Coalition slated on 'lack of ambition' in spending
The Government should be spending €15bn more on public investment than it's planning, to compensate for underinvestment during the crisis years, a new report from the Tasc economic think tank has said.
The body criticised the Government's investment plan out to 2021 as "deeply disappointing in its lack of ambition".
Tasc economist Paul Sweeney said the planned level of Exchequer funding at €27bn over the five-year plan will not be enough to meet the country's infrastructural needs, and should be increased to €42bn.
This means the level of investment per year would rise from 1.84pc of gross domestic product to 2.25pc.
Tasc said the bulk of the required funds could be sourced from part of the proceeds of the planned privitisation of the banks, although he said the State should retain a significant stake in AIB. Finance Minister Michael Noonan has already said that any money raised from the State's shareholding in the banks must be used to pay down debt.
But Mr Sweeney said it is "insane" to pay down debt when the money can be put to another use.
"These bank proceeds of €20bn (or perhaps up to €29bn) are coming on stream from 2016 onwards," Mr Sweeney said.
"It is currently proposed that all of this capital be used to repay national debt.
"In a time of great infrastructural need, with low interest rates on a declining (as percentage of GDP) debt level, this is not just a mistake, it is a major policy blunder".
Mr Noonan said last night that the Government is playing catch-up on investment and it would like more flexibility from Europe.
Separately, meanwhile, in his latest assessment of the economy, Friends First economist Jim Power forecast GDP would grow 6.3pc this year, slowing to 4.5pc next year.
He said the biggest domestic risk is politics and he warned that there shouldn't be any "auction politics" in the run-up to the General Election.