Thursday 8 December 2016

Government's giveaways will end in disaster

The Troika is gone but 
we simply cannot afford to dispense with a policy 
of fiscal caution

Published 13/07/2014 | 02:30

The final visit by Troika officials took place today at the Department of Finance. IMF official Peter Breuer (left), Craig Beaumont (centre), IMF Mission Chief for Ireland, and other members of the delegation are pictured leaving the Department of Finance
The final visit by Troika officials took place today at the Department of Finance. IMF official Peter Breuer (left), Craig Beaumont (centre), IMF Mission Chief for Ireland, and other members of the delegation are pictured leaving the Department of Finance

The Troika has departed, so it is time to get back to the core business of Irish politics, namely the purchase of the electorate's votes with their own money. The Cabinet reshuffle will be forgotten quickly but the policy measures announced by the Government on Friday are ominous.

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The Government, which took over in February 2011 tasked with the restoration of national solvency, has gone into pre-election mode and seems to be proceeding as if the financial problems of the country have magically been resolved. There are to be tax cuts for low- and middle-income earners, which, in practice, means just about everybody; a programme of social housing; free GP cards for the 50,000 over-70s not currently eligible, an enhanced household-benefits package and a review of the minimum wage. The first four measures will worsen the State finances, which this Government was elected to fix while the final measure, if it results in an increase in the minimum wage, will raise costs for business.

The Government is behaving as if the elimination of the budget deficit, and hence the postponement of stabilisation in the national debt, can now safely be deferred. With the winning post looming into view, it is time to loosen the reins and ease up. The announcements add up to a programme of cutting taxes while expanding expenditure commitments. If this is to be the policy framework, the date when government borrowing is eliminated (the winning post) recedes indefinitely into the future.

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