Monday 20 November 2017

Perfect time to begin a real debate about how to stimulate economy

Donal O'Donovan

Donal O'Donovan

THE revelation that the Government has found €150m for spending on school extensions, road repair and maintenance of social housing will come as a big surprise to many.

How is that we have cash today that wasn't there in December when the Budget was set, or indeed last week before the deadline for paying the property tax?

The simple answer is we don't, but the Government is now confident that cash, indeed a lot of cash, will have been collected by the end of the year from the sale of state assets.

A sale of Bord Gais Energy alone could raise €1bn or even €1.5bn. Under the terms of the original EU/IMF bailout, the cash raised was to be used to pay off a share of the national debt, but the Government has managed to negotiate that down to 50pc.

The plan is for the rest to be invested in projects that could help stimulate the domestic economy.

It is the right approach. This newspaper in particular has argued that the economy will not be restored by blind faith in the supposed corrective effects of endless cutting.

Targeted spending puts money into the real economy. It should also help alleviate some of the growing imbalances in the labour market, where investment by international IT firms has been a boon to people with specialist skills but has no impact on the legions of construction workers on the dole.

If money is now coming available, it is time to start a real debate over what the best approach to economic stimulus really is.

Traditionally ministers love the kudos that comes from big-ticket capital spending, especially when projects that happened to be on their home turf bubble to the top of the queue for funds.

Many economists argue that tax cuts for individuals who will spend their extra income is what really works best.

Increasingly spending on education and training is seen as something that helps both individuals and the wider economy.

There is no one right answer, and if nothing else after so many cuts, it gives us something new to talk about.

Irish Independent

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