Wednesday 17 July 2019

Editorial: 'Brexit shouldn't obscure government's overspending'

Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Editorial

Editorial

Finance Minister Paschal Donohoe's two plans for the next Budget - one for "a bad" Brexit, the other for "an orderly" Brexit - make good sense. But they must not be allowed obscure another important point about Ireland's runaway public spending which must urgently be addressed.

We have come through the recent controversy on the massive overrun on spending on the new children's hospital in Dublin. Another difficult issue on the cost of rolling out rural broadband remains to be finalised.

We also know that another overrun in health service spending is now looming into view. This is pretty much an annual event by now, despite spending on health being at an all-time high of €17bn this year.

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The Government has been given some pretty blunt warnings by the Irish Fiscal Advisory Council, an expert body established after the last economic crisis to advise government on how to avoid another crash.

This advice has been compounded by similar messages from the Economic and Social Research Institute and several other experts. But many of us know that with an election now certainly less than 12 months away, our political leaders are much more focused on getting re-elected.

This raises another important point. Barely a decade ago, we were in the throes of a mighty economic crash. As recently as 2012, Irish unemployment topped 15pc and there was significant emigration.

Now that we are enjoying a return to prosperity we should all take stock of things. It would be folly to risk a return to the recent past by making unreasonable demands or being gulled by facile political promises.

In the Dáil we hear the main party of Opposition, Fianna Fáil, counsel prudence on big picture economic issues. But when it comes to matters of detail they vociferously back every interest group seeking additional public spending.

Fine Gael still dangles the potential carrot of tax cuts, only ruling them out in the case of a no-deal Brexit. This is highly questionable given the precarious position in which we find ourselves.

A bad Brexit could happen. So could a global economic slowdown fuelled by trade tensions between US President Donald Trump and the Chinese leadership. We hope such things will not happen - but we must prepare to face them.

In the last crash of 2008 onwards, Ireland was left in a most parlous position. We hope we would not be so exposed now, but we are still left with a dangerously high overhang of long-term debt.

The last time, the Fianna Fáil-led governments used temporary revenue from the building sector to fund lavish promises. When construction collapsed, there were gaping holes in the national coffers. This time, the Government is availing of similarly temporary revenue from company taxes to paper over the cracks.

History has taught us that temporary spikes in revenue cannot be relied upon to fund a sustainable way forward. Time to get real.

Irish Independent

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