Spring Statement challenges opposition to spell out their costed plans
29 April 2015
Spring Economic Statement, Dáil Éireann
It’s pretty clear the Opposition parties don’t like the Spring Statement. In fact, it’s clear they would rather debate anything else. But I think it is not so much its content they dislike as its purpose.
The Spring Statement is about economic facts and economic reality. It governs us all. It applies equally to every politician and party – and it applies to anyone who has an opinion about what Government should be doing in its Budgets for the next few years.
The purpose of the Spring Statement is a basic one. It strips away the final shrouds of secrecy from Budget preparation. It sets out the economic and fiscal situation, predicts our fiscal space and then allows for public discussion about our economic priorities.
By setting out the facts, the Spring Statement confines us all. It says we can only make proposals to spend the money we expect to have. And so it obliges all of us not just to cost each policy but to make sure that the costs of all these policies don’t add up to more than we will have.
When the Government says we will have between €1.2 and €1.5 billion of fiscal space for Budget 2016, the first and immediate question for the Opposition to answer is: Do they accept that figure? And, if they don’t, where do they say we went wrong in our calculations?
Or is it, perhaps, that they reject the notion of having any fiscal rules at all? Remember that we had a referendum on these fiscal rules and they have been endorsed by the people. The rules now bind the Government – any future Government.
What the rules mean is that any increase in spending must be affordable and it must be sustainable. To put it unambiguously, growth in spending cannot exceed the level of potential economic growth, unless we specifically levy additional taxes to make up the difference.
So, we have to plan carefully. We have to base our decisions on the evidence.
If the Opposition accept all that, then they accept our fiscal space. And the question then is, how would they spend the amount of money we have identified?
That is all there is to this debate. What would you do with the amount of money the Government is going to have available to spend over the next few years?
And the Opposition – Sinn Féin in particular – hates this. Take just two examples. First, Sinn Fein has a black hole of up to €750 million in their budget as a result of their plan to scrap water charges. This comes from lost revenue of over €200 million and the additional expenditure of €550 million on water that goes back on the State’s balance sheet.
Second, Sinn Féin would cost the Exchequer another €500 million by abolishing the property tax.
In those two proposals, Sinn Féin would have spent €1.250 billion already – leaving at most €250 for any other tax cuts and for public spending.
Unless they are planning new taxes to make up this one and a quarter billion Euro shortfall. Yet they have, at last, dropped their will o’ the wisp wealth tax. So they need to tell us where exactly they will find this money.
Or will they follow the example of their Northern Irish colleagues and find the money by cutting back further on public services, on public sector jobs and on capital investment?
Will they cut per capita spending on health, pensions and jobseeker benefit to the levels they preside over in Northern Ireland?
This side of the House has set out our priorities. Now it’s time for the Opposition to respond. We’ve said we’re going to allocate those resources on an 50:50 basis between additional spending on services and reducing taxes for low and middle income earners.
So, we’re looking to increase gross voted current expenditure by an additional €600 to €750 million. And we’ve said this will allow us to deal with the demographic pressures in Social Protection, Education and Health. It will also allow us to target improvements in key public services.
For my own part, I am delighted to be able to confirm that our reducing unemployment figures is not just a sign of economic recovery, it is driving that recovery. And reduced unemployment is helping to turn around the national budgetary figures. With every person back at work, we are increasing the tax base, reducing social protection costs and allowing for further spending on our public services.
Employment has increased in every quarter for over two years. Almost 100,000 new jobs have been created since the low-point in mid-2012. And every indication is that this trend will continue.
But still we must be cautious. We all know we cannot meet all the demands for public spending, without bankrupting the State. We all accept, at least in theory, that any increase in spending must be matched by increased revenue. No party can ignore these common sense economic parameters. But now it’s not just common sense: it’s now European and constitutional law.
So, every contribution to this debate has to be measured against the same criteria: is the proposal genuinely rooted in economic and fiscal reality? Does it respect the limitations of our fiscal space?
None of us want to return to boom-and-bust. We all say we have learned the lessons of the past. We all swear never to repeat the mistakes that brought us almost to ruin: there must be no more unsustainable spending, no more throwing money at problems, no more short-termism.
Instead, fiscal responsibility and stable and responsible government. Increases in spending must be in line with growth and productivity. Decisions must be evidence-based. And the sums must add up.
We in the Government parties have mapped out our plans for the next phase. Now, it’s for the Opposition to step up to the plate.