Greater transparency and accountability are required to ensure public finances remain healthy and that expenditure is put to productive use, according to Mr Jim Power, director of investment strategy at Friends First Asset Management.
Addressing the Dublin Economic Workshop in Kenmare, he said an independent Dβil committee to evaluate all spending proposals, both current and capital, was an option to be considered in the future. Mr Power said this would certainly ensure:
greater accountability;
less political influence over individual projects such as the "Bertie Bowl";
better prioritisation of spending programmes; and
that the likelihood of achieving the highest possible output at the lowest possible cost was improved.
"Value for money needs to be the defining characteristic of all spending going forward," Mr Power said.
In an environment of above-trend economic growth, tax revenue buoyancy had masked strong growth in public expenditure, he said. But the economy has been hit by three economic shocks over the past year and the short-term outlook has deteriorated, with the Exchequer surplus set to come in well below target in 2001, according to Mr Power.
"Choices will have to be made, as the reality is that if public finances are to remain in broad balance over the economic cycle, increased spending commitments will have to be matched by higher levels of taxation," he said.
But Mr Power said this was not an option any political party was prepared to contemplate.
Having an arbitrary rules-based approach to controlling public expenditure had not worked in Ireland, despite attempts by successive governments since 1994, Mr Power noted.
"A model for controlling expenditure based on some arbitrary limits on spending is unlikely to work going forward, unless coupled with transparency, accountability, a penalty mechanism and a legal backing," he said.
Rather than controlling overall spending, it would be more effective to control individual spending programmes, Mr Power argued.
"The Minister for Finance is correct in standing firm against the health lobby for increased spending," he said.
"A root-and-branch examination of the entire health service is required before any extra resources are committed.
"For semi-State enterprises, no extra money should be given until firm commitments are received to change structures and work practices. Rapid privatisation of all services that could be better provided by the private sector should be considered, particularly in the area of transport," he added.
In return for benchmarking, the Government needed to get commitments on more flexible work practices and increased productivity, while account should be taken of the non-monetary benefits enjoyed by public sector workers, Mr Power said.
