Turlough O'Sullivan, director general of IBEC, says infrastructural spending must continue but better value for money must be sought.
It is almost a year to the day since I wrote in The Irish Times that we had been "lowering taxation while letting public spending spiral out of control. . . This could never have been sustainable".
For more than a year, IBEC has been sounding the alarm bells. In advance of the General Election, we said: "There is increasing evidence that we have taken our foot off the pedal and that, on a daily basis, we are losing our competitive edge. The single most worrying problem is the rapid deterioration in the public finances."
Day-to-day spending last year was seven times what was taken in through revenue. This information was publicly available but it seemed to have escaped most people's notice until recently. However, firm commitment has been given by Government to rein in the unsustainable increases in spending. Better late than never.
So where does our money come from and where does it go?
The money comes from the private-traded sector, which must remain efficient in order to sell goods and services to overseas markets. Taxes on business and labour, therefore, should be low and the generation of productive wealth should be encouraged in order to support more high-quality jobs in the economy.
Sheltered sectors of the economy, such as the public sector, which influence the business environment and add to business costs, must also operate efficiently.
The money goes on day-to-day spending and on capital projects but does so most inefficiently. The fundamental problem in the Republic is not just our spending. It is that we have got so little benefit in terms of services from the 40 per cent increase in day-to-day spending over the past two years.
The Estimates published last week provide for a pre-Budget-day level of current spending of more than €31 billion compared to €17 billion in 1997. Spending in some areas has grown at a faster pace. Health service expenditure grew 122 per cent between 1997 and 2002.
It is almost universally recognised that, inflation aside, the improvement in the quality of public services has not matched the increase in spending.
The public has every right to be alarmed about how decisions are made, how many layers of execution are required and at what level accountability comes into play. Public service managers must be allowed to manage and be accountable for outcomes. Administrative bureaucracies should be streamlined or contracted to the private sector. Obsolete spending programmes should be abolished.
While current spending must be radically curtailed, the Republic needs a high level of investment in infrastructure - at least 5.5 per cent of GNP - to provide for urgent needs in public transport, roads, telecommunications and housing. It would be self-defeating to allow day-to-day spending to drift upwards while making ends meet by reducing investment in infrastructure.
It is my belief that the basic common sense of most people will rise to the challenge of following a sensible and constructive path if it is clearly set out.
