The launch: The Minister for Finance has rejected as "phoney and fallacious" claims that the Government should increase taxation to demonstrate a commitment to public services. Arthur Beesley, Political Reporter, reports.
Mr Cowen indicated at the publication of the Book of Estimates yesterday that there would be no spending spree in his first Budget and stressed the Government's commitment to expenditure on health and education.
At a press conference in Government Buildings, the Minister promised a special initiative in the Budget next month to fund a multi-annual capital investment programme in services for the disability sector.
In addition, the Budget will contain a specific programme for current expenditure on high-priority support services in 2006- 2009. The current Estimates package contained €2.8 billion for disability services next year, €290 million more than in 2004.
Mr Cowen defended the Government's tax policy and argued against those who said that tax should be increased to provide money for State services.
"It is simply untrue and the evidence is against those who propose it who suggest that the economic policies that have been pursued by this Government are throwing away opportunities for increased social provision in Ireland. Quite the contrary," he said.
"I'm a pragmatist. Lower taxes have brought more money for this Exchequer to make the necessary improvements that people want to see." He said lower taxation, more people paying tax, greater business activity and more companies paying more corporations paying taxes had contributed to economic growth.
While several Departments would increase their staff as a result of new expenditure next year, Mr Cowen insisted that the Government remained committed to reduce overall public employment by 5,000 in line with a target set by his predecessor, Mr Charlie McCreevy.
"I have emphasised to all ministerial colleagues that we must continue to seek better value for money in delivering services."
Mr Cowen said he intended to maintain a balanced budgetary approach and would match the increase in public spending growth with resources while avoiding large-scale borrowing and increased taxes.
"An expenditure spree in a buoyant economy would simply overheat our economy, lead to inflationary pressures and excessive wage demands and cause serious damage to our international competitiveness," he said.
"We have come too far to expose ourselves to such a threat. Public spending growth must, therefore, be correlated with revenue growth in order to remain at a sustainable level over the medium term."
Mr Cowen said the Government remained committed to the decentralisation initiative but did not provide any specific details about the process or the expenditure required to manage the relocation of Departments.
He conceded that the Government would not meet its commitment to the UN to spend 0.7 per cent of GNP on overseas development aid by 2007, but promised an increase in its contribution of €60 million next year and €65 million in 2006 and 2007. Such contributions would amount to 0.5 per cent of GNP in 2007 in what he described as a "very genuine, serious effort" by the Government.
Asked why the Government was falling short of its promise, he said he preferred to be honest about the prospects of meeting the target and said he had to consider demands for expenditure on domestic services when framing the Estimates. Global economic contexts were "fairly positive", but he warned that higher oil prices, the dollar's strength and a possible weakening in the US economy could lead to a domestic slowdown.
There were unprecedented increases in social provision because of the Government's policies. Current spending was close to the last year's figures, while an estimated underspend of €330 million in capital expenditure would lead to €250 million being carried over into 2005. Health spending would increase by €915 million or 9 per cent, bringing overall expenditure to €11 billion.
Spending on education would rise 8 per cent to €7.1 billion.