Boston will meet Berlin in the low tax, high quality public service society promised by Fine Gael, reports Mark Brennock, Political Correspondent
The "Boston v Berlin" choice favoured by Government Ministers is a false choice, according to the Fine Gael leader, Mr Michael Noonan. Unveiling his party's economic policy framework - the basis for the forthcoming election manifesto - Mr Noonan insisted yesterday that Ireland can have "the best of both worlds".
He committed himself to creating a society embracing "both a US standard of income and EU levels of social and environmental protection". The future under Fine Gael will involve Boston and Berlin.
This would be done, he said, through maintaining lower, but more sustainable, annual growth rates of around 5 per cent of real Gross Domestic Product. Such a figure would create new resources that could be invested in limited future tax reductions and improving public services.
There would be no increases in income, corporate or capital taxes, according to the party document. Fine Gael would also stick rigidly to this Government's commitment to put 1 per cent of GNP into a fund to pay for future pension liabilities. Indeed, according to Mr Jim Mitchell, the finance spokesman, the party will put away an additional 0.5 per cent of GNP into a "contingency fund" in years in which growth exceeds 5 per cent.
These limitations on the revenue available to the Exchequer would be matched by a major slowdown in the level of annual increases in current spending. Current spending would rise by, at most, the level of growth plus inflation plus 2 per cent - a formula expected to allow for a rise of under 10 per cent next year. With the rate of increase currently close to double that, Mr Mitchell acknowledged that it would be a tall order, and that it would be a major achievement to negotiate a public service pay deal within this constraint . But without it, the party's sums would unravel.
While current spending would be kept tight, the money would be found for capital spending on roads, railways and other infrastructural development, through borrowing if necessary.
"All capital proposals in the National Development Plan will be met in full and on time," said Mr Noonan. The party, in other words, will be saving for future pensions and other contingencies, while simultaneously borrowing to fund capital investment.
There was no detail available on how much money would be available to fund current and capital spending in health: how a Berlin standard health service would emerge from an economic framework with such a limitation on current spending and within the projected borrowing figures provided in the party document.
Mr Mitchell said specifics in this regard would be in the party manifesto, to be published at the outset of the general election campaign.
The document's account of modern economic history starts with the Fianna Fáil 1977 giveaway election manifesto, which precipitated "the public financial crisis of the 1980s". Then came Fine Gael's 1987 "Tallaght strategy" of giving support to the Fianna Fáil minority government on condition that it followed Fine Gael economic policies. This "underpinned Ireland's economic success of the past 15 years".
The Fianna Fáil/PD government "inherited an economy of unprecedented strength" in 1997, presented to them by a Fine Gael/Labour coalition. "These fundamentals enabled the boom to grow and continue for a further four years, delivering unprecedented growth in employment, earnings and exports." However, "through a lack of vision and leadership", public services now deliver less but cost more.
Fine Gael's "cabinet enforcer" would patrol all Departments, holding Ministers to spending targets and targets for the implementation of decisions. Just how this would work in a coalition is open to question. A Labour minister, for example, might not take kindly to a Fine Gael "enforcer" poking a nose into the conduct of their brief.