The Minister is in a position to increase spending by over 10%, writes Mark Hennessy, Political Correspondent
Blessed with strong public finances, Minister for Finance Brian Cowen will be able to increase spending by significantly more than 10 per cent next year and still claim to be prudent. The Opposition must simply despair.
Whether, or not, he is being careful with the State's money depends on the usual "events" that bedevil politicians but for now Mr Cowen is banking on the good times continuing.
The election is central to the Minister's actions. The public, as ever, wants better public services and low taxes but at the same time they want to be convinced that the Government is not seeking to buy their votes.
For now Mr Cowen can easily accomplish both objectives: "We can't get up every day and worry about whether an earthquake is going to happen. We can only go on the best forecasts," he declared yesterday.
Though economic forecasts, from the Central Bank and others, remain bullish, the economy is increasingly vulnerable to property shocks as euro interest rates continue to rise.
But most signs are favourable. Taxes are ahead of target, the national debt will fall to just one quarter of the State's gross national product next year, while job numbers will rise by 3 per cent next year, and again in 2008.
In the Estimates, Mr Cowen has decided to increase current spending by over 7 per cent, though most of this is consumed by pay rises during the Towards 2016 social partnership.
Besides higher pay for existing employees, the Government is opting for headline-grabbing recruitments with 800 extra teachers and 1,400 special needs assistants.
He has been particularly ambitious with capital spending, sharply increasing spending on new roads and railways despite strong warnings from the Economic and Social Research Institute.
Pointing out that eight major road projects will finish next year, while six more will begin, Mr Cowen said that €1,475 million will be spent on new and old routes during the year.
The pace of investment in rail and bus services, including new commuter lines to Kildare and Midleton, Co Cork, will accelerate sharply from €491 million this year to €777 million in 2007.
However, the ESRI argues that if Mr Cowen spent less he would get more, since the institute believes that the Government cannot provide all the infrastructure it wants to up to 2013 without "squeezing out" other important economic activity.
More will come in social welfare and pension increases in next month's Budget, while the Government's command of the agenda should continue into January with the publication of the next National Development Plan.
Faced with such an onslaught, the Opposition is struggling to put the Government on to the back foot, following a series of favourable national opinion polls for the Government.
Fine Gael again accused the Government of failing to get value for money, but it needs a new example to drive home the message anew to the voters, who were certainly persuaded some months ago, though memory has faded.
The Estimates contain few surprises, and no obvious bad news: extra money for roads and railways, extra money to pay for more teachers, nurses and gardaí, extra money to improve the lots of carers and the elderly.
Given the pressure for better services, the State's spending on new hospitals next year, however, will fall slightly on this year's expected result, down by €3.5 million to €482 million.
This year, the Health Service Executive was given €340 million to pay back illegally charged nursing home fees, though administrative problems mean that just €30 million of this will actually be paid out by the end of December.
The delay has bought a year for Mr Cowen to absorb the costs of the illegal charges, and he has allocated just €20 million more to the HSE's budget to deal with the issue next year.
However, the final bill for the problem will run to €700 million, and more.
Clearly, the Department of Finance does not believe that the HSE will settle all cases next year, but if it does the Government will have to find more money late next year.
Though Mr Cowen repeatedly emphasised that much of the State's extra spending will be consumed by public pay, he has not offered a similar acknowledgment to local authorities faced with exactly the same rises.
In all, local councils will get just 2 per cent more, leaving open the prospect of unwelcome increases in business rates and bin collection charges when councillors come to settle their spending estimates.
The decision is deliberate and, politically very clever since most local authorities are now controlled by Fine Gael and Labour, who will be the ones to face the pain on the doorsteps.
With just eight months to go to the general election, the Government is clearly keen to avoid irritating people to judge by Mr Cowen's reply to questions about whether it intends to increase motor tax.
"That has not been part of my discussions," he replied, although this does not mean that Minister for Transport Martin Cullen will not increase the fees next month.
In the year prior to the last election under Charlie McCreevy, the Government let spending rise by 22 per cent, only to be savaged subsequently by the voters when post-elections brakes had to be applied.
Clearly, Mr Cowen believes that Fianna Fáil will return to power, and, more importantly, that he will be back in the Department of Finance and he has no intention of following Mr McCreevy's example.
Nevertheless, Mr Cowen possesses only a very a qualified form of financial virtue, given that he increased spending last year by 13 per cent and looks likely to repeat the decision this year.
However, Mr Cowen, who sanctioned 6,000 extra public servants this year and who is ready to pay for 1,800 more next year, has thrown Mr McCreevy's stated determination to cut the public payroll by 5,000 into the bin.
Unapologetic, he said: "I cannot reduce class sizes without employing more teachers.
"You cannot improve frontline services without increasing the numbers."