The Government must not throw money at the economy and repeat the mistakes it made in advance of the 2002 general election. On that occasion, public spending rose by 23 per cent in 2001 and by 27 per cent in the first half of 2002, only to be chopped back sharply in a welter of broken election promises and damaging economic uncertainty as the Government sought to regain control of the State's finances.
Recommending fiscal prudence to a government at election time is like expecting restraint from a fox in a hen house. Nature tends to break out, no matter how cogent the argument for self-discipline. And, with a general election less than a year away, there are already indications the Government is preparing to engage in a spending spree designed to generate a feel-good factor among the electorate.
The Economic and Social Research Institute (ESRI) has risked offending the Minister for Finance, Brian Cowen, by suggesting the Government should break with political tradition on this occasion and adopt a prudent approach to public spending. It offered similar advice to Charlie McCreevy back in 2001 with absolutely no effect. But times and circumstances change. And the electorate grows more sophisticated.
An obvious attempt to buy the election in the December Budget could backfire badly. On the other hand, an orderly roll-out of public spending - as the ESRI recommends - would not only display a Government in control but one confident of being re-elected to enjoy the benefits of its forward planning.
On the face of it, the Government has nothing to lose by taking the ESRI's advice. Its economic projections are as positive as the Taoiseach, Bertie Ahern, could have hoped for as he prepares for next year's election. Growth is expected to remain above 5 per cent in 2006 and 2007. Employment for those years is likely to increase by 160,000, with an immigration inflow of 130,000, underpinning domestic demand and consumption. But the economy may run out of steam in 2008 as building and construction slow and inflation bites. The Government is urged to prepare for such an eventuality.
The pity is that political cycles do not coincide with economic cycles. The result can be excessive spending by Ministers at a time when restraint would be more appropriate and a consequent lack of resources to boost the economy when they are most needed. According to the ESRI, we are now facing into such a situation. A new National Development Plan is being prepared and it will be published early next year.
So far, all the indications from Government suggest that spending on the plan will be front-loaded, as part of its election strategy. But a phasing-in of spending, to maximise the impact in 2008 and in later years, would boost domestic demand when it is most needed. The Government should put the country first -before party political interests.