The Taoiseach has big plans for health, anti-poverty and infrastructural spending. But without a rise in taxes the figures won't add up, writes Ruairí Quinn
Will Fianna Fáil raise income taxes after the next general election or kill off the National Health Strategy? In light of the Taoiseach's speech to his ardfheis last weekend, it is a fair question to ask.
While the Taoiseach castigated other parties about their economic management, he has plenty of questions to answer himself. For the Taoiseach to suggest that anybody other than Fianna Fáil created the economic crisis of the 1980s is hardly worthy of comment. More significantly, Fianna Fáil's current mishandling of the economy is now coming home to roost.
Redundancies are being announced at a worrying rate and the live register is increasing more quickly than in the 1980s. Mr McCreevy's invitation to high earners to party-on during the boom and the derision handed down to his critics, now look particularly misplaced in the light of the recent Exchequer figures. Even Mr McCreevy cannot claim that turning a surplus of €1290 million into a deficit of €67 million in 12 months is an example of competent economic management.
In the last budget, Mr McCreevy made it seem that there was a small Exchequer surplus in 2002. He did this largely by taking money from the Central Bank and the Social Insurance fund. These once-off raids cannot continue. On his own figures, the Exchequer will be in deficit by €3 billion in 2003 and €3.6 billion in 2004. This from a Minister who says that his "views on the imprudence of borrowing are well known" and a Taoiseach who told the nation last Saturday that he did not believe in public borrowing.
But in a manner reminiscent of 1977, the Taoiseach gave no indication how he would pay for his election promises.
And his promises are not just confined to those made on Saturday. He has existing commitments on the Health Strategy, not to mention the National Anti-Poverty Strategy or the National Development Plan. The health strategy alone will cost some €13 billion. The question is, how will Fianna Fáil pay for it?
Mr McCreevy, and now the Taoiseach, have said that they do not believe in public-sector borrowing, for any purpose. Neither do they wish to consider reducing the annual transfer to the National Pensions Reserve Fund even though numerous economists have queried the sense in setting aside so much money in these more difficult times.
They tell us that they remain committed to low taxes but how they intend turning their planned budget deficits into their preferred surpluses is a mystery. Their figures don't add up.
In light of the above, it is only reasonable to ask whether Fianna Fáil will raise taxes or whether any of their various commitments are any more than hot air.
Labour's position in this area is clear. In our economic policy document, entitled "New Directions, New Priorities", published in 2000, we set out our view that a new approach to budgetary policy was required. Since then, the overall economic outlook has deteriorated as a result of Fianna Fáil's incompetence, and we have updated our figures over time, but the essential policy position hasn't changed.
Labour believes that a massive programme of capital investment will be required in Ireland for at least the next 15 years. Our roads, railways, energy system and airports are hopelessly overloaded. Investing in infrastructure is essential, not just to improve our quality of life, but also because adequate infrastructure is an essential driver of economic growth. In the era of the knowledge economy, it is also vital that we invest in people through education, training and healthcare.
This level of investment cannot be funded from current income alone, without public services being starved of necessary resources. Nor is such starvation necessary.
Labour readily endorses the golden rule of public finances: don't borrow for current purposes. Fianna Fáil's failure to adhere to that rule in the 1970s led to the economic crisis of the 1980s.
But it does make sense to borrow in order to fund capital investments that have a long-run payoff. This is true of families who take out mortgages to buy homes, of businesses that borrow to build factories and buy equipment, and it is also true of the State.
Moreover, State borrowing today for capital investment does not carry the same risk of exchange-rate volatility and fluctuating interest rates because we now have the macro-economic stability of the eurozone.
Under the FF/PD coalition, this generation of taxpayers has been asked to pay off debts incurred by previous governments. We are also being asked to fund future pensions through the Pensions Reserve Fund and pay the full cost of infrastructural investment which will benefit generations to come. We have done so at the cost of a poor quality of life in terms of poor public services, crises in health and education and a divided and unfair society.
So Labour has made it clear that, if necessary we will borrow to fund capital expenditure. We will also use the Pensions Reserve Fund to invest in public projects. We will not increase income tax for ordinary workers because we don't think it would be either fair or necessary but we will use the current budget surplus to improve the quality of public services - ending the under-funding of schools, providing GP care, tackling poverty and improving the quality of public services.
Labour is ambitious for Ireland. We believe that Irish citizens deserve the best public services in Europe and we intend to deliver them. Our commitments are set out on our pledge card. If you don't have one yet, contact me at Leinster House, Kildare Street, Dublin 2, and I will send you one. Then, if Labour are returned to Government, hold us to those pledges.
We will do all of this, while staying within the requirements of EMU. Sound public finances are essential if we are to foster further growth in prosperity and jobs.
If we are in Government after the next election, we will again implement policies to promote growth and employment, to tackle poverty and unfairness and to deliver quality public services.
We will start by telling the Irish people the truth about budgetary policy. We would welcome similar frankness from the other political parties. Either the Health Strategy is a fraud, or Fianna Fáil will raise income taxes. Which is it, Taoiseach?
Ruairí Quinn is the leader of the Labour Party