The spending Estimates announced yesterday are, of course, the first instalment in a two-part process that will end on Budget Day on December 3rd. Politically, however, they are part of a longer process than will end on an election day in 2006 or 2007, writes Mark Brennock, Chief Political Correspondent
And behind the new stealth taxes, cuts in services and the slowdown in capital spending, a clear political strategy is emerging.
Having brought public spending increases down from 20.7 per cent in 2001 to 7.6 per cent this year, the Government is sticking to the parsimony for at least another year. To achieve this they have had to abandon major spending promises and introduce a range of new unexpected charges for health and other services. Further increases in these charges next year will, the Government says, bring in €91 million in 2004, although nobody should be surprised if they bring in more.
However, if the result is sound public finances, the Government should be very well positioned to take advantage of the hoped for global economic recovery. If growth rates increase again, tax revenues will also be boosted, the Exchequer will have more cash and Ministers will be able to increase spending on high-profile projects. They might even be able to cut some of the new charges.
Don't expect this to happen next year, and possibly not the year after. But it could well happen, oh, some time before the next general election.
That's not all that will change before the Government next faces the voters. Mr McCreevy indicated yesterday that he was one of the optimists within the Government who believed that despite the hammering they have received since June 2002, the voters may yet re-elect them in 2006 or 2007.
The key, he suggested, was the transformation of Ireland's infrastructure. Some €5.5 billion will be spent on capital projects next year, roughly the same as last year and the year before that. In an innovation, each Department will agree a capital spending plan for the next five years before the end of this year, guaranteeing how much money will be available for capital spending into the future.
Of course, capital spending is not growing at the pace promised before the last election, and the National Development Plan is falling behind schedule. The Government is spending less on capital projects in 2003 than was originally budgeted for. The amount allocated for capital projects next year is marginally less than was allocated in 2003.
But people will vote on the basis of what they see, not on whether projects have been slower than promised a few years ago.
And at €5.5 billion a year, the Government is spending roughly twice the amount on capital projects as are other EU member-states. Even with delays and cost overruns, this will build an awful lot of roads and other facilities. Most importantly, it will build many of them before the next general election. Mr McCreevy gave the example of the recently opened motorway from Dublin to Dundalk, remarking everyone who has used it loves it.
He listed other road projects currently under way, many of which will be completed before the next general election.
"If we can continue to spend 5 per cent of GNP on infrastructure we will see an extraordinary difference in the country in a short period of time. When we stop digging up the streets - and we will - we will see the difference." The hope is that voters will see the difference, and be suitably grateful to the Coalition, before the election.
In response to a question about whether there are to be any changes to the Special Savings Investment Accounts scheme, Mr McCreevy said he could not say what would be in the Budget. But he reminded his audience of his consistent enthusiastic support for the scheme, and said we should not expect any surprises. So when the five-year savings period is up, some 1.14 million savers will be able to cash in their lump sums worth up to €20,000 each. That may put a spring in their steps on the way to the polling booths.
Finally, the Opposition claim, Mr McCreevy's tight control of public spending has more to with preparing for a pre-election splurge than it has with planning in the best interests of the country. In this scenario, the Government will start spending money left right and centre to please voters who will be driving down smooth new roads or on shiny new trains, stopping off at the bank to collect their SSIA nest eggs before arriving at the polling booths.
The Opposition fears this scenario, but is determined the effects of the cuts will be made clear to people so that they will not forget. Fine Gael yesterday pointed to the increase in current spending for health, saying that when you strip out pay increases and the extra costs of the GMS scheme, there is just €38 million left to improve existing services.
The party's finance spokesman, Mr Richard Bruton, maintained that not only did this rule out the opening of extra beds, but it would cause further reductions in services.
Labour concentrated on the "nasty and vicious" social welfare cuts, pointing to no fewer to 16 schemes which were being restricted in some way. Allowances to educate those on welfare, rent supplements and a variety of other schemes used by the less well-off were being slashed, the party said. A spokesman for the Minister for Social Welfare, Ms Coughlan, said these cuts would save some €58 million, but that significant increases in other social welfare payments were yet to come in the budget.
Fine Gael also pointed to the various "stealth taxes", from health charges to motor tax increases and passport application fees. A one-point rise in the lower rate of income tax would raise €375 million, while a similar increase in the upper rate would raise €154 million, they said. Adding up various charges imposed and local authority charges yet to come would bring a total equivalent to an increase of 1 per cent in the lower rate of income tax, they maintain.
There has clearly been an effort to cut (in as much as is possible) in non-"front line" areas of the public service. Thus in almost all departments there are significant cuts in administration costs, such as office equipment and supplies, travel and subsistence and spending on outside consultants. Mr McCreevy remarked yesterday that this latter cut was to encourage Ministers to make decisions rather than hire outsiders to make them.
The Minister for Justice has bravely given a hostage to fortune by reducing the estimate for prison officers' salaries, wages and allowances. At the start of what may be a bitter dispute, Mr McDowell has allocated €600,000 less to pay prison staff in 2004 than in 2003.
Mr McCreevy launched a pre-emptive defence against the criticism that half of the increase in public spending next year will be taken up by pay rises for civil servants. Total Government spending next year will increase by €1.9 billion (although the budget will bring that figure well above €2 billion), some €1.1 billion of which will go to pay rises.
Public services were provided by people he said, remarking that the only way to educate children was to hire teachers to educate them.
"Public servants are entitled to expect the same rates of increase as the private sector for the good job they do", he said.
So civil servants will be happy, (some) roads will be built, the public finances will be in order, there may be more money to spend down the road. Now if they could only get around to reforming the health services, you'd almost bet on them for a third term.