The truth is out at last - the only way we can have superior public services is if they are paid for by way of taxes, argues Maev-Ann Wren
The election debate has at last hit the iceberg of fiscal reality. For three weeks it was based on the false premise that the incoming government will inherit sound finances. That is not the case.
To achieve the desirable goals which all parties offer - investment in health, transport, schools, childcare - will require hard choices. No party wants to say that to the electorate.
Fianna Fáil and the Progressive Democrats will never admit that after five years of boom, they have allowed a collapse in the public finances. The Opposition parties have been slow to confront the Government's failure because this could force them to acknowledge that superior public services must be paid for - in the form of tax. The election debate has been a conspiracy of silence.
Why hasn't the health debate taken off, commentators ask. But it has. The economic debate is the health debate. Until this society accepts that public services cost money and that social solidarity and equity cannot be achieved without redistribution, there will not be a solution to the healthcare crisis.
What happened to the public finances on Charlie McCreevy's watch? Growth in public spending far exceeded his Department's forecasts and tax receipts fell far short. The great savings giveaway availed of by 40 per cent of the adult population will eat up billions. The parties' manifestos have been overtaken because they relied on the accuracy of his Department's forecasts.
Before the full gravity of the public finance collapse emerged, the ESRI warned in its spring commentary that even with good growth, expectations for increased public spending would further damage the public finances "unless revenue growth is brought into line with expenditure growth". That was a polite way of saying that we need to raise taxes.
Tax remains a problem for people on low wages but this is not a highly taxed society. Government revenue was 33.7 per cent of GDP last year compared to an EU average of 47.4 per cent. The UK takes over 42 per cent of GDP in taxes. The tax increases on capital and employers' PRSI proposed by the Labour Party would raise revenue by under 1 per cent of GDP, hardly state socialism.
Despite its recent runaway growth, public spending is not high. Government in Ireland spent 32 per cent of GDP last year compared to an EU average of 47.5 per cent. That is why our public services compare poorly with those of other European states.
Public spending needs to grow but not at the pace of the last two years when the Government belatedly woke up to the need to placate discontent about poor public services.
The value-for-money audit of the health services noted that even though the health service badly needed extra funding, the "sheer pace" of additional funding injections was producing pressures to spend rapidly rather than effectively.
The great recent public spending increase has not delivered value for money because the economy has been simultaneously over-inflated by tax cuts, following the Good Time Charlie dictum then that when you have money, you spend it.
The notion that it might be dangerous to over-inflate in a boom was derided by the Minister for Finance. The inflation figures are his answer.
The secretary general of the Department of Health, Michael Kelly, told the Cabinet at Ballymascanlon a year ago that 40 per cent of the value of investment in health under the National Development Plan had been eroded by inflation.
To avoid inflation and prevent further deterioration in the public finances, it is necessary to choose between better public services and a low tax economy. Put simply it's a choice between building hospitals and holiday homes. Funding both invites inflation.
To avoid such choices, the political parties' answer is borrowing.
Borrowing to fund sound investment projects is defensible at a stage of development when we have a great need for infrastructural investment, but borrowing for capital investment which allows more slack to increase current spending without raising taxes will exacerbate the deterioration in the public finances, increase inflation and leave little to show for these great years of growth.
The PDs would substitute privatisation for borrowing and risk an indigenous sector asset-stripped by multinationals. Fianna Fáil would employ public-private partnerships so development of our public infrastructure would be driven by the profit requirements of the private sector at a higher cost of funds than the government could achieve. These are stratagems to avoid the need to raise taxes.
FIANNA Fáil believes it created the employment growth of the boom years by tax cutting. For foreign corporations to set up for-profit private hospitals? For "investors" to drive up property prices again just as they were beginning to fall? The true Fianna Fáil architects of the boom were Donogh O'Malley who introduced free secondary education and Seán Lemass, who opened the State to competitive industrialisation.
Last year, a senior civil servant in the Department of Health confided: "I believe we have the chance now to do for health what O'Malley did for education." Efforts to provide healthcare for all were defeated 50 years ago by the opposition of the Catholic Church and the medical profession.
The church has other fish to fry today and many doctors would welcome change. The only barrier to equitable and quality public services is our unwillingness to accept the need to pay for them.
Maev-Ann Wren is an Irish Times journalist