The Minister for Finance, Mr McCreevy, is in the fortunate position of presiding over an economy that is growing at a record rate and thus generating record Budget surpluses. While his predecessors struggled with high unemployment and sluggish economic growth, he has to deal with the problems of success. But choices made at this time of plenty by the Government are no less vital in shaping the future well-being of our society.
The spending Estimates for next year, published yesterday, make it perfectly clear that the Government has abandoned its commitment to limit current spending increases to 4 per cent annually. At this time last year, Mr McCreevy projected an increase of 6.8 per cent in day-to-day spending, but the out-turn for the year will now come to 10.8 per cent.
For next year, the projection for current spending growth comes to 10.9 per cent and, given the growing militancy of public-service workers and the social welfare rises to be announced on Budget day, the final figure will be higher. Looking at investment spending, the Government is pressing ahead with major structural programmes involving roads, public transport, local authority housing, health and education. There are legitimate reasons for increases in Government spending. Rising inflation is pushing up the cost of providing services to the public and there are many areas where services - and infrastruture - need to be improved. The economy may be roaring ahead, but the citizens of this State are still denied the kind of childcare, education and social facilities that the rest of the European Union takes for granted.
There are generous and welcome increases next year in areas such as health spending. However, this Government has still to show that it can ensure value for money by properly planning the delivery of key services. Announcing the rise in health spending, Mr McCreevy concluded that "there must be effective management to ensure that increased resources lead to better services." It is up to the Government to ensure that this is the case. The management of investment spending to ensure that the key bottlenecks in the economy are tackled is also crucial. Some aspects of the National Development Programme are already behind schedule and this must not become the trend.
The reaction of the main opposition parties to the estimates was instructive. Fine Gael concentrated its fire on the manner in which the extra money will be spent, rather than objecting directly to the spending increases. And the Labour Party, which itself proposed a £3 billion increase in current spending over three years, concluded the Government was embarking on an election splurge. The strong state of the public finances means that, when the Minister for Finance unveils his Budget on December 6th, he will be well placed to introduce further tax cuts to try to underpin the Programme for Prosperity and Fairness. As higher Government spending will inevitably add to inflationary pressures, he must be reasonably cautious in planning this tax package. He must also generously compensate social welfare recipients and pensioners for higher than expected inflation.
However, the Government will realise that many people are now more concerned with the delivery of key services in areas such as health, education and public transport than with the precise shape of the tax package. Getting value for money from the spending increases announced yesterday must be a priority.