A LARGELY POSITIVE survey of the Irish economy by the Organisation for Economic Co-operation and Development (OECD) for 2008 will provide useful reassurance for foreign investors while encouraging consumer confidence at home and identifying tough administrative and fiscal reforms for the Government. It comes in advance of a detailed examination of the public service that is likely to recommend wide-ranging reforms and increased productivity.
The basic finding of the report is that Ireland's economic fundamentals remain sound, even though there has been a deterioration in the situation that permitted the Government to increase spending while, at the same time, operating a budget surplus. Irish banks are well capitalised and profitable, providing a cushion for more difficult times. A return to higher growth rates will, the OECD suggests, require increased competitiveness and better infrastructure, along with product and labour market reforms. The most immediate challenges facing the Government involve the housing market, fiscal policy, pensions and the integration of immigrants.
The issues identified by the OECD will test the courage, resourcefulness and resolve of taoiseach-in-waiting Brian Cowen, who has adopted the late Seán Lemass as his political role model. The more difficult problems, such as the need for a reduction in housing subsidies and reform of pension schemes, have been on a "to do" list for years, but were ducked by successive governments led by Bertie Ahern. On the basis of Mr Cowen's comments so far, it is likely his first years will be devoted to public service management reforms and efforts to secure better value for money. A reversal of policy in relation to home ownership and housing subsidies is unlikely, in view of commitments given in the recent general election and the current property market downturn. As for pensions, the OECD takes the view that the present system will become unsustainable as the population ages. It suggests that a new retirement age be indexed to longevity and that tax incentives should be targeted towards the lower paid.
The report posits tough political choices for an incoming minister for finance. His or her job will be to improve public services without a large increase in resources. The most obvious place for such negotiations will be at the forthcoming national pay talks, where wage restraint and flexibility in work practices are likely to surface in the context of benchmarking and public service reform. The provision of additional language training for adult migrants and their children is identified as a major challenge. Young and well educated, their contribution to Irish society has been significant but unsatisfactory. They are often employed in basic jobs where their professional skills are not used. Their successful integration should be made a priority. Most of what is contained in this report has been staring government in the face for some time. But, insofar as it represents independent, dispassionate advice about what should be done, it is a useful exercise. Mr Cowen has been offered a challenging agenda.