Room For Manoeuvre

After a generation in which policy-makers struggled with the problems brought about by sluggish economic growth and high unemployment…

After a generation in which policy-makers struggled with the problems brought about by sluggish economic growth and high unemployment, they must now confront the problems of success. The National Development Plan, scheduled for publication on Monday, will give a detailed picture of the Government's investment plans for the next seven years. But the estimates published yesterday provide an overview of the government's main priorities for next year. On the basis of the estimates, it is clear that the Government is ready to respond to the demands of the social partners, articulated in the recent report of the National Economic and Social Council. It is planning record levels of investment in roads, transport services, housing and water services. The proposed 25 per cent increase in Government funding for capital programmes designed to upgrade our creaking infrastructure is especially welcome; the potential risks the infrastructure deficit represents to economic health has been well documented in recent years.

The surge in proposed spending for social infrastructure is also overdue; the economy may be booming but the citizens of this State are still denied the kind of child care, education and social facilities that the rest of the EU take for granted. The main problem in these areas is that there is a lot of ground to make up. It remains to be seen whether the ambitious plans to be outlined in the National Development Plan can be realised in practice. Achieving a strong return from the big increase in investment spending by boosting the economy's productive capacity is a significant challenge for the Government. We have huge needs in infrastructure development, but the Government must ensure that the once-off opportunity provided by the current strength of the exchequer finances is not squandered through inefficient decision-making and poor project management.

To his credit, the Minister for Finance, Mr McCreevy has managed to keep current public spending in reasonable check, despite the robust state of the public finances. For next year, he has projected an increase of some 6.8 per cent in day-to-day spending although critically this does not include the cost of any public service pay deal that might succeed Partnership 2000. Social welfare increases on Budget day will also add to spending for next year.

As with investment spending, the Government must strive to get value for money from its day to day expenditure. The rising public sector pay bill is a particular problem; it has increased by 50 per cent over the last five years but this has not translated into a commensurate improvement in the level of service to the public. Mr McCreevy is right to insist that the Government can no longer tolerate the special increases and leapfrogging claims which have become part of the public sector pay landscape. Public servant are, of course, entitled to additional increases if these are pegged to changes in productivity. But too often in the past the State paid out more without receiving any corresponding rise in productivity.

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The strong state of the public purse means that Mr McCreevy should have sufficient room for manoeuvre in next month's Budget to lay the foundation for a new national agreement, through tax cuts aimed particularly at lower and middle-income earners and social welfare measures designed at giving a real lift to the worst off in this society. But the trade-off must come in a new way of determining public sector pay as part of any new pact.