The Labour Party's economic policy paper, published yesterday, should initiate a debate on the future direction of economic policy in this State. Quinn yesterday and the by the Tanaiste and Taoiseach in recent weeks is about the size of the State. In very broad terms, the choice is, as Ms Harney put it, between Boston and Berlin - between moving Ireland more towards the American model of low taxes and minimal state intervention or the European model incorporating higher taxes and stronger levels of social provision.
The idea of spending more on areas such as health and education is likely to win voter approval. In the latest Irish Times/MRBI opinion poll health came high on the list of voter priorities, with almost two-thirds of people interviewed placing health among the top three issues they want addressed. A pre-Budget opinion poll last year saw health, housing and education all rated by respondents as more important than tax cuts. Looking at the top three choices of voters at that time, 88 per cent of those surveyed opted for improved public services over using the money to develop infrastructure, cut taxes or reduce the national debt.
Labour proposes spending an additional £1 billion a year over three years on a variety of projects, particularly in health, education, child care and social disadvantage. The detail of these projects has not been spelt out but will be the subject of a series of releases by the party over the coming weeks and months.
The money will come from continuing Exchequer surpluses. In a climate where the Government can report a surplus of £2.9 billion - as it did yesterday for the first nine months of the year - that is an easy option but, by 2003, a small deficit is forecast. The surplus on the social insurance fund would also be targeted, while the contribution to the new pension fund would be cut to 0.75 per cent of GNP.
The policy document was robustly attacked by Fianna Fail yesterday. The party took particular issue with the possibility of plundering the social insurance and pension funds. Perhaps the biggest fear of those who believe in keeping public expenditure down, is the State's experience in the 1970s and 1980s. At that time, increased borrowing to pay for services appeared simply to disappear down a black hole. Fianna Fail rightly points out that the last time a large portion of the national income was spent by Government, the State was nearly bankrupt and unemployment was at its highest ever level. Labour argues that this does not have to be the case. It is advocating a "value for money unit" to evaluate spending. The danger must be that the money would be swallowed up almost exclusively by increased public service pay rather than in improving services.
Simply throwing money at the health service may not cut waiting lists or take elderly people from trolleys in our hospitals. Only funding backed up by reform of the entire system can achieve that. But the generally agreed priority of helping those on lower incomes should be advanced by the document's commitment to ensure that the first £200 of weekly pay would be tax free.
The trade off between tax cuts and public spending may well form the battleground on which the next election will be fought. With an election likely next year, a debate on how to spend the proceeds of our new found wealth is welcome.