This week will see a range of documents focused on Ireland’s national economic planning. The Economic and Social Research Institute (ESRI) has already published a medium-term outlook and is due to release a new quarterly report, as is the Central Bank. Meanwhile, a medium-term financial framework for the State is due to go to Cabinet and, if approved, is also likely to be published this week.
It is a safe bet that both the ESRI and the Central Bank will renew their warnings on the trends in the national finances, as the Fiscal Advisory Council is also likely to do at an Oireachtas committee on Tuesday. And that the Government’s strategy document will say that enough is being done to prepare for any likely shocks by continuing to put cash into two funds for the future and keeping the budget in surplus.
This does, indeed, create some leeway if trouble hits. So, too, does the sum of over €40 billion which the National Treasury Management Agency (NTMA) holds in cash reserves on behalf of the State. However, such is the scale of the State’s reliance on corporate tax revenue that a permanent and significant fall-off would still create significant problems. Spare funds, by definition, are designed to cover temporary problems rather than permanent ones.
Nonetheless, the Coalition is correct to plan to use much of the resources available to boost State investment in key economic and social infrastructure. Doing so efficiently, of course, remains a major challenge. But the consequence of doing this is that day-to-day spending needs to be better controlled. The plan will also probably show that the scope for budget giveaways will be limited.
RM Block
What is needed, in other words, is balance and a plan that will tie the hands of the Government and ensure that it stays within certain parameters in terms of spending increases. The annual overruns of spending – likely to approach €4 billion this year – need to end, as they make a nonsense of each year’s budget. The risk of a fall-off in corporate tax remains, but sensible and consistent budgeting can contain it - to some extent at least.
