Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

In today's Irish Examiner, Daniel McConnell reports on a new EU study showing that this Government is putting the recovery at risk by political budgeting. The report states that recent fiscal policy decisions are influenced by the current political context, which is the upcoming election and the disgraceful auction politics we are seeing from the Government. The report points out that while the Government erodes the tax base, State investment will remain well below the euro area average and, in fact, is being revised down by the Government. This means that investment in infrastructure needed to support business will not happen. Investment in public services such as health care and education will not happen.

The report is a damning indictment of the Government's pre-election politics, which is straight out of the Fianna Fáil playbook. What is worse is that the Government parties are only warming up. The Fine Gael-Labour Party election promise to eliminate USC will cut the revenue base annually by €4 billion to €5 billion. This, of course, is to be paid for by what the report describes as "strong but generally volatile corporate taxes". This is just like Fianna Fáil's tax-cutting measures, which were based on unexpected stamp duty revenues, but what the Government is proposing is even worse than that. When the recession hit in 2008, households - or most of them, anyway - were able to cut back. Businesses and voluntary groups were able to cut back and the State was able to borrow. None of those conditions holds today. The report states:

External risks are increasingly tilted to the downside as the slowdown in China and other emerging markets could affect global trade more widely. The high levels of private and public debt continue to make Ireland vulnerable to potential increases in interest rates and other shocks.

Given that the Government is eroding the tax base and the safety nets have all been used up, when the next economic shock hits from China or elsewhere as it will at some point we will be much more vulnerable than we were in 2008.

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