Wednesday, 27 June 2018
The Government is very interested in and very welcoming of an open debate on budget priorities. I came from the National Economic Dialogue this morning in Dublin Castle where Government is engaging with unions, employers, NGOs, charities and academic experts. It will run all day today and tomorrow and Cabinet Ministers will attend it over the next two days. It is an initiative Deputy Howlin was involved in establishing when he was Minister for Public Expenditure and Reform. It is one worth continuing because we want an open dialogue on budget priorities. That is exactly what is happening.
Where I differ with Deputy Howlin is I think it should be obvious to everyone that the best way to reduce debt is first to stop borrowing and after that to run a surplus and run some of that surplus to pay down the debt. The truth is we are still borrowing. This year we will spend more than we raise in taxation. Even next year, where we are targeting a budget deficit of 0.1% of GDP, we will still spend more than we raise in taxation. That is not sustainable. We are in a situation in which the economy is growing strongly and where we are heading for full employment. We should, like other small countries such as the Nordic countries, the Netherlands and Luxembourg, which are doing well economically, be getting to the point where we are running a surplus. Our national debt is falling as a percentage of GDP but it needs to fall faster. When we went into the last financial crisis just over ten years ago, our national debt was €15,000 per person. Today it is €45,000 per person. That means that ten or 15 years after the financial crisis our national debt per head is three times what it was back in 2007. That is major risk. We have an opportunity now to break the boom-bust cycle, not to repeat the mistakes of the past and not to sign up the philosophy of "When I have it, I spend it and when I do not, I borrow it." We have an opportunity now to break the cycle of boom and bust and not to repeat the mistakes of the past. In our view that means balancing the budget next year, running a deficit of roughly 0.1% of GDP, and in the year after that running to a surplus and using that to pay down our debt so if we ever enter another financial crisis, downturn or recession, we will not have to make the kind of painful decisions that were made during the lost decade I spoke about. It may not be politically popular. I am sure there are way more votes in cutting taxes and ramping up spending but we will do the right thing because we are much more interested in the next generation than we are in the next election.
I reassure the Deputy that we have set out a plan to invest €116 billion over the next ten years in our public infrastructure, healthcare, housing, tackling climate change, new schools and social infrastructure which we both agree is so important. We are not waiting for ten years to do it. If we compare this period with the same period last year, there has been an 18% increase in capital spending. That is 18% more spent on our public infrastructure. Next year we will increase it by another 25%, going from a country that is a low spender on public infrastructure to one of the highest spenders in public infrastructure in the coming years.