THE Irish Fiscal Advisory Council, in its latest report analysing Budget 2019, published on November 28th, stressed the need for prudence in expenditure given the global uncertainties that face Ireland. It is not impressed with the government’s propensity for spending every bit of spare cash that comes its way – a sure sign that a general election cannot be too far off.
Unfortunately, the extra revenues the government is keen to blow now have come from unexpectedly high corporation tax receipts that are not sustainable, just like the stamp duty and other property taxes that fuelled the economic excesses of the Celtic Tiger era, and when they suddenly dried up, the country was plunged into a downturn that ultimately led to a humiliating IMF bail-out. One would have hoped that lessons would have been learned from the economic crash of a decade ago; some were, with the banks having stopped reckless lending practices, but the current crop of politicians seems to be forgetting about the importance of handling the public finances responsibly.
The National Treasury Management had already stated in its mid-year report in July that the Irish economy’s ability to absorb future shocks is limited by the fact that we are still borrowing in order to pay interest on the still substantial national debt accrued from the bail-outs. The Department of Finance also expects the exchequer shortfall to be greater for this year than it was for 2017.
Surely, the most prudent course is to balance the books first? That and building up some sustainable surpluses.
The Taoiseach promised at the recent Fine Gael Ard-Fheis that, over five years, in government, they would incrementally increase the threshold for paying the higher rate of income tax to €50,000. Such auction politics beget a slippery economic slope.