The Government must stop believing that it can deal with the current economic crisis by just cutting State spending, the Labour Party warned today.
Producing an 11-point recovery plan, Labour leader, Eamon Gilmore said Fianna Fáil "has brought the Irish economy into recession and has no strategy to get us out of it. Although the recession has been made worse by the international credit crunch, it has its origins firmly in the house-price bubble which Fianna Fáil stoked, mishandled and refused to dampen."
Construction workers, who no longer needed to build houses that cannot be sold, should be put to building schools and installing insulation, he said.
The Government should put forward a four-year strategy to improve the Exchequer's finances – not one that opts to do too much too quickly. The position of projects in the National Development Plan hierarchy should be changed to focus most on those "with a high economic and social return", i.e. schools and social housing "where advantage can be taken of softer tender prices in construction".
Education spending should be ring-fenced: "Athough most of the money spent by the Department of Education is not categorised as 'capital' spending, education is the most important investment we make in our people and in our future. It is vital to the long-term success of the Irish economy, and to a thriving society," said Mr Gilmore this afternoon.
Meanwhile, the Labour Party is recommending that the performance of the Central Bank and the Financial Regulator over the last five years should itself be quizzed.
"The Government should commission a look-back review of the performance of the Central Bank and the Financial regulator, to examine how they exercised their regulatory functions over the past five years," he said.
"The main factor precipitating the recession is the collapse in house-building, and the problems besetting the broader construction/property sector. While the 'Celtic Tiger' economy was export-led between 1993 and 2001, from 2001 onwards growth was driven by domestic demand, and particularly by house building.
"The economy was allowed to become over-reliant on the house building sector in respect of employment and tax revenues to a dangerous degree," said the Labour Party document.