Fianna Fáil backs approach of Irish Fiscal Advisory Council
Ireland needs to adopt a prudent approach and work towards ending deficits in advance of inevitable downturn, says McGrath
Fianna Fáil spokesman on Finance Michael McGrath said the party would be in support of the reintroduction of some form of SSIA-type (special savings incentive account) scheme. File photograph: Alan Betson
IFAC has recommended no more than €800 million in new measures be introduced in the budget, due in the autumn, as the Government aims to eliminate budget deficits and run a surplus by 2020.
Mr McGrath said the Government should spend no more than €3.4 billion in the budget which would allow it spend €800 million in new measures.
He said while Sinn Féin and some other parties had argued for a total spend of around €5 billion, Fianna Fáil believed that €3 .4-billion spend was the correct approach.
“It is open to the government to go beyond €800 million, but that will involve raising that extra money through various revenue raising methods,” he said.
“Our perspective is if the package goes above €800 million and isn’t funded elsewhere then you are increasing the deficit and increasing borrowing.”
“You end up increasing the national debt and you are doing so at a time when the economy is probably around the top of the economic cycle so that would not be a prudent thing to do in our view.”
Mr McGrath said the IFAC approach was the appropriate and prudent course of action to take, given the uncertainty surrounding the economy both internationally and domestically with Brexit and possible changes to the international tax regime particularly in relation to corporate tax all worrying factors.
He said that there was also uncertainty stemming from an ongoing trade war between the United States and others as well as growing protectionism which could have a huge impact in Ireland given the openness of the Irish economy.
“If there are to be significant international developments, they are likely to be negative for Ireland as we approach the top of the economic cycle so it’s not the time to put your foot on the accelerator but to drive the economy cautiously and prepare for an inevitable downturn at some point.”
Mr McGrath said the budgetary plan to run a very modest deficit next year of 0.1 per cent of GDP was correct and the priority now was to deliver a budget that met that target. Ireland was now ten years on from the crash and the pace of reform of the public finances had slowed in recent years, he said.
“We do need to get to grips with the budget and balance the books - the cost of borrowing for Ireland now is remarkably low, but that’s not to going to last indefinitely,” he said.
Mr McGrath said Fianna Fail is open to the idea of an SSIA-type (special savings incentive account) scheme as proposed by the Governor of the Central Bank, Philip Lane recently to help cool economic growth. The scheme was first introduced during the boom to encourage saving and offered a top up of 25 per cent from the State.
Mr McGrath said any new scheme should be linked to assisting individuals and families to purchase their own homes and address the growing housing crisis.
“We think the SSIA could play a useful role in helping individuals and families to save to purchase a home and we think a scheme could be designed to help bridge the affordability gap that’s there at the moment, as well as addressing the issue of overheating which is a real risk for the economy.”