Editorial comment: Economy

The overriding priority has to be finishing the work of stabilising the national finances

Ibec, the business lobby group, has called on the Government to lobby for a relaxation of EU rules to allow an increase in State-funded investment in 2016. Its pre-budget submission also calls for cuts to income tax and a range of pro-business measures aimed at both entrepreneurs and foreign direct investment. Its key argument on the need to prioritise investment is valid, but if this is to happen it must be on the basis of a strict ranking of economic and social priorities.

Like other lobby groups Ibec needs to be realistic – the overriding priority has to be finishing the work of stabilising the national finances, a job as yet far from complete. Of Ibec’s 26 specific recommendations, 16 would cost the exchequer money in the short term, five would be cost neutral while just one, the reintroduction of third level fees, would raise money. In assessing the rival demands of lobby groups, the Government must consider their impact on limited public finances.

Ibec takes issue with the way new EU budget rules are being applied to Ireland, arguing that they underestimate the economy’s potential growth rate. Ireland should be able to invest more, it argues. The EU rules do, indeed, appear inflexible on the issue of investment, which has been slashed during the downturn. However, the Fiscal Advisory Council has argued that the Government may not have as much room as it thinks it has in terms of the overall budget sums. In other words caution is essential.

It is also vital that investment spending delivers and does not get siphoned off into excessive profits by a range of companies and advisers, derailed by official bureaucracy, or driven by local political favouritism. In framing the budget, the Government now faces a host of demands. Perhaps this is inevitable given what we have been through. But in looking out over the next few years a sense of priorities and of how the public finances should be structured need to underpin annual budget decisions. The days of adding up the numbers and seeing what is left over to “give away” in higher spending and lower taxes must come to an end.