Sir, in his letter last Saturday Charlie McCreevy quite properly draws attention to Ray McSharry's achievement in reducing public spending between 1987 and 1989, with the aid of Fine Gael's "Tallaght strategy". I must however, correct him on his figures: as a proportion of GNP current spending in those two years was reduced from 53 per cent to 44 per cent - not to 38 per cent as he stated. Exclusive of debt interest payments it went down from 42.5 per cent to 35.5 per cent.
But when in 1989 Fine Gael's support from the Opposition benches was replaced by Progressive Democrat participation in Government, the picture changed radically. in the following three years the volume of current spending exclusive of debt interest rose by 14.3 per cent, viz. an average volume increase of over 4.5 per cent a year. This raised the share of GNP absorbed by this spending from 35.5 per cent to 38.5 per cent.
Charlie McCreevy's ingenuity in describing the failure of expenditure control during the period of the FF/PD Government as a deliberate countercyclical policy is novel and ingenious, and deserves marks for a good try. But it will convince nobody.
As to the burden of taxation: During the FF/PD period in Government between 1989 and 1992 the share of personal income taken by income taxation including PRSI did not fall, but actually increased, from 19.7 per cent to 20 per cent. A principal reason for this was the fact that during this period personal allowances were increased by an average of less than 1 per cent a year, which because of inflation substantially eroded the impact of reductions in tax rates.
The personal tax burden rose further to 20.8 per cent during Fianna Fail's remaining period in power, but has declined again since 1994. A major factor in this recent decline is the unprecedented increase of 24 per cent in the Personal Tax Allowance in the past three years. I must, incidentally correct an error in my article of May 17th: this increase in personal allowances is four times greater than the rate of inflation not six times greater as I erroneously stated.
That slip apart, which I am glad to have the chance to correct here I have not, as Charlie McCreevy seems to suggest, either invented or distorted these figures. I have simply extracted them from our National Accounts because I believe they are relevant to the current electoral debate.
- Yours, etc.,
Rathmines,
Dublin 6.