IMF: Government needs to increase capital spending

The Government has signalled its desire to spend more on key capital projects as the IMF in a new report said that “robust” economic growth may give the Coalition a bit more room to invest in the country’s infrastructure.

In its latest assessment of Ireland’s prospects following the exit from the international bailout in 2013, the IMF urged the Government to make sure tax breaks designed to encourage house building and stem high rents and homelessness benefit those who are most in need.

It warned that plans to phase out the Universal Social Charge (USC) “should not come at the expense of the breadth and stability of the tax base”.

“With capital expenditure already well below peers, well-targeted increases are needed to buttress Ireland’s competitiveness and support the population’s welfare,” said an IMF spokesperson.

Public Expenditure Minister Paschal Donohoe last night signalled his desire to increase the Government’s capital spending, given borrowed money is very cheap at the moment.

Mr Donohoe told the Irish Examiner Ireland must do so to deal with our growing population and also to combat the impact of Brexit.

“Minister Noonan is leading work with the EIB [European Investment Bank] on this and I will be prioritising capital spending in 2018 and beyond,” he said.

Housing Minister Simon Coveney said at present the Government can access money cheaply, but the difficulty is spending it and remaining compliant with strict EU budgetary rules.

“We need to find ways to either agree flexibility with the EU commission or find other ways of financing projects that are within the rules that allow us to build now and pay later,” he said.

He said that public-private partnership projects to build schools are more cost effective now than 10 years ago and he would like to see them used in a much more ambitious and direct way.

The Department of Finance said the Rebuilding Ireland housing plan is this Government’s top priority.

On the IMF’s comments on proposed USC cuts, Finance Minister Michael Noonan’s spokesman said the Programme for a Partnership Government commits this Government to the creation of a more social economy and specifically recognises that economic and social progress go hand in hand.