Big spending increases a thing of the past: Cowen

DOUBLE-digit spending increases are now “a thing of the past” following years of rapid rises in public spending, Finance Minister Brian Cowen said yesterday.

Warning that the rate of increase in current public expenditure would have to be “much lower” than in recent years, Mr Cowen yesterday told the Fianna Fáil parliamentary party meeting that Ireland’s prosperity would now have to be protected.

In a largely pedestrian speech, Mr Cowen said the party’s ambitious investment plans could only be implemented if a responsible fiscal policy characterised by balanced budgets and lower rates of growth in public spending are followed.

Also focusing on the future of the economy in his keynote speech to TDs and senators in Druids Glen, Co Wicklow yesterday, the Taoiseach Bertie Ahern criticised those who have been “confidently predicting economic recession and the end of our strong performance of recent years”.

“Some appear to have taken a strange delight in a return to the bad old days,” he said.

While conceding that housing output is going to be significantly below the record levels of recent years, the Taoiseach insisted that next year will see dramatically high rates of housing construction by Irish standards and, in relative terms, by international standards.

“This will, of course, have an effect on the performance of the economy and the revenues received by the Exchequer,” he said.

“However, I want to take this opportunity to state loud and clear that the Irish economy is strong and growing,” he said.

Mr Cowen further insisted that if the economy is to avoid the “stop-start cycle” which has plagued so many developed economies, people have to accept that double-digit spending increases are a thing of the past.

“As our economic growth rate moderates to a mature, fully-developed level, we will have to ensure that our spending growth reflects that new, sustainable economic reality.

“This all helps to provide the basis for secure economic prosperity into the future. By acting responsibly, we are ensuring that the economy will be able to respond to future shocks without disturbing the low, fair taxation model which today underpins our prosperity,” he said.

The options of keeping spending level higher for the next few years at the cost of higher borrowing, higher taxes and spending cuts later on or sacrificing the National Development Plan were both ruled out by Mr Cowen.

“Neither option is responsible or palatable. The short-term gains would only be a fraction of the long-term costs and this country knows that from experience,” he said.

“Pretending that we can still increase day-to-day spending rapidly would be the wrong thing to do and would undermine our current prosperity, erode confidence in our economy and put at risk the opportunities of future generations. Anticipating economic reality is the best means of protecting our prosperity.”