Paschal Donohoe: Sticking to spending plans will deliver more housing and better services

Calls to loosen the purse strings are hard to ignore in a time of surplus but we cannot risk a return to boom and bust spending 

Paschal Donohoe says more houses and better public services will be achieved by sticking to spending plans.

Despite the fact that 2008 is a decade and a half ago, the scars from that time, for many, have yet to fade.

That is why remarks made in recent days by the Irish Fiscal Advisory Council — the State’s budgetary watchdog — that the Government’s spending plans risk “repeating the mistakes of the past” were noteworthy.

The events of that time are still clearly etched in my memory.

My most searing memories are not the historical events: The tough budgets, the bailout programme, or the banking crises.

Instead, it is the imprint of the thousands of individual discussions and contacts with the constituents that I serve in Dublin Central. Every Friday morning, I would arrive in my office for a day of clinics. The day was full of personal financial crises and trauma.

I would frequently leave a meeting to meet a queue of constituents; there was no laughter, the chat was so grim.

As our economy went into freefall and our government confronted
insolvency, services were cut and people’s lives were unimaginably shaken as austerity took hold.

But I also remember what I said to constituents in these endless meetings: We have to get out of the bailout programme. We cannot default on our debts. We must stay in the Euro. We had to reduce spending. I did not believe in TINA (There Is No Alternative). There were alternatives, but they could cripple our country for generations.

This has been my defining political experience. It has shaped the politician that I am and many of the decisions I have made.

The aftermath of the crisis and a period of high economic growth created soaring expectations. But, as minister for finance during that time, I continually made the case for running budget surpluses — for not spending all of the taxes that we collect. We delivered this, twice.

A surplus is not a cure for all ills. It’s not a guarantee that a future crisis can be avoided. Or that you can avoid a bust. But it is the most effective insurance policy to have.

As corporate taxes increased, they were not fed into permanent spending increases. Instead, they helped grow the surplus.

I have attracted much criticism for this approach. Some have contended that the surpluses should be much bigger. Far more argue that the surpluses should be a lot smaller, that we should have spent more or taxed less. That is the nature of politics.

My answer back is that in the era of Brexit, Trump, a pandemic, and soaring inflation we can still invest in our future. This is rare now and rarely happened in our past.

Without this approach, we would simply not have had the ability to intervene when the global pandemic hit; when the State stepped in to secure the wages of hundreds of thousands of our people who could not work, something unprecedented in our economic history.

Similarly, the widespread predictions of imminent austerity after the pandemic simply did not come to pass.

This was thanks to the work of the European Central Bank. But also due to choices made before the pandemic.

'In the era of Brexit, Trump, a pandemic, and soaring inflation we can still invest in our future,' says Paschal Donohoe  

So anything can happen. The worst is never certain. Don’t bank on the best.

We now look to Budget 24, and my work for the second time as Minister for Public Expenditure. I have been already working closely with Finance Minister Michael McGrath for many months on the right level of spending for next year. This was laid out in the Summer Economic Statement.

The Minister for Finance and I are working closely to put a plan in place that will continue the investment we have seen in recent years, that has seen the biggest staff increase in nurses and doctors since the HSE was established, an almost 80% increase in number of special needs assistants in our schools, and huge increases in investments in new homes, schools, and buses.

I hear calls for more money to be spent, for the purse strings to be loosened. But I must and I will stick to the spending plans announced for next year. I appreciate this is a difficult argument to make at a time of a surplus.

Each call to spend more is backed up by a worthy case and a compelling argument. All Government ministers confront difficult circumstances every day.

But our budget watchdog has reminded us of the risks we must be aware of. And Sinn Féin would spend every cent we have, make inflation even worse, and plunge us back to boom-and -bust spending. They are for everything that is popular and against nothing that is difficult.

That is why sticking to our spending plans is so important. It is a recipe for more houses, better public services, and improving standards of living for Ireland.

• Paschal Donohoe is Minister for Public Expenditure, National Development Plan Delivery, and Reform.