OECD Joins Chorus Of Concern Over Irish Spending Levels

by Jason Gorringe, Tax-News.com, London

29 April 2002

In its semi-annual Economic Outlook report, released recently, the Organisation for Economic Cooperation and Development joined the growing chorus of voices concerned over current levels of government spending.

The Irish government was recently criticised by the Economic and Social Research Instiute (ESRI) and the Irish Business and Employers Federation (IBEC), who warned that government spending levels are a 'recipe for disaster'.

The OECD, once one of the cheerleaders for Ireland's economic success, supported this view, observing that: 'for an economy experiencing a temporary downturn, the shift in fiscal stance from sizeable structural surplus to small deficit has been inappropriately large and suggests weakness in the budgetary system.' It added that: 'Current public expenditures need to be better managed to avoid the choice of either allowing further fiscal slippage or cutting infrastructure investment.'

With the General Election date now officially confirmed as May 17, it seems that whichever party is successful, some tough choices will have to be made. However, economists are keen to point out that increasing taxes is not the way forward, as this would damage the economy's international competitiveness, which in turn would threaten growth prospects.

Fianna Fail, which for the past five years has shared power with the Progressive Democrats, released its manifesto on Thursday. In the pre-election document, the party stated that:

'We believe that the clear lesson of the times that Ireland has left behind is that we cannot tax and spend our way to employment and better services. In fact, the surest way to cause unemployment and undermine the public finances would be to implement unsustainable spending plans or to try to return to the days of high taxation.'

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