Ahern's Agenda

FIANNA Fail has to develop a distinctive economic message to sell to the electorate. And Bertie Ahern, the party leader, will have to do much of the selling. While many of the specifics still have to be tied up - and will remain under wraps until the election campaign starts Mr Ahern is clear about the main directions. Fianna Fail will put forward a package based on fiscal prudence and an enterprise culture, but leavened with consideration for the less well-off and elements of State-driven development.

Bertie Ahern is confident that detailed consideration of party policies by TDs and outside experts - culminating in a two-day think in last week - will lead to the party being able to strike the right balance.

The economic agenda is moving on, he says, and policy makers must respond. Technology, changing patterns of world trade, and new work patterns are combining to create a new economic backdrop.

"The principles of economic success in this new environment will not be the same as they were ten years ago, or even as they are today."

"The basics will be the same," he says. The goals of policy will be to sustain growth, create jobs, cut unemployment and raise the quality of life. But other considerations are coming into play.

"Why is there still such social deprivation and such social exclusion, despite strong economic growth?" Growth is necessary he says, but it is not solving all societies' ills. New areas of technology and the growth of areas like services also create new issues for policy.

So how would Fianna Fail strike the balance? An important part of its platform will be a pro-enterprise agenda. "We must give entrepreneurs a real future," Mr Ahern argues. "The risk-takers must be rewarded." A policy of tighter control on spending and tax reform will be central to the manifesto, while the party also promises dearer focus on what business needs from the education and training system. Party spokeswoman, Mary O'Rourke is doing much detailed work in the business area and policies look set to include new taxation measures in areas like capital gains and a range of specific measures directed at small and growing companies.

Fianna Fail's policy approach to business would not be entirely "laissez-faire," however. Mr Ahern argues that new approaches can be taken by State agencies to develop targeted areas of indigenous industry. The party has closely examined the potential from targeted investment in research and development, he says, and how other indigenous sectors can develop as successfully as the software sector. Meanwhile a new approach to encouraging apprenticeship-type training will form part of what the Fianna Fail leader says will be a radical education package.

What of the commercial State companies? Mr Ahern has made it clear that Fianna Fail will not go down the out-and-out privatisation route favoured by its prospective partners, the Progressive Democrats. But he does see the potential for Irish institutional investment in state companies. Huge amounts of investment capital leave the State each year, he points out, and there are opportunities to direct this towards State industry.

But in the wake of the Budget, it is in the area of public spending that Fianna Fail has been directing its attack, pointing to a key focus of its overall strategy. Mr Ahern is critical of the 20 per cent rise in current spending over the past three years. "This was the time when we should have used the healthy economy to hold spending in check," he argues, warning that "we are going to be in trouble, we are going to pay the price."

Questioned on why recent Fianna Fail governments had also presided over rapid spending increases, Mr Ahern argues that much of the pressure in the early 1990s came from pay increases and other measures postponed from the 1987 period of cutbacks. If returned to government, Fianna Fail would insist on a tough line on spending, he, promises.

With EMU just two years away and the likelihood of Ireland receiving less from EU structural funds after 1999, tighter control of the public finances is essential, he argues. Fianna Fail is calling for a green paper on the shape of the 1999 Budget to examine: now how to prepare for these challenges.

With strict rules limiting budget deficits inside monetary union "we have to accept that discipline is essential and we have to plan our way." Mr Ahern believes that exchequer borrowing should be eliminated entirely by 1999.

Deficit budgeting will be irresponsible in a single currency area, he says. For this reason the Government needs to start to prepare now for 1999. Not enough focus is being put on what happens once monetary union starts. Inside the single currency, the Government of the day must have some flexibility to adjust the national budget in response to an economic downturn or a problem specific to Ireland. It must be able to do so without risking a breach of the exchequer borrowing limit which will be held to an absolute maximum of 3 per cent of GNP.

Spending control is central to the required budgetary adjustment, he believes.

The Government's 2 per cent limit on real spending growth failed, he says, as Departments merely saw it as a floor from which to bargain. Fianna Fail would consider an absolute cap on spending as a percentage of GNP, which would be tougher but better understood.

A new approach is needed, involving an examination of the value for money from every area of spending, to stop the relentless spending rise. Experience shows that this does not mean donning the hairshirt, he believes, but would actually stimulate confidence and investment and thus underpin sustainable growth.

While recognising the challenges in budgetary and other policies of monetary union, Mr Ahern has no doubt that Ireland should enter, even if Britain stays out. "It has to be good to be in," he says, as it will lower transaction costs for business and maintain low interest rates. Remaining outside, on the other hand, could deter tourism and inward investment.

The potential growth markets of the next 10 years will also be EMU members, he says and Ireland must be a full member of this single market. Staying out and keeping the option of devaluing the pound would not be a wise strategy, as "devaluation has few, if any, long-term benefits." He also believes that countries which stay out will not get away with aggressive devaluations against the euro.

"The main task of the next Government will be to manage the transition to EMU successfully," he says. It remains to be seen whether he will be the man to lead the administration facing this challenge.