Opinion: Ireland's strong economic performance should permit key budget reforms, writes Fine Gael finance spokesman Richard Bruton.
For many years now economic growth has generated more than adequate tax revenue to fund emerging needs in our public services. Public expenditure has grown by 85 per cent in just five years. In the case of health it has almost trebled, rising by a staggering 125 per cent.
Spending per customer in many areas of the public services is now at the upper end of the former 15 EU member states, but service delivery seldom matches that ranking. The priority in public expenditure now is to generate proper value for money from our much higher plateau of public spending. Attention to value for money has been lamentably absent under this Government.
It is time to introduce radical change to our financial procedures. Fine Gael in Government will see that:
Outcome and performance indicators become central to the approval of annual spending budgets. A failure to meet targets should trigger an independent review of the programme.
Every Minister is obliged to sign off with a compliance statement that robust financial procedures are being observed by his department.
Annual cost estimates for different tax shelters are presented along with performance indicators justifying their worth.
A resource fund is set aside each year for new initiatives emerging from a programme of reform.
A draft budget is presented in October detailing both spending and tax proposals side by side, with six weeks consideration before final adoption.
Some financial procedures have been allowed to rust over the past five years. Even if we leave aside the crass decisions on the Punchestown Equine Centre, electronic voting, Stadium Campus Ireland, and the Kenmare marine facility, we have still witnessed a constant flow of dubious spending.
Expensive new health units stand empty. Asylum facilities have been bought that were not fit for occupation. Medical cards for persons aged over 70 and pensions for persons with pre-1953 records proved ten times more expensive than estimated by the Minister when he sought approval. Some of this may be put down to sharp political practice. However, at a deeper level it exposes serious system failures that allow these decisions to proceed unchecked.
The reaction of Minister Séamus Brennan to the findings of the Comptroller and Auditor General on the Roads Plan revealed just how cavalier the attitudes are to financial control.
The Comptroller found that mis-estimation of the true cost of road projects added a staggering 60 per cent amounting to €4,000 million to the Minister's original estimate. To paraphrase the Minister, his response was: "Everybody knows this is the way we do it. We start with gross underestimates and only when the Government has made an irreversible commitment does the full picture emerge." There was no question of an apology or being ashamed.
It is time to have an NCT on the control systems on our public finances. They have suffered a remarkable number of spectacular breakdowns. Brakes seem to fail, particularly at election times. When things go wrong, it is the ordinary passengers who are put out to push, and the weakest are left to walk.
The problem is that budget day has become a charade. The hype of budget day feeds short-term opportunistic thinking. Rabbits are pulled out of the hat. Ill-thought out ideas shelter behind a veil of secrecy. Tax concessions are introduced on a whim without any evaluation. New initiatives are tacked on but spending programmes are never reformed. When money is tight, the bureaucracy is protected while frontline services suffer. Stealth taxes shore up folly. Spending is approved without any targets for the outcomes to be achieved. No one takes responsibility when a proposal turns out to have been ill-conceived.
Parallel to new financial procedures, a programme of public service reform must become a central framework underpinning expenditure programmes. The system of benchmarking was supposed to herald a whole new era in relation to pay and performance in the public sector. However, the Government totally undermined the potential of this new framework, first by concealing the basis of the awards, then by the abject failure to negotiate any reform. If benchmarking is to continue it must be placed at the heart of a new programme of public service reform.
Low rates of corporation tax and income tax have helped deliver a more dynamic economy. These low rates have been compromised in the last number of years. Keeping headline rates low while modest earners are pushed into the top rate and money is siphoned off in stealth taxes is not a low-tax regime. Loading development levies, commercial rates, stamp duties and service charges on to the most dynamic elements of our community is storing up problems for the future.
Ireland faces tough competitive conditions in the years ahead. We must remain committed to maintaining a low-tax environment that is supportive to enterprise and initiative. The strong economic performance will permit further key reforms in our taxation regime if waste is curbed.
The spending in 2000-2 delivered little in the way of real service improvements. The promises turned to ashes. A repeat of that performance will not deliver the improvement in public services which our people need.
That is why Fine Gael will champion genuine reform in pursuit of zero waste with the public's taxes
Richard Bruton TD is the Fine Gael finance spokesman
