It is part of a process of reducing the gap between revenue and spending (including spending on interest payments) to 3% of GDP, in accordance with EU rules and the Maastricht Treaty which the Irish people approved in 1992. This reducing of the gap is called ”fiscal consolidation”.
In 2009, the fiscal consolidation was 7.6 billion euros,
For 2014, a consolidation of an extra 3.1 billion euros must be made.
And , finally, to get on target, yet another consolidation of 2 billion must be made for 2015.
While these figures show that a consolidation of 22 billion has already been made, and the remaining consolidation is “only” 6.6 billion, the truth is that the further one goes along a road like this, the harder it gets.
I think there is a strong argument for announcing, upfront next month, a full programme of all the cuts and tax increases for all three remaining years- 2013,2014 and 2015. We should have a three year budget, rather than a one year one.
The last time Ireland faced a similar crisis , in 1981, I was the Minister for Finance. Within 4 weeks of taking office I introduced and passed an emergency budget in July 1981.
I then prepared a White Paper on how the country could avoid getting into the same sort of mess again.
But the reforms proposed in that paper are just as relevant to today’s problem, as they were to those of the early 1980’s.
In “A Better Way to Plan the Nations Finances, I suggested a new timetable for budget preparation for the following year which would see the proposed tax and spending measures published in the previous October, allowing 2-3 months for debate, and even changes, before the measures took effect.
And the 1981 White Paper suggested a change to Dail procedure to allow opposition parties to make detailed proposals for amendments to spending plans, so long as they put forward equally detailed alternative ways of bridging the gap.
It seems to me that it would be very helpful today if information was published, on a regular basis, by someone like a Public Expenditure Commissioner, comparing different types of public spending and tax breaks here, with those applying in other jurisdictions, like Northern Ireland, Germany or Spain.
For example, we could usefully know how things like
medical consultant’s salaries,
public service pensions, and
here compared with the other places.
One could also compare the unit costs of the courts and legal proceedings, and of prison services here with other countries.