Labour’s Economic Plan will keep us mired in debt - Lenihan

The Labour Party has changed its mind about bringing our budget back to near balance by 2014. They now want the adjustment period extended out to 2016. Fianna Fail want to achieve an adjustment of €9 billion by 2014 so we can move our economy forward. Labour want to reduce that target to €7 billion.  

That means they want to borrow more and for longer. It’s the sub-prime approach to politics.

There is no prospect of any government being able to persuade the EU or the IMF of such a wholesale revision of the agreement we have reached under the Programme. That Programme expires at the end of 2013 which means we would have to be back in the market by early 2014 (at the latest).

Under Labour’s plans our deficit at that stage will be close to more than 7% of GDP compared to 5.8% under the National Recovery Plan.  Under Labour’s plan, the national debt will still be rising as a percentage of GDP at the end of 2013 whereas under the National Recovery Plan, it will be stabilising.  That will hardly inspire the markets with confidence in our ability to manage our own finances. So the future for this country as Labour sees it is....another IMF/EU Programme. 

Predictably enough, Labour’s tax proposals are an article of faith:

• They’ve changed their minds on the introduction of a property tax but not before 2014.
• They have returned to the old pot of gold: the tax exiles. No government has done more to restrict that group than the current government and there is no chance of raising €100 million from any further changes

The NPRF is already investing in infrastructural projects, such as the water metering project under the National Recovery Plan which will create employment in the construction sector.  It makes no sense to channel these funds through Labour’s Strategic Investment Bank. This bank is supposed to become a proper bank accepting deposits and raising funds on international markets "once market conditions normalise." But when conditions normalise, the existing banks will be able to fund themselves and will be in a position to lend to the economy. Starting a new bank also conflicts with the EU/IMF Programme objective of downsizing the banking sector here.