James Leonard
Question:95 Mr. Leonard asked the Minister for Finance his views on the proposal from IBEC in relation to a smaller role for Government as stated in its strategic policy framework document 1996 to 2005. [12710/96]
Written Answers. - IBEC Proposal.
The IBEC document to which the Deputy refers addresses the role of Government in the economy in two respects i.e. the provision of services by the State and the level of Government expenditure.
In relation to the former, the operation of the public service and its delivery mechanisms are under continuous active review, not least as part of the strategic management initiative. Further, many commercial State bodies are now operating successfully to a commercial mandate. This is an important dimension of the drive to improve the competitiveness of the Irish economy. Very significant progress has been made and continues to be made along these lines. I am convinced that this has contributed in no small measure to the current strength of the Irish economy.
In regard to the latter, IBEC has specified a target of 37.5 per cent for public expenditure as a share of national output by the year 2000. At present, public spending accounts for approximately 45 per cent of GNP. To meet IBEC's target would require a reduction in spending of the order of £2,700 million or £700 million per annum in current terms. Most of these spending cuts would have to fall on current supply services i.e. the day-to-day cost of running Government programmes and services. Adjusting current spending programmes on this scale would present a major challenge and would involve significant reductions in the existing level of public services. Unfortunately, the IBEC document does not specify how it considers such an adjustment in spending might be achieved.
In principle, I accept that setting targets for public spending, whether by reference to the annual rate of increase, as this Government has done, or by its share of GNP as IBEC has suggested, can be an effective and straight forward means of controlling public spending. The specification of a target should, of course, be accompanied by a coherent strategy to achieve the target while, at the same time, avoiding too severe a dislocation of essential public services. With the latter objective in mind, the aim of the Government is, nevertheless, to maintain firm control over growth in public expenditure in the medium term.