Donohoe’s approach to national debt is irresponsible

Reacting to Minister for Finance and Public Expenditure, Paschal Donohoe’s remarks on the National Debt, Labour Leader, Brendan Howlin TD, questioned the use of unorthodox statistics and the argument for Ireland to be treated as exceptional.

Deputy Howlin said:

“Minister Donohoe’s approach to the national debt is irresponsible.

“Presenting the national debt in terms of euro per person is not a normal statistic. Doing so ignores the different age profiles of countries, where Ireland’s younger age profile puts it us in a distinctly advantageous position in terms of future economic growth potential. Presenting debt on a per person basis also distorts the role of corporations to shoulder part of the debt.

“The European Commission provides comparative statistics on the national debts of member countries. Ireland’s general government debt for 2018 is forecast to be 65.6% of GDP, lower than 12 other EU member states, including Austria (74.8%), Belgium (101.5%), France (96.4%) and the UK (86.3%).

“Whatever about using GNI* to strip out the distorting presence of multinationals when it comes to calculating an appropriate level of public expenditure, Ireland’s full GDP is the correct basis upon which to calculate our tax base and therefore our ability to repay public debt. As the measure of our economic output, GDP is also the basis upon which the EU calculates Ireland’s annual financial contribution to the Union.

“There are a number of limitations in the report on the national debt produced by Minister Donohoe’s department. Comparisons with other small open economies fail to refer to Ireland’s smaller employment rate and the relatively under-developed nature of Ireland’s infrastructure and public services compared to countries like Denmark, the Netherlands and Sweden.

“In order to underpin sustainable economic growth, what Ireland needs now is a commitment to a large programme of State-led investment in house-building, as Labour has proposed, to meet the urgent needs of the current generation. There is also a need to invest more in education, health, social care and childcare, to meet people’s essential needs and also to provide a quality of life that is attractive for globally-mobile workers, including Irish graduates.

“Minister Donohoe is planning to run a deficit while using the money borrowed to establish an unnecessary Rainy Day Fund, rather than spending that money on meeting essential needs that will also put Ireland onto a trajectory for higher future economic growth.

“Borrowing money in order to save it is a ludicrous and irresponsible policy at a time when the needs of so many citizens are apparent, and people and companies are loudly calling on the government to take action to alleviate the burden of housing costs.”