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Government trying to get out of hole by digging even more – Morgan

2 July, 2010

Speaking today following the publication of the Exchequer figures for June, Sinn Féin Spokesperson on Finance Arthur Morgan has hit out at the Governments economic policy, saying that their actions are akin to ‘trying to get out of a hole by digging even more’. Deputy Morgan said that the Governments reliance on indirect taxes to recover the economy was the exact prescription that led to the crisis.

Deputy Morgan said:

“Despite Government insistence that the economy has turned a corner, the publication today of the exchequer register figures for June make clear that the Government are trying to get out of a hole by digging even deeper.

“A lot of Government commentary has used recovery in GDP as a vindication of government policy but today’s exchequer figures have shown that what is emerging is a two-tier economy that will lead to a renewed economic crisis.

“The Minister for Finance is pointing to increases in VAT and corporation taxes as positive but the harsh reality is that these are indirect, unreliable taxes upon which economic growth cannot be based. The Government’s reliance on indirect taxes to recover the economy was the exact prescription that led to the crisis. Their reliance on cuts is the exact kind of right-wing politics that caused the crisis. The onus should be on increasing income taxes, a project on which this Government is failing abysmally as the €300 million shortfall in June has proven.

“Deflationary policies that put too much emphasis on deficit reduction are crowding out productive expenditure on sectors including infrastructure, education and health. The bottom line is, to generate economic activity that will result in meaningful job creation and improvements in tax revenues, consumer spending needs to recover and we need to increase investment. Expenditure is down 6.2% on last year and we are seeing a decrease in tax income by 8.7%.

“The fact that taxes are 1.6% behind profile is confirmation that the Governments deflationary policies, through welfare and wage cuts for lower paid workers, are having an adverse effect on the public finances. Rampant deflation will increase the real debt for all households, businesses and the Government, making interest payments and debt repayment more burdensome.

"What is also interesting here is that these accounts make no allowance for the massive debt being incurred by NAMA which the government is keeping off the books through its SPV – a smoke and mirrors device allowed by Europe. Even if the deficit is addressed, this debt will hand over Irish people's heads for generations." ENDS

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