The idea of setting out public spending plans for a period of seven years is a good one, and the inclusion for the first time in a national development programme of current as well as capital spending in relevant areas is also welcome, writes Garret Fitzgerald.
However, the presentation of this extended material is seriously defective as the components of the more than 30 spending programmes are not divided between capital and current.
Nor are annual figures provided for spending under these programme headings.
Moreover, spending is shown in current money terms only, thus failing to show the actual volume of activity being planned.
And no information is provided as to what share of future national output will annually be absorbed by this programme's capital investment element.
Furthermore, a key element of the 2000-2006 programme has been dropped, namely the tables showing how much is to be spent in each of the two regions into which our State is divided: the Border, Midland and West (BMW) region and the more prosperous Eastern and Southern region.
All this will make very difficult any assessment of the programme at this stage, or of progress made with its implementation. Unless the Government now publishes considerable additional data, suspicions are likely to be expressed as to the reasons for this most inadequate and confusing presentation.
As to the economic basis of the programme, it must in fairness be said that it is based upon what is probably a realistic economic growth rate of between 4 per cent and 4.5 per cent a year between 2006 and 2013 - on the assumption, of course, that neither the euro value of the dollar nor our housing boom will be subjected to hard landings.
On these same assumptions the ESRI, in its last medium-term review, projected a slightly higher growth rate of just over 4.5 per cent for the period of this programme.
By contrast, the inflation rate upon which this programme has been based is much less convincing.
The planned inflation rate for the last programme covering 2000-2006 was 2 per cent a year - which in the event turned into an inflation rate of almost 4 per cent. This programme once again uses a 2 per cent inflation rate. As the consumer price index is now running at almost 5 per cent, and is expected to move up towards 6 per cent before dropping back later this year, such a low figure for the period of the new programme seems far too optimistic.
It might be argued that the doubling of the projected inflation rate in the 2000-2006 programme was due to the gross mismanagement of our economy by Charlie McCreevy, who boosted current public spending by a horrifying 32 per cent in his election budgets for 2001 and 2002, at the very time when our economy was already overheating as we approached full employment. The Government could - but is perhaps unlikely to - claim that his successors in office will behave much better!
It is, of course, true that the present finance minister is unlikely to be quite as irresponsible as was Charlie McCreevy. But already Brian Cowen's pre-election Budget has been criticised by serious economists as too expansionary and inflationary. Moreover, the present minister has also rejected the ESRI's advice about the need to restrain the rate of growth of the public capital programme to avoid creating yet further inflationary pressures.
As now published, the programme appears to envisage a rise of over 40 per cent in the volume of public investment between 2006 and 2009, and in 2012 it is to be 66 per cent higher than last year. In the years immediately ahead this will involve raising the level of public investment at a rate almost 2½ times faster than the growth of our national output.
You would not need to be an economist to worry about the impact of such a proposal on inflation.
It would not be unreasonable for the minister to have allowed himself somewhat more leeway in this matter than the cautious ESRI might consider wise. But what is proposed seems to run well beyond a reasonable margin of appreciation.
Given the experience we have had of a doubling of the projected 2 per cent inflation rate during the period of the last development plan it is not credible to assume that inflation will rise by only 2 per cent a year between now and 2013. Instead it is likely to increase by between 3 per cent and 4 per cent a year, substantially outrunning inflation elsewhere in the EU, undermining the purchasing power of incomes and eroding the competitiveness of our exports.
A further issue raised by this programme is the part of the report dealing with regional development. I find this particularly interesting because between the lines of the document one can detect signs of the confusion and contradictions in this policy area which for the past 40 years have derived from the persistent conflict between sound economic principles and policy distortions due to political pressures.
This programme document first states in uncompromising language the vital need to balance the attractive power of Dublin by concentrating development on our other major provincial centres.
I quote: "Regions containing large urban centres . . . are performing comparatively better economically. Regional economic growth is promoted by strong gateway centres with the levels of critical mass, competitiveness, quality of built and natural environment and quality of life necessary to drive not just their own growth but the growth of the wider region of which they form part."
All absolutely true, but the report goes on to make nonsense of these sound principles by proceeding to assert precisely the opposite when stating that "the programme of decentralisation of government departments and a range of agencies will also have significant positive effects" - this despite the hugely damaging impact of dispersing this effort to no less than 53 provincial towns from which has been excluded the city with by far the best chance of competing successfully with Dublin, namely Cork.
Surely a classic illustration of the total incoherence of what the Government has the nerve to describe as "regional policy".