The proposed National Development Finance Agency will take command of the finances of most infrastructural projects, including those currently managed by the National Roads Authority, Fianna Fáil has said.
The agency will supply all financial, technical and legal advice for major projects, including those run by local authorities, and cut down significantly on the numbers of private consultants.
From 2003, it will raise €2 billion a year for infrastructure projects using Government-backed bonds, or public-private partnerships. None of this will be included in the Government's Exchequer borrowing figure.
However, the Minister for Finance said he expected that half of it would have to be declared on the General Government Debt figure - the guide used by the European Commission to judge the health of EU economies.
The EU's statistical arm, EUROSTAT, last month raised serious questions about Portugal's use of a similar system and demanded more information before it will sign off on the country's total borrowing figure.
The new agency could provoke tensions between Fianna Fáil and international banks, since they will find it more difficult to compete with an agency able to borrow at near A+++ rates.
The NDFA will be able to compete with banks and other financial institutions to offer the best value finance packages for design, and build, operate and finance public-private partnerships, said Mr McCreevy.
All State authorities will be required to seek the NDFA's advice throughout the procurement process, thus saving money and cutting down on the number of private consultants hired.
The inspiration for the agency came from the Taoiseach, Mr Ahern, Mr McCreevy said: "He came back from summit meetings asking how the Portuguese, for example, were managing to do more than we were."
Capital spending over the last five years has jumped from €4.412 billion in 1997 to €9.261 billion this year, including major increases in the budget for building new schools.
"Even though there has been a 300 per cent increase in capital spending, and an equally large increase in the number of projects actually happening on the ground, people are impatient with the pace of progress.
"It is clear that existing ways of financing and delivering major capital programmes are severely limiting. We could double spending again and we would not achieve the progress which people want to see," said a Fianna Fáil briefing paper.
The change would help to move the Republic away "from the medieval accounting system" inherited from the British, where all budgets had to run on a 12-month term.
Meanwhile, the Minister adopted a cautious approach to future taxation cuts, though Fianna Fáil will aim to ensure that 80 per cent of taxpayers pay only standard rate, while all low-paid workers would pay no tax. The party has committed itself not to repeat Mr McCreevy's controversial €635 million raid on the Social Insurance Fund, while payments into the National Pension Reserve Fund will rise to €1.5 billion a year by 2007.
He rejected Labour's plan to increase Capital Gains Tax and employers' Pay Related Social Insurance, since "they would immediately impact on jobs and revenue available for services".
Questioned about the benchmarking report on public pay, which is due in June, Mr McCreevy said Fianna Fáil had already agreed to backdate 25 per cent of any increases to December 2001.
"We believe that the clear and obvious lesson of the times that Ireland has left behind is that we cannot tax and spend our way to employment and better services. In fact, the surest way to cause unemployment and undermine the public finances would be to implement unsustainable spending plans or to try to return to the days of high taxation," said Fianna Fáil.
Spending will rise by 4 per cent annually, plus inflation, Mr McCreevy promised, though he emphasised that everything was based on Gross Domestic Product increases of 5 per cent. "While less than the recent spectacular growth rates of recent years, this remains well ahead of projections for most of the OECD and gives us the capacity to keep on a stable and upward economic growth path."
Growth has begun to pick up again in the wake of September 11th. "Inflation will fall during the year and employment prospects can be expected to improve. The challenge is to position ourselves so that we can take maximum advantage," he said.
Under the EU's General Government Debt yardstick, the Exchequer will be €612 million in the red next year, €1.4 billion in 2004, before dropping back to €536 million by 2007, the Minister predicted.
The spending promises made on Thursday, including 2,000 extra gardaí and teachers, a €200 old-age pension and a homemaker's pension, will cost €4.9 billion a year by 2007.
