Monday 29 May 2017

Watchdog chief says he 'regrets confusion' over 'blown Budget'

Minister for Finance Michael Noonan and Brendan Howlin Minister for Public Expenditure and Reform pictured with Sean O Rourke in the RTE Radio 1 Studio before going on air. Picture Credit: Frank Mc Grath
Minister for Finance Michael Noonan and Brendan Howlin Minister for Public Expenditure and Reform pictured with Sean O Rourke in the RTE Radio 1 Studio before going on air. Picture Credit: Frank Mc Grath

Colm Kelpie and Kevin Doyle

The head of the State's budgetary watchdog has been forced to retract a suggestion that Budget 2016 could be in breach of European rules.

The Fiscal Advisory Council issued the clarification just hours after its chair, Professor John McHale, went on radio highlighting concerns that an EU budgetary requirement would not be met as a result of the Budget.

The move sparked anger in political circles, with Government sources saying they were furious with Prof McHale, who also serves as economics professor at NUI Galway.

The Fiscal Council chair had flagged concerns about extra spending by the Government this year, beyond in health, to plug holes in various departmental budgets, saying that extra spending would be carried over into next year.

When asked if he thought the Budget would be approved by Europe, which it now needs to be under new rules brought in since the financial crisis, he suggested it may not, as the Government may miss the target needed to improve the so-called structural balance - which represents what Government revenues and expenditure would be if output were at its potential level. This, he said, needed to be improved by over 1pc of the value of the economy, but in actual fact, it only needs to be improved by 0.6pc.

Finance Minister Michael Noonan had said the Budget would improve the structural balance by 0.8pc.

A clarification was issued by the Council later in the afternoon, correcting the position and stating Mr McHale regretted the confusion caused.

"The Council's chairman, John McHale, regrets any confusion caused by reference to the possible requirement to improve the structural balance by greater than 1pc of GDP in 2016 in an interview on Morning Ireland on Wednesday, October 14.

"The Council has confirmed with the European Commission that the required improvement under the rules of the SGP (Stability and Growth Pact) is 0.6pc of GDP in 2016, as stated in the Budget 2016 documentation."

Furious

Finance Minister Michael Noonan addressed the issue during a meeting of the Fine Gael Parliamentary Party last night. He told TDs and senators that he was happy for the Fiscal Advisory Council to make public statements and enter the debate.

"But where people have facts and the facts are wrong we're happy to clarify them," he said.

However, Government sources said they were furious with Prof McHale last night.

"It's unbelievable really. Anybody who understands how the system works knew he was wrong immediately but it took until the late afternoon for the Council to clarify his remarks. In the meantime, every minister who appeared on radio was being asked if they had blown the Budget."

Another source said: "The Fiscal Advisory Council has a job to do and this isn't it. You can have your own opinions but you can't have your own facts."

When asked about Prof McHale's comments, Tánaiste Joan Burton told the Irish Independent: "They have their job to do. Obviously we've set out targets in relation to the deficit and in relation to the debt which absolutely meet the requirements as set out. "

She defended the spending, saying the Government made a decision to publicly outline the supplementary budgets much earlier than other years.

She said the Budget "marked a milestone in moving on" and described the increases in various State payments as "modest".

Irish Independent

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