Q & A: What is the Fiscal Advisory Council?
Published 15/10/2015 | 02:30
What does the Fiscal Advisory Council do?
It's essentially the State's budgetary watchdog set up in the wake of the crisis to keep the Government in check and ensure the mistakes of the past are not repeated. Its tasks include endorsing the macroeconomic projections underpinning the Budget, as well as assessing the official forecasts produced by the Department of Finance. But while the Government has a legal obligation to take the views of the council into consideration when framing budgets, it doesn't have to accept its advice.
What did it say about Budget 2016?
Its chairman, economics professor John McHale, went on radio yesterday morning expressing concern about the scale of the supplementary spending announced for this year to plug budget overruns in some departments, including Health. But he also suggested that Budget 2016 may not pass muster with Europe because it could mean Ireland will not reach the target to improve the so-called structural balance.
So was Prof McHale wrong for flagging these concerns?
Yes and no. He had to clarify his comments concerning the EU rules. He originally stated that the structural balance had to be improved by just over 1pc of GDP. In fact, 0.6pc is the target. The European Commission has confirmed that. However, the Commission has not yet signed off on Ireland's Budget, which it must do. Prof McHale's concerns about the level of extra spending this year, however, are shared by a number of experts. He isn't alone in raising that point.
So Europe checks our Budget? Can we not tell them to sod off?
Not any more, I'm afraid. The new post-crisis world we now live in means the European Union is taking a much more proactive approach to member state's budgets. Remember, we used to have the Budget in December, but it was brought forward to October a few years ago? That was to facilitate new European rules that state countries must submit their draft budgets to the EU for approval by October 15, and the Commission will then submit its opinion.