Business Banking Inquiry

Sunday 22 January 2017

Refreshingly blunt take on politicisation of department

Published 25/06/2015 | 02:30

Giving evidence, the Department of Finance's chief economist John McCarthy was refreshingly blunt
Giving evidence, the Department of Finance's chief economist John McCarthy was refreshingly blunt

We got an insight into the inner workings of the Department of Finance and how annual budgets are really prepared by Government at the latest episode of the Banking Inquiry.

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And just ahead of an election too.

While the economists might spend hours and hours on documents warning Governments about the perils of over-spending, when it comes to Budget Day much of that is long forgotten, we were told. It's as much as we suspected really.

But, giving evidence, the chief economist at the department John McCarthy was refreshingly blunt.

He said during his time in the department there were instructions given to people to take things out of statements because they were "too political".

"I would agree that there was some over politicisation", he said before adding that instructions had come "from beyond my pay grade within the department."

Mr McCarthy, who joined the Central Bank in 1996 but spent most of his career on secondment in the department where he is now chief economist, was discussing the budgetary process and the role played by the economics division within the department.

This included a budget strategy memo produced in June of every year.

The document marks the starting point of the budgetary process but never seems to make it to budget day intact.

In between, you see, the politicising intervenes.

Ministers demand more money for their departments and of course Governments also keep their eye on the big prize - keeping their seats in the next election.

Mr McCarthy's insight was particularly timely given that we are less than a year away from the next election.

Addressing the inquiry, he talked about the budgets from 2001 and 2006 - what we would term "giveaways", especially in hindsight. And there was a "big gap" between what the economists had recommended as prudent budgets and what emerged on the big day.

Definitely no warning signals, as we headed towards the cliffs.

Remember Budget 2004? Maybe not, but if we mention former Finance Minister Charlie McCreevy and decentralisation you'll get the picture.

Yes, that was the year of the famous decentralisation budget. Just a decade ago, when you think of it.

Not just any decade mind, remember this has already gone down as the lost one.

In the meantime we may have tweaked the system to make the process more open and prudent but that doesn't seem to matter. We now have the budgetary spring economic statement, the Fiscal Advisory Council and other spending constraints from the EU.

But the usual lobbying is in full swing. The budget warnings from the likes of the Fiscal Advisory Council are clearly falling on deaf ears.

Finance Minster Michael Noonan is working on what he is willing to spend in the last budget prepared by the current Government ahead of next year's election. So the temptation to "politicise" is stronger than ever.

He is looking at wriggle room of between €1.2bn and €1.5bn in tax cuts and spending increases in the October budget.

Public Expenditure Minister Brendan Howlin is also under pressure to deliver, with evidence there too that he has bowed to temptation.

For example, the majority of the county's public servants will now get a pay boost of about €2,000 under a deal recently hammered out between the Government and unions.

As Mr Noonan and his team assess what he is willing to spend, it might be prudent to note there is one thing we definitely can't afford - another lost decade.

Irish Independent

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