Business Irish

Friday 2 December 2016

Budget watchdog compares coalition's spending to boom-era policies

Published 26/11/2015 | 02:30

Professor John McHale
Professor John McHale

The head of the State's Budget watchdog has compared the Coalition's economic management this year to the worst period of the boom era.

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Professor John McHale of the Fiscal Advisory Council said ministers "deviated from prudent economic and budget management" by signing off on €1.5bn more in spending than was originally included in Budget 2015.

This year's unplanned hike in spending did not breach European Budget rules, but Prof McHale said was "very much against the spirit of the rules".

Michael Tutty, a former civil servant who was appointed to the Fiscal Advisory Council earlier this year, backed that view.

"We are clearly saying we do not think it was a prudent move," he added.

And in comments likely to be seized on by the opposition in the weeks and months leading up to the General Election, Prof McHale explicitly linked the extra spending to the boom era's Budget practices.

"There is no doubt there were strong similarities between what happened this year and what took place during the boom," he said.

The Minister for Public ­Sector Reform Brendan Howlin defended the spending plans last night.

"In relation to 2015, given the increasing demand for high-quality public services - particularly in the health service, education, social welfare and infrastructure - and the still-too-high unemployment rate, using a proportion of the increased and sustainable tax revenues, as confirmed by the Revenue Commissioners, to meet the demands was appropriate and prudent."

The Irish Fiscal Advisory Council publishes its ninth fiscal assessment report today. The council is one of the new institutions set up in response to the economic crisis.

Its job is to examine whether Government policies are based on sound forecasts, comply with European rules, and are financially sustainable.

However, the Fiscal Advisory Council was left in the dark by officials in Brussels and at the Department of Finance on key facts it needs in order to do its job, Prof McHale said.

In October, he was criticised by ministers and forced to revise comments made on radio suggesting Ireland would breach European rules as a result of €1.5bn in new spending.

Tweaked

He said yesterday that despite being a statutory body charged with monitoring the rules, the Fiscal Advisory Council was not told the criteria had been tweaked earlier in the year, allowing the overspending to go ahead.

He criticised the flow of information from the European Commission and the Department of Finance and admitted rules may have been changed again since, without his agency being told. "We don't know what we don't know," he admitted.

In its latest report, the Fiscal Advisory Council says the economy here is experiencing a strong recovery, but the State remains deeply in debt and faces risks linked to a potential British exit from the European Union, a slowdown in emerging markets, and stagnation in Europe.

The Fiscal Advisory Council says the Government should have used this year's unexpectedly high corporate tax income to help provide a buffer against any new economic shocks.

The Fiscal Advisory Council has given its backing to the stance taken for Budget 2016 - however, it warned that proposals beyond that do not address weakness in medium-term plans.

Irish Independent

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