Sunday 25 September 2016

Fiscal Advisory Council set to cost €1.7m over three years

Published 27/12/2015 | 02:30

Government warning: Fiscal Advisory Council chairman John McHale. Photo: Frank McGrath
Government warning: Fiscal Advisory Council chairman John McHale. Photo: Frank McGrath

The Irish Fiscal Advisory Council (FAC), whose chairman was embroiled in a high-profile spat with the Government over the amount of information made available to it, is set to cost €1.7m in the first three years of its existence.

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Finance Minister Michael Noonan said the budgetary watchdog cost €480,941 in 2013, €605,714 in 2014 and, subject to audit, would cost €647,852 for this year, with a staff of six.

The Council is an independent body whose task is to assess whether the Government is meeting its own budgetary targets, and assess its compliance with fiscal rules.

The FAC's chairman Prof John McHale told Morning Ireland the morning after the Budget that there were questions about Ireland's compliance with European budgetary rules.

He said Ireland was required to make a reduction in its structural deficit of greater than 1pc of GDP, but that the Government projection had been an improvement of 0.8pc.

"There are some questions about the formal compliance with the fiscal rules, both European and national," he said.

Later the Fiscal Advisory Council issued a clarification saying that in fact a reduction of 0.6pc was required.

"The actual required improvement of 0.6pc of GDP was set earlier in the year based on the projections in place at that time. The information that the required improvement was fixed earlier in the year has not been published and was not made available to the Council," the statement said.

"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."

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

Prof McHale told the Irish Independent afterward that the "information flow" from the Department of Finance to the Fiscal Advisory Council needed to be improved.

Last month the watchdog issued a hard-hitting fiscal analysis of Budget 2016, saying supplementary estimates for 2015 "was a deviation from prudent economic and budgetary management".

"Budget 2016 showed an increase in gross government expenditure for 2015 of €1.5 billion, compared to the projection in (Stability Programme Update) 2015. The additional spending absorbs the majority of the better-than-expected tax revenues in 2015 and results in a significantly more expansionary fiscal stance than earlier planned by the Government.

"This keeps the deficit and debt higher than could have been achieved and provides an unnecessary stimulus to an already fast-growing economy.

"Using unexpected incoming revenues to fund permanent increases in expenditure at a time of strong economic growth has worrying echoes of past fiscal policy errors and goes against the spirit of the new budgetary framework."

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