Friday 30 September 2016

Brave assessment of failings shouldn't be dismissed

Thomos Molloy

Published 04/06/2015 | 02:30

Prof McHale is one of the frontrunners to succeed Patrick Honohan as the governor of the Central Bank
Prof McHale is one of the frontrunners to succeed Patrick Honohan as the governor of the Central Bank

The Irish Fiscal Advisory Council was imposed on the country by the troika as a response to the financial crisis. Like many good troika ideas, it has yet to win a place in the Establishment's heart despite the obvious need for such a council. It would be closer to the truth to say the Establishment has tried to suffocate the council since birth by ensuring it remains underfunded.

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It is all too easy to predict the response from ministers today after the council's assessment is published - bland indifference.

Government spokesmen will dismiss the council's findings and note, correctly, that the council does not have a stellar record when it comes to making predictions. What will be left unsaid is that the Government's predictions over the years also leave a lot to be desired. The argument about forecasts is sterile; none of us know what will happen next week, let alone next year. What we do know is whether we have made prudent plans for most eventualities.

What is different about today's report from the Fiscal Advisory Council is that it is an assessment of Government policy rather than just a forecast or opinion.

The council's economists have studied the ludicrously complex conditions imposed by the European Commission on member states when it comes to budget planning and found the Government has simply ignored the rules.

This will raise a cheer in some quarters and not without reason. There is often an argument to be made for ignoring stupid rules. After all, most of us cross the street when the road is clear rather than waiting to find a zebra crossing or the lights to change. We like the narrative of the plucky Gael thumbing his nose at the lumbering bureaucrats in Brussels.

But the complexity, and even stupidity, of some the rules from Europe does not mean that we can afford to ignore them. Less than 10 years ago, we danced over the economic precipice while breezily dismissing warnings from some quarters in Brussels and closer to home about unsustainable economic success.

Today, the council is making similar warnings about a lack of planning. It is also pointing out that the Government's forecasts are built on optimistic predictions about population growth and consumer spending. The council notes correctly that Government spending plans seem to change on an almost weekly basis as we saw last week with the generous pay awards to public sector workers.

Most of the arguments contained in today's report are highly technical; too technical for almost anybody outside the economic profession to follow. We will only know sometime in 2017 whether the Government or the council is correct - long after the next general election. If the council is right, this country will face sanctions, but those sanctions are a remote possibility while the elections must feel very real to everybody in office.

There is then no reason for the Government to concede ground on this issue, but there was every reason for the council chairman John McHale to let the Government off the hook. Prof McHale is one of the frontrunners to succeed Patrick Honohan as the governor of the Central Bank.

The Galway professor's findings almost certainly reduces his chances of becoming one of the most powerful and best paid men in the country displays courage. It is also a reminder that we should pay attention. People rarely commit career hara-kiri without good reason.

Irish Independent

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