Thursday 22 February 2018

Watchdog criticises 'information flow' as he stands over concerns

Professor John McHale of the Fiscal Advisory Council
Professor John McHale of the Fiscal Advisory Council

Colm Kelpie and Kevin Doyle

The head of the State's budgetary watchdog has gone on the defensive and argued that the Department of Finance isn't providing his team with enough information, a day after he was forced to retract a suggestion that Budget 2016 may breach EU rules.

Professor John McHale told the Irish Independent that the "information flow" from the Department to the Fiscal Advisory Council needed to be improved.

He said he was not told that the Government intended to allocate extra spending to plug overruns this year to a range of government departments, not just in Health.

And he stood over his claim that Budget 2016 was too expansionary.


"Part of it [the supplementary] was known, certainly the overrun in health was known, but the extent of the supplementary was not known to us and it goes well beyond health to include Social Protection, Education, Agriculture and Transport as well," Prof McHale said.

"I do think that the information flow to us needs to be improved."

The Fiscal Council chairman went on radio on Wednesday morning to flag concerns about an additional €1.5bn in spending by the Government this year.

But when asked if he thought the Budget would be approved by Europe, which it now needs to be under new rules brought in since the financial crisis, he suggested it may not as the Government may miss the target needed to reduce the so-called structural balance -which represents what Government revenues and expenditure would be if output were at its potential level.This, he said, needed to be improved by over 1pc of the value of the economy, but in actual fact, it only needs to be improved by 0.6pc.

The improvement next year is expected to be 0.8pc. Labour TD and former finance minister Ruairi Quinn accused Professor McHale of not understanding the budgetary process.

"The idea of spreading any extra money is standard practice and has been going on for 25 years in my experience," he said.

"The fact is, you have an estimate and that is what they are, estimates. And then you rebalance them across departments."

He described Prof McHale as "naively ill-informed".

But Prof McHale said that while the 0.6pc target was flagged by the European Commission as far back as early summer, he wasn't informed that this was cast in stone.

"We didn't know that the required adjustment was fixed at that point," he said.

He added that had it not been, EU rules would have insisted on a greater improvement in the structural balance.

He also argued that the council's credibility had not been damaged by the error, "despite the spin that people might be trying to put on it".

But the Department of Finance said relevant documents involving the budgetary process were continuously made available to independent fiscal bodies by the European Commission.

"The commission holds regular training sessions on the SGP (Stability and Growth Pact) at which independent fiscal institutions attend. The concept of freezing was outlined and discussed at recent sessions."

A source also queried why Prof McHale went on radio without first expressing concern to the Department.

Fianna Fáil's finance spokesman Michael McGrath said it was "deeply worrying" that the council was "kept in the dark".

Irish Independent

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