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State watchdog savages Department of Finance over 'failures'

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Professor John McHale

Professor John McHale

Professor John McHale

THE State's official economic watchdog, the Irish Fiscal Advisory Council (IFAC), has savagely criticised the Department of Finance's consistent "failure" in forecasting Ireland's financial position since 1997.

It said the repeated errors had been made by a "small team of about four economists" within the department, and said it "failed to predict the sharp economic downturn".

"The 2012 exchequer deficit was consistently overestimated by the Department of Finance," it said.

"Although the forecasts were reduced successively as the year progressed, the projection on Budget Day in December still overestimated the deficit by €0.8bn. This overestimate was relatively large by historical standards."

The report also criticises the department as well as the Central Bank and the ESRI for their reliance on "heavily judgement-based approaches as opposed to model-driven methods".

The sharp criticisms contained in the report have been seen as a means of "getting their own back" on the department which has repeatedly ignored the council's advice, particularly in relation to the level of tax increases and spending cuts in last December's Budget. While the Budget introduced cuts and tax increases of €3.5bn, the council had argued for Mr Noonan to cut €4.4bn from government spending.

Speaking to the Sunday Independent, Professor John McHale, of the IFAC, said the criticisms had not been driven by the repeated ignoring of its advice by Mr Noonan.

"No, this is not as a result of being ignored by the minister; I wouldn't characterise it like that," he said.

The council also reckons the promissory note deal, secured in February, represents a saving of €1bn or 0.6 per cent of GDP, and has improved Ireland's chances of reducing its debt levels to below three per cent by 2015.

Irish Independent