Sunday 20 October 2019

Editorial: 'We won't get fooled again on economy. Or will we?'

Seamus Coffey, the chairman of the Irish Fiscal Advisory Council. Photo: Daragh Mc Sweeney/Provision
Seamus Coffey, the chairman of the Irish Fiscal Advisory Council. Photo: Daragh Mc Sweeney/Provision


Fool me once, shame on you. Fool me twice, shame on me.

What is the point of the Irish Fiscal Advisory Council?

The economic watchdog was set up in the wake of the economic collapse to serve as an independent authority giving its opinion on the management of the public finances.

A bit like a friendlier version of the Troika - just with fewer teeth.

IFAC was set up as a statutory body by the then Fine Gael-Labour Party government as part of the EU/IMF programme of budgetary reforms.

The State's coffers have thankfully recovered significantly since those dark days at the start of this decade when we lost our sovereignty. Now the Government is getting unexpected windfalls of revenue and nobody really bats an eyelid.

Yet another unexpected surge of corporation tax payments boosted the Government's coffers during November. As a result, the headline deficit will be eliminated this year.

Quite the turnaround.

November is always a crucial month for tax receipts as it is a VAT-returns month and gives an indication of sentiment before the Christmas shopping run.

For the first 11 months of the year, corporation tax receipts hit €1.5bn, nearly 20pc higher than expected at the start of the year. And corporation tax is even eclipsing VAT in revenue terms.

Happy days are here again. Or are they?

The Fiscal Advisory Council will warn today that Finance Minister Paschal Donohoe's long-term spending plans "lack credibility" and "look unrealistic" - and the economy is "close to its potential".

IFAC chairman Seamus Coffey will say today that central forecasts suggest growth will "move beyond potential from 2019 onwards, with overheating emerging in later years". Mr Coffey will tell TDs that recent revenue growth has been supported by "short-term cyclical developments and a possibly transient surge in corporation tax receipts".

Efforts to stabilise the public finances since the crisis have proved successful, yet "improvements on the budgetary front have stalled since 2015".

"The repeated failures to prevent unplanned spending increases have resulted in long-lasting increases in spending which are difficult to reverse. These failures represent a repeat of the policy mistakes of the past."

This is a crucial point for the Government, IFAC and the voting public. If these stark warnings are not getting any attention, then what's the point of having these warnings?

Just pack the IFAC up and thank them for their service, in that case.

This time, we can't say we weren't warned.

We won't be fooled again. Or will we?

Irish Independent

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