Department of Finance must address warnings on fiscal rules

Fianna Fáil Finance spokesperson Michael McGrath has welcomed the publication of the Fiscal Council report today on the Spring Economic Statement saying that it will make sobering reading for the Minister for Finance.

Deputy McGrath commented: “The Fiscal Council makes a number of very important points including that forecasts for government spending do not take account of the likely costs of demographic ageing and tax revenue forecasts do not reflect stated government commitments to reduce taxes. It is vital that the Department of Finance use the earliest possible opportunity to clear up these apparent anomalies.

“There is a blunt warning in the report that “forecasts indicate that the fall in the structural budget deficit in the Government’s plan falls short of the requirements of the European Commission’s Budgetary Rule in 2016 on a forward-looking basis.” In such circumstances, Ireland runs the risk of sanctions under the Fiscal Treaty rules and it is imperative that the Government clear up the confusion which now exists over its own projections.

“I welcome the fact that the Fiscal Council has confirmed that there will be scope in 2016 to reduce the burden of the USC and to invest in services which have been starved of resources in recent years. As the year continues, we will be in a better position to fully assess the extent of the leeway available, in particular if the current trend in exchequer returns is maintained.

“Ireland is currently benefitting from a number of favourable international trends including a weak euro, record low interest rates, the ECB’s quantitative easing and falling energy prices. While these factors are underpinning the recovery, they are outside our control and may not last in the medium-term. It is essential that decisions taken in relation to the future of the economy reflect the uncertainty of the international situation.

“I sincerely hope the government take a more constructive approach to the work of the Fiscal Council than they have in the past. Last September, the Taoiseach stated that the “advice of IFAC was something for future governments to follow” implying that they were disregarding it. The government should be required to set out a formal response to IFAC’s report. It is within its rights to disagree with advice given but it should be required to issue a detailed response setting out why it is taking a different course of action.”