Fianna Fáil Finance Spokesperson Michael McGrath TD has called for the Government to clarify why key information in relation to the rules that apply for the 2016 budget was not provided to the Fiscal Council.
There was some confusion on Wednesday when Prof. John McHale, the Chairman of the Irish Fiscal Advisory Council, stated that his initial assessment of Budget 2016 was that the scale of the deficit reduction in 2016, as measured by the change in the structural balance, was insufficient to meet new fiscal rules.
For a country with debt above 60% of GDP and where the economy is operating above its normal level, the adjustment must be 1% of GDP. The projected deficit improvement on budget day was just 0.8% of GDP when account was taken of the tax cuts and expenditure hikes.
It was later clarified that the scale of improvement that Ireland is required to make is actually based on estimates provided to the European Commission earlier this year, prior to the acceleration in economic growth. As a result the deficit needs to be brought down by at least 0.6% of GDP, not 1%. On this basis the budget would pass the deficit rule test.
Deputy McGrath commented, “The Fiscal Council provides very valuable commentary and advice on the public finances and the appropriateness of fiscal policy. The members of the Council, including the recent appointees, bring a wealth of experience to their role. It is important that they receive full co-operation from Government departments. It is reasonable to assume that they would be proactively provided with any information that they would need to undertake their work. The government must explain why it appears this did not occur. Ministers must acknowledge the importance of the Fiscal Council and support it in its works. At present, it appears to regard the Council as a nuisance to be sidelined as much as possible.
“Notwithstanding the technical clarification provided, the essence of the point made by Prof McHale stands. He made the point that the government has considerably ramped up expenditure with an additional €1.7bn in expenditure before the end of 2015 and €1.5bn package in 2016.
“Ministers have a duty to provide clarification as to what exactly the additional spending before the end of the year covers. While some supplementary estimates before the year end were expected, particularly in health, I don’t think anyone envisaged its scale. With an election looming and strict fiscal rules coming into effect in the new year, the suspicion will be that the government is trying to circumvent the rules through the back door and essentially buy votes.
“So far, the government has failed to demonstrate any clear strategy as to how to improve the delivery of public services and is now panicked into extra spending to put a gloss on their record in key areas,” concluded Deputy McGrath.