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Should the Irish Fiscal Advisory Council shut-up shop? Should Government take all the advice offered?  The short answer is NO. The Council is an independent statutory body and should continue to give and publish budgetary advice, even if there is a perception that the advice is not always implemented. Government has to take decisions having regard to a wide range of considerations, knowing that its performance is measured by the electorate at election-time.

IFAC’s Legal Basis: The Irish Fiscal Advisory Council (IFAC) has a legal obligation to make its views known. It was established under the Fiscal Responsibility Act 2012, which states that theCouncil shall be independent in the performance of its functions. Those functions include providing an assessment of the official forecasts, and providing an assessment of whether the fiscal stance, of each Budget, is in the opinion of the Fiscal Council conducive to prudent economic and budgetary management. At the same time, the Council is required to take into account the provisions of the EU’s Stability and Growth Pact. The Council is required to publish its assessments.

The Council has also been given an endorsement function. Specifically, it has been given responsibility to endorse the macroeconomic forecasts produced by the Department of Finance on which Budgets and Stability Programmes are based, on foot of EU regulations introduced in July 2013. This function is set-down in legislation under the Ministers and Secretaries Amendment Act 2013. The actions required under this function are outlined in a formal ‘Memorandum of Understanding’ between the Council and the Department of Finance – see www.fiscalcouncil.ie

Fiscal Assessments: The Council publishes two fiscal assessment reports every year, regarding the Budget in the Autumn and the Stability Programme Update in the Spring. The reports assess the Government’s macroeconomic and budgetary forecasts, the appropriateness of the fiscal stance, compliance with the budgetary rule, as well as detailing the Council’s endorsement function. Reports are then submitted to the Minister for Finance, and are laid before the Houses of the Oireachtas.

The latest Fiscal Assessment Report was published last November. This assessed the macroeconomic and budgetary projections set out by the Government in Budget 2015, and the appropriateness of the fiscal stance. The report also detailed the Council’s endorsement of the macroeconomic forecasts underlying Budget 2015. In this report, the Council acknowledges the success of Government in achieving many of the fiscal and budgetary projections. It does, however, include some criticisms. For example, the IFAC is of the view that Budget 2015 reflects a missed opportunity to move the public finances more decisively into a zone of safety by following through on previous plans. That conclusion has not gone unchallenged. The Minister for Finance, in a letter dated 9 January 2015, states that he does not agree with this Council position, as he believes that the fiscal stance adopted in the Budget is appropriate for Ireland at this point in the economic cycle. This in one of a number of issues addressed by the Minister in his response. The full response runs to eight pages –see www.fiscalcouncil.ie

Conclusion: The Irish Fiscal Advisory Council should not be discouraged if it feels that all of its advice is not being taken into account by the Minister for Finance, and his Department. It is an independent and legally constituted body. It should continue to do the job it has been asked to do. It should continue to make its assessments and present them to the Government without fear or favour. It is not a question of whether the Government likes what it hears; it is more a question of having independent assessment of the Government’s budgetary performance available to all, on the record, and published widely.

Tom Ferris is a consultant economist specialising in Public Sector Governance, Better Regulation and Transport Economics. He was Senior Economist in the Department of Transport until February 2006. Since then, he has undertaken consultancy projects for the World Bank, the OECD, the High Level Group on Business Regulation, and a number of private sector companies. He is an occasional lecturer in public sector economics at NUIG, UCC, and Public Affairs Ireland and he writes regularly for PAI Publications. He holds a Masters degree in economics from University College Dublin and a Fellowship from the Chartered Institute of Logistics and Transport.

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Certificate in Public Sector Financial Management- March 25th

Policy Development, Legislative Drafting , & the Legislative Process- April 16th & 30th