Ireland’s budgetary watchdog is far from happy with the Government’s failure to plan for the medium or long term.
The Fiscal Advisory Council was set up as part of a fundamental reform of the State's budgetary architecture. It monitors whether a government is meeting its own stated targets, assesses official economic forecasts and keeps an eye on whether ministers are complying with fiscal rules.
Well, the architecture may have changed but, to judge from the council’s comments, little else has. In commendably clear language, the report says the forecasts in Budget 2017 “show a marked slowdown in the pace of improvement in the public finances” this year.
Part of the pressure on budgetary spending is directly attributable to fallout from the earlier insistence of successive governments that long-term spending commitments on public pay and services, as well as tax cuts, be made on the back of exceptional tax revenue.
Before the bubble burst, those exceptional revenues came from stamp duty.
We know now how foolish such presumptions were. The price we paid was a loss of sovereignty as the troika took command. The fallout is still evident today in the continued hardship for thousands of people across the State.
At the time, the consensual refrain was: “Never again.”
The failed Fianna Fáil-led administration was berated for its reckless management of the State’s finances. Yet here we are, with the Fiscal Advisory Council warning that forecasts might need to be cut, that no provision has been made to finance public pay promises and that exceptional tax revenues – in this case from corporation tax – are being used to fund “difficult to reverse” spending increases.
The last election clearly showed that many people have yet to feel the warm financial glow of recovery. The Government is understandably keen to put this right.
However, politics is about choices; if we keep adding to the spending bill without providing for a future slowdown, we run the risk of repeating the catastrophic mistakes of the all-too-recent past.
