Government choosing to ignore fiscal killjoys

For generations, governments have employed the tactic of commissioning reports on awkward issues in an effort to stave off the rainy day when the issues will have to be dealt with if somehow they cannot be forgotten in the meantime.

It remains a neat way to kick the proverbial can up the street.

The current Government established the Irish Fiscal Advisory Council in 2011 and put it on a statutory footing 18 months later, in 2012.

Its purpose is to provide an independent assessment of official budgetary forecasts and proposed fiscal policy objectives. It’s been in the news a bit recently as we come up to the 2015 budget but more about that later.

There are five members and they include John McHale, professor of economics at NUIG; Sebastian Barnes, who is an economics counsellor to the chief economist of the OECD; Alan Barrett, who is head of the economic analysis division of the ESRI; Dr Donal Donovan, an adjunct professor in UL and a former deputy director of the IMF, and, last but not least, Dr Róisín O’Sullivan, an associate professor in Massachusetts and a specialist in macro-economics. I think we can all agree that these folk have some pedigree.

The appointment of this council of experts followed probably one of the most ignominious periods in our economic history.

The ship of state had run aground during the watch of the previous government when they and the regulators took their proverbial eyes off the ball and allowed the economy to overheat to volcanic proportions.

Economists and others far and wide saw it coming, but government, lording over the boom, believed them all to be killjoys and, as a previous Taoiseach suggested, “should commit suicide” if they couldn’t get with the plan. We know the outcome of that little adventure.

We will be paying for it for a long time to come.

But it was probably a driver for the appointment of the Fiscal Council.

Now, we will really never know what’s in the mind of a politician when he opens his mouth.

But let’s assume for a minute that the Government was honest, particularly to itself, when it established the council.

We can surmise that it was established so that government would have a sounding board for its policies and a help in making its economic decisions, rather than simply having to listen solely to the permanent government, its party advisers, lobby groups or vested interests.

Unfortunately, today it would appear that it was just another exercise in making smoke and then kicking the can up the street when other more personal interests appear on the horizon.

We will not know what is in the budget for another two weeks, but if the sound bites are anything to go by, there will probably be something in it for everyone — that is, everyone who has a vote.

The 2016 general election is looming and it seems that Enda with the two left feet wants to be the first Fine Gael leader to be re-elected.

Recently, the fiscal council suggested that rather than take the opportunity to slacken the reins, the Government should continue to make material cuts in the budget and warned against “premature easing”.

After all, it isn’t as if we are running a surplus.

The opposite is true and we are continuing to borrow billions every year.

The IMF echoed that view, and now the European Commission has come out and demanded that the Government implement €2bn in cuts.

The bottom line is we still have one of the highest debt-to-GDP ratios in the EU and the Commission believes that we would be better off reducing our debt and deficit. Our own Fiscal Council agrees. Why does government continue to buy a proverbial dog and bark itself?

The risk we now run is that the Government will use our money to get itself elected and we, the taxpayer, will end up worse off than ever.


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