Flying blind with State finances is not on

The most common excuses used by those who sought to defend their mismanagement of the country’s economy before the collapse were that 1: They couldn’t foresee the future; and 2: They didn’t have the benefit of hindsight.
Flying blind with State finances is not on

But now it seems those to whom we entrust our fragile finances don’t have any present-day sight either.

“The department is flying blind,” Derek Moran, the top official in the Department of Finance, told the Public Accounts Committee when asked to explain the sudden and unanticipated surge in revenue from corporation tax revealed in the exchequer returns this week.

Mr Moran explained that the department lacked “real-time” information to track the performance of this absolutely key sector of the Irish economy.

Which is not so bad if, when all the figures are finally and belatedly collated, they turn out to be surprisingly good. And €6.4bn in corporation tax when only €4bn was expected is certainly a good thing, with the only downside being the dilemma over how to spend it.

But what if the intake had been a third less than anticipated instead of a third more? What kind of dilemma would that have posed for public spending plans?

If we can’t predict with any degree of certainty what a key sector of the economy is likely to contribute from one end of the year to the next, how do we plan for anything other than the shortest term?

And if we don’t know there’s an upsurge or downswing happening, how can we tell for sure what factors are contributing to it and what policies may need to be swiftly tweaked to help steady the ship.

The Government has been quick to express confidence that the windfall is not the once-off result of a freak gust of prosperity but that all signs are that the companies whose profits spilled over into the State coffers this year will have a similar overflow next year.

But if Mr Moran’s candid assessment of his own department’s limitations is correct, it will be this time next year before we know if that confidence is justified.

There were gasps of incredulity a few years ago when it was revealed that around half the staff in the Department of Finance had no qualifications in business, economics, or related fields.

Of those who did have some specialist knowledge, only a very few had pursued it to masters level at university and there was just one single member with a PhD to their name.

It may not be lack of expertise that is contributing to the lack of up-to-the-minute information in the department but it’s hard to imagine any major stockbroking company or firm of financial analysts being quite so in the dark about a sector under their scrutiny.

So whether it’s about personnel, training, systems or communications, it all adds up to a need for the department to get its act together, real-time.

Because when it’s flying blind, it’s the rest of us who are destined to become the crash victims.

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Wednesday, January 20, 2021

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