A five-member independent Fiscal Advisory Council has been established to assess and comment publically on whether the Government is meeting its own budgetary targets and objectives. It will also assess the appropriateness and soundness of the Government’s fiscal stance and macroeconomic projections and the extent of compliance with the Government’s fiscal rules.
While the Fine Gael manifesto and the Programme for Government made the commitment to establish a body that would report to the Dáil and the public, reports by the council must be given to the Finance Minister 24 hours before it is given to the Oireachtas.
Part of the deal on the EU-IMF Memorandum of Understanding was an agreement to establish a Fiscal Advisory Council by the middle of the year. The second part of that deal is to bring forward legislation in a Fiscal Responsibility Bill by the end of the year to reform the budgetary framework.
A similar move was made in the UK in May 2010 when the Office for Budget
Responsibility (OBR) was formed to produce forecasts for the economy and public finances, judge progress towards the Government’s fiscal targets, assess the long-term sustainability of the public finances and scrutinise the Treasury’s costing of Budget measures.
Its first task was to make an independent assessment of the public finances and the economy for the emergency Budget, when the UK’s deficit stood at £163 billion. For the first time, the forecasts were not determined by the Chancellor’s judgements. Instead, he retained responsibility for fiscal policy and set the fiscal target while providing the OBR with full access to the data and analysis necessary for it to scrutinise the public finances.
In each Budget and pre-budget report the OBR will confirm whether the UK Government’s policy is consistent with a better than 50 per cent chance of achieving the forward looking fiscal target set by the Chancellor.
Similarly the Irish Fiscal Advisory Council will:
• assess of the soundness of the economic and budgetary projections and forecasts set out by the Government in the annual Budget and the stability programme update;
• assess the appropriateness of the fiscal stance set out by the Government in the Budget and stability programme update;
• assess whether the plans in the Budget and stability programme update are consistent with the fiscal rules which are to be included in a Fiscal Responsibility Bill by the end of the year; and
• perform other functions, including an assessment of the implications of budgetary plans for economic growth, investment and employment, as may be assigned by the Minister for Finance.
The council will be chaired by John McHale, Head of Economics at NUI Galway and a former associate professor of economics at Harvard University.
Speaking to eolas about his appointment McHale said: “As a new organisation, there is a lot of work to be done to get our administrative structures in place, to get the council’s staff of four recruited and in place, and to establish working procedures for the council.
“I will be closely involved in the various assessment functions that comprise our mandate. Moreover, as visibility is central to our effectiveness, part of my responsibility will be to clearly communicate the council’s assessments to the public.”
In response to doubts about the council reporting to the department rather than the Oireachtas Public Accounts Committee, McHale says: “The council is currently functioning on an interim basis. Even on this interim basis I am confident that the council can act in full independence of the Department of Finance.”
He adds: “Of course, independence and accountability, and the public perceptions thereof, will be critical to the long-run success of the council. The council has been asked to make its views known on statutory basis for the permanent council as part of the Fiscal Responsibility Bill, and much of our emphasis will be on ensuring the council’s independence in terms of funding, recruitment, retention and reporting.”
Commenting on the establishment of the council, Michael Noonan said: “The council will provide an independent assessment of the Government’s budgetary plans and projections and, in doing so, will help to inform the public discussion surrounding economic and fiscal matters.”
He added that a number of other countries have taken the step of establishing such a council and have “found it to be beneficial not only in helping to ensure that an appropriate budgetary policy is pursued, but also in sending a positive signal to markets regarding the conduct of future fiscal discipline.
Writing on Irish economy.ie, economist Stephen Kinsella pointed out that the Swedish Fiscal Council saw its resources limited when it argued publically with their Minister while the Hungarian Fiscal Council was shut down when it disagreed with its Finance Minister.
Funding will initially be provided through the revised Estimates Volume that will be published shortly by the Department of Public Expenditure and Reform. For the longer term, the council’s funding will be considered in the Fiscal Responsibility Bill that will be published before the end of the year.
John McHale (Chair)
Head of Economics at NUI Galway, McHale was previously Associate Professor of Economics at Harvard University and Associate Professor of Managerial Economics at the Queen’s University Ontario.
He received PhD and AM degrees from Harvard in 1996, and also holds first-class B.Comm. (1988) and M.Econ.Sc. (1990) degrees from the National University of Ireland.
Head of the OECD’s Europe desk, Barnes formerly headed the Ireland desk, where he co-authored two economic surveys of Ireland which focused on macroeconomic and structural issues and offered policy recommendations to boost economic performance.
He has a bachelor’s degree in philosophy, politics and economics from the University of Oxford, a master’s degree in European political economy from the College of Europe (Bruges) and an MSc in economics from the London School of Economics.
Research Professor with Trinity College Dublin, where he is the Project Director with The Irish Longitudinal Study on Ageing (TILDA), Barrett is currently on secondment from the Economic and Social Research Institute.
He received his PhD in Economics from Michigan State University in 1994 and joined the ESRI that year. Most of his research work has been in the areas of labour economics, population economics and macroeconomics.
Adjunct professor at the University of Limerick and a visiting lecturer at Trinity College Dublin, Donovan formerly worked with the IMF. He was a member of the teams that produced the Governor of the Central Bank of Ireland’s report in May 2010 and the Nyberg Commission’s report in April 2011, both dealing with the causes of the Irish banking crisis.
Associate Professor in Smith College, Massachusetts, O’Sullivan was educated in NUI Galway, where she attained bachelor’s and master’s degrees, and at the Ohio State University, where she received a PhD in economics.
Her scholarly work focuses on issues relating to macroeconomic policy and financial markets, and she teaches courses in macroeconomics, money and banking, and central banking. Prior to becoming a college professor, O’Sullivan spent several years as an economist in the monetary policy department of the Central Bank of Ireland.
Tags: Financial advice
Date posted: Friday, August 19th, 2011 at 11:43 am