Establisment of the Irish Fiscal Advisory Council
Establishment of Irish Fiscal Advisory Council
This Council is supposedly an "Independent" body. But who does it represent ? Economics are not neutral.
Some comments from twitter -
The Fiscal Council is about FISCAL policy - aka Macroeconomics & Public Finance. There are no independent macroeconomists or finance specialists on it!(@cgcost)Why is Fiscal Council over-loaded with 3 economists specializing in pensions?!
Following the agreement of the Government in June, the Minister for Finance, Michael Noonan T.D., announced today the establishment of the Irish Fiscal Advisory Council. The Council is being put in place as part of a wider agenda of reform of Ireland’s budgetary architecture which is envisaged in the Programme for Government.
The Council will be an independent body and its existence and independence will be underpinned by legislation to be brought forward by Government later in the year in the proposed Fiscal Responsibility Bill. Its role will be to provide an assessment of, and comment publicly on, whether the Government is meeting its own stated budgetary targets and objectives. It will also be charged with assessing the appropriateness and soundness of the Government’s fiscal stance and macroeconomic projections as well as an assessment of the extent of compliance with the Government’s fiscal rules. The latter are also to be brought forward in the proposed Fiscal Responsibility Bill.
The members of the five-person Council are:
Mr. Sebastian Barnes, OECD,
Professor Alan Barrett, TCD (on secondment from the ESRI),
Dr. Donal Donovan, University of Limerick (formerly IMF staff),
Professor John McHale, Head of Economics, NUI Galway and Chair of the Council, and
Dr. Róisín O’Sullivan, Associate Professor, Smith College, Massachusetts.
Commenting on the establishment of the Council, the Minister said:
“The establishment of the Irish Fiscal Advisory Council is another important step in the process of reforming Ireland’s budgetary framework. 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.
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.”
The Minister wished the members well in their work and expressed the view that the Council will make a significant contribution to the task of ensuring that Ireland avoids the type of imbalances in the public finances that have been a feature in recent years. The Minister said that he was confident that the move would be viewed positively by the markets as further clear evidence that Ireland remained on track in meeting its obligations under the EU/IMF Programme and that it was committed to overcoming its financial difficulties.
The Minister thanked the new members of the Council for lending their time and expertise to help establish this important addition to Ireland’s budgetary framework.
“I am delighted that we have been able to assemble such a high-quality team to form Ireland’s first Fiscal Advisory Council. I have no doubt that, over the coming period, the Council’s standing will only increase through its work. I am particularly pleased that Professor John McHale has agreed to act as Chair. He will have a key role in setting up the Council and in helping to define its remit and its independent character. I would like to thank all of the members for making available their time and expertise to help reform our budgetary architecture.”
7 July 2011
ENDS
Notes for Editors
General
Under the Programme for Government, the Government is committed to establishing a Fiscal Advisory Council.
The Council will be titled “Irish Fiscal Advisory Council”
It will be an independent body and it is proposed that its existence and independence will be underpinned by legislation to be brought forward by Government in the autumn in the context of the Fiscal Responsibility Bill.
The Council has five members, including the Chair, appointed by the Minister for Finance.
The standard tenure of members will be three years. The first appointments to the Council are being staggered by arrangement with the members. One member will be appointed for two years, two members will be appointed for three years and two members will be appointed for four years.
Purpose and Mandate
The overall purpose of the Council is to help the Government to adhere to its own fiscal targets. For the initial two years following its establishment, the role of the Council will be to provide an assessment of whether the Government is meeting its own stated targets and objectives. It will also be charged with assessing the appropriateness and soundness of the Government’s fiscal stance and macroeconomic projections as well as an assessment of the extent of compliance with fiscal rules.
The specific mandate decided by Government is as follows:
(a) to provide an assessment 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,
(b) to provide an assessment of the appropriateness[1] of the fiscal stance set out by the Government in the Budget and Stability Programme Update, including, the Government’s stated medium-term budgetary objective, with particular regard to whether they are conducive to prudent economic and budgetary management, including by reference to the provisions of the European Union Stability and Growth Pact,
(c) to provide an assessment of whether the budgetary plans set out in the Budget and Stability Programme Update are consistent with the fiscal rules which it is proposed to publish as part of a Fiscal Responsibility Bill by the end of the year, and
(d) to perform such 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,
In carrying out its role, the Council is to maintain within its structures a technical ability to provide an informed assessment and critique of the official macroeconomic forecasts, in line with its mandate.
Reporting
The Council will be required to report formally in writing to the Minister for Finance at least three times per year and to publish such reports and submit them to the Oireachtas within 24 hours of their presentation to the Minister.
Legislation
It is envisaged that the new Council will contribute to the relevant legislation that establishes the Council in law when it is being brought to finality prior to publication later in the year.
Initial Support and Accommodation
For the initial six to nine month period and to get the Council up and running quickly, support services and accommodation will provided for the Council through the Economic and Social Research Institute (ESRI). It is envisaged however, that the after the initial period, it will be a matter for the Council to make its own arrangements within its budget.
Funding
Funding for the Council will be provided through the Estimates process. An initial provision to get the Council up and running is being made in the revised Estimates Volume that will be published shortly by the Department of Public Expenditure and Reform. For the longer term, the question of the most appropriate arrangements to fund the Council will be considered in the context of the Fiscal Responsibility Bill that will be published before the end of the year.
Context of this development
The establishment of the Irish Fiscal Advisory Council is part of a significant process of reform of the budgetary architecture, including the introduction of multi-annual budget planning, performance budgeting and the introduction of a set of “fiscal rules” designed to ensure minimum rules of good practice are observed through the economic cycle. The necessary legislation to give effect as appropriate to the reforms will be brought forward by the end of the year by the Ministers for Finance and Public Expenditure and Reform in the Fiscal Responsibility Bill.
The proposals for reform mentioned above take account of, and dovetail with, fiscal governance reforms at EU level. As a result of the financial and debt crises, the processes of economic and budgetary governance have been under active review within the European Union and specific proposals are being brought forward to help ensure that all EU Member States manage their national budgets in a sustainable way. These proposals include:
· clearer policy coordination and monitoring,
· a new principle of prudent fiscal policy-making,
· clearer annual debt-reduction targets,
· sharper enforcement of Stability and Growth Pact provisions,
· more detailed monitoring of Member States, and
· stronger national fiscal frameworks.
Compliance with EU/IMF Structural Benchmark
Finally, it should be noted that in the EU/IMF Programme of Financial Support, Ireland agreed to two structural benchmarks, the first being the establishment by mid-year of a Fiscal Advisory Council. This benchmark has been met. The second is the bringing forward of legislation in a Fiscal Responsibility Bill by end-year to reform the budgetary framework. It is the Government’s intention that this benchmark will also be met.
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Originally Posted by PaddyJoe McGillycuddy
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