The Irish Fiscal Advisory Council (IFAC) has developed an important role in independent commentary of the budgetary position and outlook which has seen it crossing swords with government on a number of occasions since its foundation in 2012. A review of the council by OECD experts, published this week, confirms the value of its role and adds that to underpin it, the council should have the legal right to access budgetary data from the Department of Finance.
The council was established in the wake of the financial crisis as part of the troika programme. Since then it has cautioned governments on a number of occasions in relation to issues such as reliance on potentially-volatile corporation tax revenues and the need to credibly plan for the long-term cost of an ageing population.
In this context the OECD conclusion that it has had difficulty accessing information in areas such as non-exchequer spending are interesting – and this should be remedied not only in relation to the council, but more generally.
We can never know how the pubic finances would have panned out had the council not been in existence in recent years. However, the fact that Ireland entered the pandemic with a broadly balanced budget, giving scope to respond, reflects in part its ongoing monitoring and warnings, as well as decisions made by the Minister for Finance in the previous government, Paschal Donohoe, who still holds that role. Ireland has never before been able to pursue counter-cyclical policy in this fashion.
As we exit the worst of the pandemic, the council will have a vital role. It has called on the Government to continue to borrow and spend for now. However, difficult decisions lie ahead in terms of reducing borrowing in the years ahead and setting the public finances on a sustainable course. Huge uncertainties surround the appropriate course of action, much depending on the path of the pandemic. Having the independent voice of the council to add to the debate is of significant value.