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Fiscal Responsibility Bill 2012: Second Stage (Resumed) (Continued)

Wednesday, 10 October 2012

Dáil Éireann Debate
Vol. 778 No. 1

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(Speaker Continuing)

[Deputy Paul J. Connaughton: Information on Paul Connaughton Zoom on Paul Connaughton] It turns its attention to the problems already created and comes up with a solution that is both pragmatic and practical.

The Bill marks the completion of a number of phases in dealing with the economic crash and it behoves all of us to leave behind recriminations about the reasons for the mess the Government inherited in order to focus on the task of securing a deal on the banking debt incurred to date. The Minister for Finance has indicated that a statement of intent from the ECB on the Anglo Irish Bank promissory notes would help him to frame December's budget. He has also noted that the political timeline for a deal is from now to March 2013, when the next tranche of promissory notes is due to be paid. Last June the Heads of Government in the eurozone agreed in principle to allow the ESM to recapitalise Irish banks in term of legacy debt. The Government must focus its full attention on supporting the ongoing efforts of the Minister and his officials as he seeks to secure the details of a deal at the earliest opportunity. As we face into what is likely to be one of the most difficult budgets in the history of the State, the Government deserves to be provided with crucial information on the country's finances. A statement of intent from the ECB on the likely parameters of such a deal would greatly assist the Minister in determining the extent of the cuts required. Cuts that prove unnecessary will only damage the economy further, create unnecessary fear among the public and dent economic confidence. Our key task in 2013 will be to restore a measure of confidence in the economy. That is why a statement of intent from the ECB is crucial.

When we passed the fiscal compact treaty, we proved to Europe and the rest of the world that we intended to sort out our own financial problems. We now need the European Union to step up to the plate with a deal on banking debt. With this Bill, we are taking on a level of fiscal responsibility that will go a long way towards ensuring greater equality in the economy of the European Union. I hope the determined efforts of the people to reduce the budget deficit will be supported in every way by our colleagues in Europe, including with a statement of intent on the promissory notes.

Deputy Brian Walsh: Information on Brian Walsh Zoom on Brian Walsh I had an opportunity last night to listen to the contributions of Deputies Pearse Doherty and Seamus Healy. Deputy Pearse Doherty gave us more of the same populist rhetoric we have heard from Sinn Féin since I was elected to the Dáil 18 months ago. Given that he has been finance spokesperson for his party for some time, one would expect him to have acquired at least a basic knowledge of the way the Department of Finance operates and how the budgetary process works. He argued out of both sides of his mouth, on the one hand, opposing increases to direct taxation and cuts in expenditure, while, on the other, claiming that the debt-to-GDP ratio has increased since the Government assumed office. He cannot argue against measures aimed at reducing the deficit, while at the same time complaining that the debt-to-GDP ratio is increasing. He criticised the Government's performance since the European Council of 29 June, but he had previously argued against the creation of the ESM and the fiscal compact treaty. If he had his way in the referendum in June, we would not even be in a position to negotiate on these matters.

The Fiscal Responsibility Bill 2012 stems from the resounding endorsement of the stability treaty by the people earlier this year and represents a watershed in our economic history and a vital building block in the foundation of our future economic prosperity. With our European counterparts, we will be bound by common principles of good governance and fiscal responsibility in order that no Government will ever again be at liberty to perpetrate such cynical economic mismanagement as that witnessed in the recent past. Basic principles of budgetary discipline will be given a statutory basis and overseen by the Irish Fiscal Advisory Council. This independent body which was established on a non-statutory basis in July 2011 will monitor compliance with fiscal parameters and key economic indicators. Its role will be integral in preventing the calamitous circumstances of the past from recurring. It will ensure transparency in the budgetary process through public, independent analysis of Government decisions and the underlying fiscal policy assumptions on which they are based. Crucially, it will provide expert opinion on the long-term fiscal implications of revenue and expenditure measures, which we lacked to our grave detriment in the past.

There is a growing appreciation internationally of the value of such independent advisory bodies. In 2008 alone, 27 such institutions were established in 17 EU member states. Similarly, there is an increasing awareness of the importance of having a framework of enforceable fiscal rules which are adequate to ensure sustainability but flexible enough to take account of exceptional circumstances and cyclical change. In predicting the value of economic oversight and fiscal parameters in the future, it is a useful exercise to look to our past. The six pack reforms introduced last year included an early warning system to monitor ten key indicators of macroeconomic imbalances. Had this warning system been in place between 2001 and 2006, there was no year in which Ireland would satisfied all of the indicator thresholds. The Fiscal Responsibility Bill will ensure sources of macroeconomic imbalance are promptly detected and addressed in the future. The Bill presents an opportunity to ensure no future Government can perpetrate the economic misdeeds of previous Fianna Fáil-led Administrations.

Deputy Peter Fitzpatrick: Information on Peter Fitzpatrick Zoom on Peter Fitzpatrick I welcome the opportunity to discuss the Fiscal Responsibility Bill 2012 which provides for the implementation in national law of certain fiscal rules contained in the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. It continues a programme of reforming Ireland's budgetary framework in line with developments at national and EU level. It is aptly named if one considers the definition of the word "responsibility" as the obligation to carry forward an assigned task to a successful conclusion, or reliability or dependability, especially in meeting debts or payments. This the job that the people have asked the Government to perform. Last May they endorsed the Government in this task with a strong 60% vote in favour of the referendum. The first definition refers to carrying out a task to a successful conclusion. That is what the Government will do. We were given the task of putting the country back on the road to recovery through thick and thin. The Government will carry out this task, even though difficult decisions will have to be made.

The Bill imposes a duty on the Government to comply with the budgetary and debt rules. The budgetary rule requires that the budgetary position must be either in balance or in surplus, with the annual structural balance at the medium-term budgetary objective, MTO, figure or else the annual structural balance must comply with the adjustment path toward the MTO as set out in the Stability and Growth Pact, unless exceptional circumstances as defined under the pact apply. If there is a failure to comply with the budgetary rule and the deviation from the MTO or the adjustment path is more than 0.5% of GDP, the Government will be required to implement a correction mechanism, the provisions of which have been drafted in the light of common principles adopted by the European Commission. If these parameters are adhered to, Ireland's path to recovery will be shortened and, as such, they should be embraced. The Government has agreed to them and can now use them as a roadmap and platform for future targets. It is worth remembering that fiscal rules are not a new phenomenon, with a variety of fiscal policy rules already in place across the European Union and the OECD.

Many in this country were not happy with the way Ireland was allowed to fall into the depths of economic stagnation and regression. We were given a mandate by the people to redress our economic stagnation. When it comes to fiscal responsibility, the Government will carry forward its assigned task to a successful conclusion. The Bill is part of that ongoing work and as a result I have no hesitation in commending it to the House.


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