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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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  12 o’clock

(Speaker Continuing)

[Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív Zoom on Éamon Ó Cuív] Therefore, it is not sufficient to get a 50 year write-off, or any other length of write-off, as it will not affect the sums one bit in terms of having to adjust that figure.

  I do not know why we are setting up the Fiscal Advisory Council. It seems to me it publishes reports and they are dismissed by the Government and the Taoiseach as being irrelevant. There is not much point in setting up a body if we keep ignoring its advice. It seems we are not even debating what it is saying in detail in this House and that, before we even examine the merits of its arguments, its reports are being dismissed with one wave of the hand. If we are going to have an Irish Fiscal Advisory Council, the Oireachtas should at least go through its analysis line by line, and should then advise as to what is the view across the House of its advice. Only then should the Government finish its consideration of its proposals. Anything less is only window dressing and does not serve any useful purpose except to have more paper gathering dust and to have more staff being paid but no heed being paid to it.

  The other issue I am disappointed about is that I thought the Government was making a change to the way we prepared the budget. We were told in early summer that by July the Ministers would come in and discuss next year's budget. It was a small step in the radical reform we need to have on how we do budgeting in this House. However, it never happened and it is now intended it will happen in the next two or three weeks, at the end of October. That is too late.

  The second idea we have had over many years concerns the Estimates debate in the committees, in that every Minister used to come to the Estimates debate post factum and the intention is that we would now have this debate pre factum. By doing it on a committee by committee basis, however, each committee will ask each Minister to dig in with his or her Department in order to have the cutbacks made somewhere else or to get them from some mythical tax, and so on. When we were in government, although it did not happen and I regret that, I was in favour of having a budgetary or finance committee which would actually consider the Estimates as a whole and, therefore, it would have to take a holistic view of expenditure. What happens at present is that every committee will make the case for a particular Department and will not have to concern itself with whether more for one Department means less for another.

  I put this forward as it would be helpful for Government that those on the Opposition side would also have to take a holistic view, as one does around the Cabinet table, as to the total amount of cake and how one is going to divide that cake. The structures of our House do not force us to face up to reality at times. Often, when we create good structures in committee, we get more consensus than people might have expected. When we were in government, I remember that the members of the present Government used to have all of these suggested savings - I believe there was a €4 billion saving in health that used to be tossed around, but some of us have too good a memory.

Deputy Fergus O'Dowd: Information on Fergus O'Dowd Zoom on Fergus O'Dowd That was just Deputy Ó Cuív's Department.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív Zoom on Éamon Ó Cuív No, it was €500 million for my Department but it was a €4 billion saving in health. I used always ask my colleagues to get them into the committees, get them at page 1 of the Estimate and then say we are going to go through every page of the Estimate and ask them under which subheads they can find the savings. I recommend that the current Government would do this too.

Deputy Fergus O'Dowd: Information on Fergus O'Dowd Zoom on Fergus O'Dowd I look forward to seeing it.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív Zoom on Éamon Ó Cuív Between us, and in terms of the public dialogue, it would force all of society to face up to the facts and to get away from the wizzy-woo figures that tend to get tossed around the place which, in my view, do not serve either the Oireachtas, the Government or the country well. We have to change our structures. We have to involve more Oireachtas Members in a holistic way, not in this fractionalised way, on the money issue.

Up to a point, there is no need for the Bill because if we keep spending more than we are earning, we will not be able to borrow the money. We will just not get it on the markets and, therefore, we will be forced to face the hard decisions. With regard to some of the Deputies around this House who always have easy answers to everything, my view is that a more interactive system would make them face the realities of money.

Deputy John Deasy: Information on John Deasy Zoom on John Deasy I wish to share time with Deputy McHugh.

An Ceann Comhairle: Information on Seán Barrett Zoom on Seán Barrett Is that agreed? Agreed.

Deputy John Deasy: Information on John Deasy Zoom on John Deasy A part of this Bill I was drawn to, and on which I might agree with the previous speaker, concerns the Irish Fiscal Advisory Council, not necessarily the mechanics of setting it up but what the council has been saying and what has happened as a result. The Bill puts the advisory council on a statutory basis and it limits the Minister for Finance's power to fire members of the council, thereby strengthening its independence. "Independence" is the key word here. The council provides independent assessments of fiscal policy but the truth is that, so far, it has more or less been ignored and, ultimately, might always be ignored. The key point is that, to date, it has urged greater budget adjustments or, in other words, a front-loading of cuts in the last two budgets. The interesting point for me is that it has not been the only group to have done this.

Last Friday I noticed the Central Bank again cutting its growth forecast, which is something we are getting used to. I thought it would be no harm to take a look at the area of growth forecasting - who has been saying what, who has been most accurate and the usefulness of this exercise, particularly when it comes to the budget and the assumptions that are made and what we base budgets on. To start with the Department of Finance, in December 2010 the Department said we would have a 1.8% growth rate for 2011 but, by April 2011, that figure was down to 0.8%. At that time, it was probably the most upbeat of any forecast. In late May 2011, it was calling for a 2.8% growth rate for 2012. In July, Mr. Kevin Cardiff came into the Committee of Public Accounts and reiterated that figure. By November 2011, that was down to 1.6%, the following month it was down to 1.3% and by April of 2012 it landed at 0.75%. The reality is that in 2012 the Department was forced to lower its GDP forecasts three or four times.

As far as the Central Bank is concerned, in July 2011 it forecast a 2.1% growth rate for 2012. An important point is that around that time it advised the Government to make expenditure cuts rather than increase tax. One year later, it is advising the Government to increase the overall scale of fiscal correction, making the case for getting the adjustment over with more quickly. It is still doing this, which is a key point. To return to the projections, by October 2011 the 2.1% growth figure for 2012 was 1.8%. The Central Bank's explanation for this was a darkening international outlook. This was not atypical at the time and many groups were saying the same, and this sounds ominously like the IMF's position yesterday. Again, the Central Bank recommended an aggressive approach to deficit reduction and explained it was worried about the risk of negative shocks to the domestic economy.


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