More on Fiscal Reform Post author By Philip Lane Post date June 3, 2011 The presentations from last Monday’s seminar organised by the Department of Finance and Department of Public Expenditure and Reform are available here. The English summary of the May 2011 annual report from the Swedish Council is here. Categories In Uncategorized 9 Comments on More on Fiscal Reform ← Kenmare DEW October 2011 Conference → The Competition Authority: Vacancies 9 replies on “More on Fiscal Reform” I am baffled by this fiscal reform mantra……… Imagine a country where the only money created was fiscal debt – even high paid civil servants would only pay cash for their houses – banks would be full deposit institutions……….. Must we again strive to create a money vacuum so that banks can make leveraged bets on non productive investments that need a higher and higher credit deluge to maintain the illusion of productivity ? Steve Keen does not believe in any monetory reform such as the goverment providing the only credit as the above – but even he admits there is little point in striving to remake the credit mistakes of the past. The central problem is that we have out of control banks that will increase credit to bet on 2 flys going up a wall. Almost all of private credit is unproductive now , why go after a half banjaxed fiscal money transfer mechanism when the prime culprit is staring us all in the face. Malinvestment from a domestic banking system that has only enough credit expertise to give consumption credit to a country with outside multinational capital / transfer payments. Anyhow reducing fiscal debt will merely increase credit leverage again – you must have a money base babies. Although I do concede that a Irish Euro fiscal base at these levels is grossly unsustainable given nondefault in our banking system. Thanks Philip, very useful. I looked through Robert Watts’ slides (DoF) on spending reforms. What struck me most of all was the fact that the main drivers of change nearly four years on are still external agencies. The quality of information available to government about value-for-money is still poor. That is pretty worrying. How do local authorities spend commercial rates they collect? How much money local authorities spending on legal advice and/or court actions and is there any oversight mechanism to ensure value-for-money here? I doubt satisfactory answers are forthcoming. I think it is Slide 7 but the diagram on budget deviations was not captioned sufficiently for me to understand it. May be someone could elucidate. BTW: Dan O’Brien as a piece today on the tax take to date. The positive €600 million increase over January-May 11 compared to the same period last year, is a figure worth reflecting upon. It is at the lower end of estimates for Tribunal legal costs. Note to Chopra et al. If you simply reduce pay to civil servants again , some will default on their loans and given the acceptance of the socialisation of private credit losses these losses will flow back into the exchequer. Tax policey should not be about raising money as tax just remains in the tax office – its primary goal should be about increasing the effeciency of the state through reducing the need for imports. A bug bear of mine is the congested nature of traffic during school commute times – this was never a problem during my school daze ,however its the only time when the roads are busy now. Perhaps its time to increase the tax substantially on a second car so that designer mums can get back down to earth with a bang. Of course any politically incorrect statements will be shot down unless dressed up in the language of the day which in very real terms is just carbon emissions. + if we want just a little bit of payback from Germany we should hit them where it hurts. Fiscal policey should reduce oil and car imports even further. But I guess our dear leaders need permission first……… http://www.irishtimes.com/newspaper/opinion/2010/1123/1224283932883.html would have been nice to see the newly established Dept of Public Expenditure Secretary Gen address this issue… The sound of stable doors being slammed after the horse is long gone is deafening. If the new stable is to be more secure, there is one bolt-hole that can be blocked immediately and that is by breaking the link between the salaries of elected representatives and public servants. As matters stand, both sides can see nothing but advantage in conceding the demands of the other. The other essential point is, of course, to place employment in the public and private sectors on an equal footing. Going from a closed shop in the public sector to the opposite extreme of throwing open senior appointments – to the detriment of the legitimate promotional prospects for serving middle-ranking public servants who are guilty only of doing their jobs – is the mistaken answer to a mistaken analysis. cf. http://www.reviewbody.gov.ie/Documents/Report_No_38.pdf Of course, turkeys do not vote for Christmas and, on the evidence of the presentations at this seminar, they are not about to start. Please keep posting this very useful stuff, Philip. That hardly any commenters have anything useful to say on the topic does not not mean that you lack an appreciative audience. I’m personally very interested to know where the 0.75% and 1.5% come from. The Goldilocks rate of fiscal adjustment has to be one of the most important economic policy questions facing Ireland right now. What is the evidence that 1.5% is “just right”? @ Bee Cee Tee I thought DOCM summed it up nicely . There’s no rule about what to do when the weather is really s***t*. Only had a chance to read through these now. The slides are fairly “sparse” so it’s hard to interpret too much. The preso that struck me most was the Downes presentation on Expenditure Aspects. The implication from some of what he said seemed to be that the dept has no real idea of spending or results, and doesn’t look much beyond that year’s cashflow. Worrying and certainly backs up the need for more fiscal governance. Hugh Sheehy hits the nail on the head when he suggests that the Department itself should know what is being spent to enable it to have credible control of spending. An example of the deep-seated Victorian mindset of the ruling class are the current discussions on revision of the Freedom of Information law. Brian Cowen claimed in Nov 2009 in the Dáil, that the FOI Act was being abused by long-winded requests. He said public servants were being forced to spend an inordinate amount of time “trawling through” files when they could be doing other work. “It is an expensive and time-consuming aspect of Government work,” he said. “I have no problem whatsoever with the legitimate use of the Freedom of Information Act for individual citizens or, indeed, for others. “However, the idea of the department trawling every question that comes in from people who, perhaps, regard the departments of State as a source of generating information was not within the contemplation of the Freedom of Information Act and, to be honest; it is an abuse of the process,” he added. It would never occur that many of the requests on spending arise because of the primitive accounting system where with a few exceptions, there is no cross-departmental spending data by category. Never mind the local government budget which is taken as a net add-on. So when it’s revealed that the public drugs’ bill almost doubled to €1.6bn between 2002 and 2008, it’s big news — including for DoF officials. There is €16bn spent on procurerment but in 2007, the DoF refused to provide me with a breakdown. It’s almost 100 days of the current government in office and one big reform it could have made that would not involve big spending would be to have open transparency on public contracts above a low level. As for a fiscal council of say 6, 2 or 3 should be appointees from well-run comparable European countries. The first fiscal council has to establish credibility and we could probably do without a Doheny & Nesbitt on steroids. Comments are closed.