Irish Fiscal Advisory Council

The government has announced the establishment of the Irish Fiscal Advisory Council – the details are here.

Congratulations in particular to regular contributor John McHale on his appointment as Chair of the Council.  Best wishes to all the Council members on their new task.

58 thoughts on “Irish Fiscal Advisory Council”

  1. John McHale’s appointment is excellent news and well-deserved, although I might be one of the very few posting here to say that.

    I hope that Alan Barrett will be more accurate, in whatever macroeconomic forecasts he gives the Minister, than he was with his migration forecasts.

  2. I second congratulations to John McHale.

    Few of the commentators here are by any means in agreement about everything or anything, so I am pleased to see a deeply grounded, thoughtful, painstaking and open to debate person take up the position of Chair of the Council.

    All the best in creating the role.

  3. I echo JTO’s sentiments. John’s level-headed and responsible analyses are a welcome antidote to much that is written about our difficulties.

  4. First I want to add my own warm comgratulations to John McHale to the others here. Michael Hennigan has excellently summed up my initial reactions.

    Secondly, we need much more detail on the Council’s guarantees of independence. The Office of Budget Responsibility in the UK was captured even before it was properly established. We need to know that it will be properly resourced. Ministers Varadkar and Bruton have already issued some eyewash, respectively, on allowing the rrelevant Oireachtas Cttee to make proposals on new road traffic legislation and on creating a combined Competition and Consumers Council.

    Governments will never devolve power voluntarily. When they present themselves as doing so one should be exceptionally vigilant and sceptical. Given the two examples I have cited, I fear this is just more eyewash. I genuinely hope it isn’t given the calibre of those appointed, but we need to remember that governments always and everywere will use every ruse to avoid proper scrutiny, restraint and accountability. It’s simply in their DNA.

    I hope and am fearful.

  5. I wish the members of the Irish Fiscal Advisory Council well. Cheers to heterodoxy!

  6. @John McHale

    Now look at what you’ve gotten yourself into! Engage and Enjoy.

  7. Congrats to all.
    If I can say this, without taking away from any of the appointed, it would have been good to see a contrarian appointed!
    How contrarian I couldnt say, but it is something that Ireland and IRL Govt needs to do more.

  8. Congratulations to John McHale. It’s a pity Morgan was not nominated to balance things up.

  9. Congratulations to John McHale in particular, I hope the appointment doesn’t put an end to your public opinions, musings, analysis and comment on here.

  10. Congratulations John and best of luck to all the members.

    I agree with Michael : it is good to see that the IFAC “will not be a boys club” and hopefully this fact will encourage wider participation on this excellent site.

  11. I welcome this body, and calibre of appointees…but…

    There is no one with a performance management/accountancy background including accompanying real world experience, such a person would be vital in ensuring the macro is tied to the micro. The current quality and standard of PS financial management information is abysmal, improvement is needed, else policy determination and measurement will prove rather challenging.

  12. OECD : Check
    IMF : Check
    Ex Central Banker : Check
    ESRI : Check
    A proponent of ‘sure it will be grand’…Check

    how, by whom, or on what grounds these were chosen, no matter how good and fine they may be, would be interesting. No outsiders, no contrarians, no real micro specialists, no labour market people, no …

  13. Congratulations to all the members of the council.

    However, I do wonder who will have the role of dissenter, curmudgeon, etc. There ought to be one.

    There ought to be a chairman and at least one optimist, one pessimist, and one skeptic.

  14. Many thanks for the kind words and good wishes. It is is daunting but we are committed to making a difference. I also welcome the more negative comments above — if we can’t ruffle some feathers then we are not right for the job. Central to our success will be visibility, so I anticipate that council members will continue to be active in debates outside our formal assessment reports. I will certainly continue to value forums such as Irish Economy and NWL to help get a deeper understanding of the challenges and choices.

  15. Congrats but be careful.
    Great men have been chewed up and spat out by this crisis. You’re up against it. I suspect it’ll be a little like the Model T Fords – you can come up with any solutions you like as long as the Troika, the market, the ECB, Goldman and the EU like it. And even if that is not said explicitly……
    Donal Donovan was staff member with the IMF during it’s most disastrous when they destroyed many an economy
    Alan Barrett – I dunno….!

  16. The council should look at issues such as the reporting systems both for internal control but also for information for the public.

    Information should be available on significant categories of expenditure both at central cross-departmental level and at local government level.

    Does anyone know how much the State spends on IT?

    Last Jan the PAC guessed that State pays lawyers about €500m annually – – but that is a guess.

    We do have a figure for the annual science budget of €2.5bn encompassing 39 departments and agencies but there’s zero scrutiny (other than accounting issues by the C&AG) of this spending.

    For example, there was good news this week for the UCD spinout BiancaMed and Prof. Conor Heneghan and colleagues deserve praise for developing a technology for sleep disorders that is of interest to a bigger US company, which is willing to pay a price that can give a French venture capital company a 50% return in 2 years.

    However, such early stage takeovers are mainly for the technology and there is little value added for Ireland from the billions spent.

    Finally, the first council has the opportunity of establishing its credibility that will have an impact for many years.

    The members have the opportunity to do noble work and the Lancet report on the jump in suicide rates in Greece and Ireland is just one window on the collateral damage caused by negligence and unbridled greed:

    Suicide rates jump in Greece and Ireland during financial crisis; Road accidents dip in Europe

  17. Yet another forum/committee/’high-level’taskforce/advisory body etc,etc – analysis-reports-kerfuffle-verbal commitments to act-‘wait for the kerfuffle to die down’/inertia/nothing done – mandarins and vested interests rest easy for another while………..same old/same old……..

  18. I don’t quibble with any of the appointments. Good luck to them all. But, I can imagine the reaction if all this had occurred with Fianna Fail and Fine Gael/Labour being in the reverse positions in recent years.

    Just imagine:

    (1) 31 January 2011: The Fine/Gael Labour government are under siege. A prominent economist forecasts net emigration of 60,000 in year to April 2011. He also insists that his previous forecast of 120,000 net emigration in the 2-year period to April 2010 was correct, and that CSO figures indicating that it was much less are wrong. If accurate, his figures indicate that the population is now falling, in other words depopulation is back. He goes on television and makes semi-political statements to the effect that people are very angry with the Fine Gael/labour government because of the ‘return of mass emigration’ and ‘depopulation’. His comments are reported worldwide, and there is universal belief across the world that such an exodus is taking place.

    (2) 1 February 2011: Election campaign gets under way against the background of the ‘return of mass emigration’ and ‘depopulation’. The opposition Fianna Fail party make the ‘return of mass emigration’ and ‘depopulation’ the major issue of the campaign.

    (3) 25 February 2011: Election day comes, and the Fine Gael/Labour government gets absolutely trashed. Pollsters say one of the main reasons was the electorate’s anger with the Fine Gael/Labour goverment for the ‘return of mass emigration’ and ‘depopulation’. Fianna Fail return triumphantly to power.

    (4) 30 June 2011: The census results come out. They show that the
    ‘return of mass emigration’ and ‘depopulation’ was actually a hoax, with 120,000 net immigration since the previous census and the population growing by 8.0% in 5 years, by far the fastest rate of growth in the EU.

    (5) 7 July 2011: A week after the census results come out, the same economist, who got it so hopelessly wrong about population growth and migration gets appointed to an important position by the new Fianna Fail government, in which one of his duties is providing the new government with economic forecasts.

    I am not alleging anything untoward at all here. The economist might just have been unlucky and he might be a brilliant man alltogether. I wish him every success in his new position.

    I merely make the point that Fianna Fail would never have got away with it.

  19. @ Paul Hunt, and others

    All remains vague for now.

    http://www.irishtimes.com/newspaper/finance/2011/0708/1224300301077.html

    “The council will have no powers to recommend levels of overall tax and spending.”

    Really?

    Also the final sentence of the article:

    “The council, additionally, sent “a positive signal to markets regarding the conduct of future fiscal discipline”, he [Noonan] added.”

    I read that and went, ‘no, no, no, no, no’. It makes a pragmatic step towards improving fiscal policy, look like a sly dodge to seduce those recalcitrant markets.

    http://www.irishtimes.com/newspaper/finance/2011/0708/1224300302447.html

  20. Great news. A fiscal council was long overdue. Many commentators have said we should have run bigger surpluses during the boom, with precious few suggesting the size of these suggested surpluses. You could feel sorry for politicians, in the past they were following the only rules laid in front of them namely the stability and growth pact. Hopefully the fiscal council will bring some political clarity to appropriate fiscal responses to boom/bust cycles and unsuitable interest rates long into the future.

    Also it’s great to see someone as committed and objective as John McHale as the chairman.

    The Government of the day seems totally focused on implementing the IMF deal. I hope the council considers reducing the deficit quicker in order to have the slightest chance of actually returning to the bond markets before the Troika funds run out.

  21. @Gavin Kostick,

    Well done. I see you’re on the vigilance patrol early. Unfortunately, the media, is is their wont, are just doing basic reporting of verbatin comments. They’re not asking the hard questions. It’s early days yet, but I don’t think the media have any understanding of what questions they should be asking – or, indeed, what their real role is in situations like this.

    Here is a government conveying the impression of allowing some external renstraint on its behaviour and of increasing accountability. And the media report this as if these are facts. Questions like: Why are they saying this? Why are they saying it this way?, Why are they saying it now? What does it really mean? seem to be beyond the ken of our peerless Fourth Estate.

  22. Given that the fiscal side is being strangled by the banking side, why is no banking professional involved?

  23. JohnTheOptimist was likely as bewildered as Taoiseach Bertie Ahern in April 2006 when Ahern said that he had listened for seven years to warnings and arguments about difficulties in the construction sector. “I think you have to look at the asset.

    This is the question: if you are borrowing ‘x’, if you sell the asset, if there’s a bit of a downturn, will you get ‘x’ back in return? That’s the issue. At the moment, there doesn’t seem to be an indication [of difficulties].

    “I mean quite frankly, if you had taken the advice a year ago you would have lost a lot of money. Everybody said we’re going to see a huge downturn in 2005 linking into 2006 – they were entirely wrong.

    Really we should have an examination into why so many people got it so wrong. My view is there’s not a great problem. Really, the bad advice of last year given by so many has maybe made some people make mistakes, that they should have bought last year.”

    This was FF economics and it sure was compelling for the believers.

    @ Paul Hunt

    Most press issues from the DOF are made late in the afternoon – – presumably because that’s the way it has always been done.

    I would suspect that the lack of analysis was a matter of time rather than interest.

  24. Congrats to John McHale and congrats to Philip Lane for making his vision become a reality. The pen is mighty indeed.

  25. A fiscal council looks like a great idea and will doubtless be of great value for the next crisis. But it is not going to stop the operation of the circular into which the country is now being fed by the markets.

  26. Hee hee!

    I can just see the lads in the DoF dusting down the high shelf for these IFAC reports.

    If I were you, the first thing I’d insist on is completely, and ring-fenced, independence from the failed department – anything else is parking your tanks on their lawn but they’ve got all the fuel and the shells.

    Good luck with that!

  27. Any groupwhich can be critical of Government budgetary policy in a) a semi-institutional capacity and b) without glarinyl obvious vested interests is to be applauded overall.

    I note that the legislation implementing the group won’t be in place until nearer the end of the year according to the MOU – will the Council be up and running in time for the 2012 budget?

  28. I think the real congrats are due to Philip Lane who quietly, and dispassionately, floated the idea of a fiscal council for Ireland and supported his concept with evidence of how it should work and its likely benefits.

    It’s great to see it come into being at last and hopefully it will be an effective body. Congratulations to John McHale on his appointment as Chair. I think he’s taken on a difficult job, and a massive responsibility, as the body will operate in a twilight zone between sometimes intense politics and the media. Very best of luck.

  29. @Michael Hennigan

    The members have the opportunity to do noble work and the Lancet report on the jump in suicide rates in Greece and Ireland is just one window on the collateral damage caused by negligence and unbridled greed:

    Suicide rates jump in Greece and Ireland during financial crisis; Road accidents dip in Europe

    JTO again:

    MH, I fail to see why you should introduce the subject of suicide into a thread designed to congratulate John McHale on his well-deserved appointment. Of what relevance is suicide to that matter? His appointment is hardly that bad a piece of news.

    But, if you must, try to use up-to-date figures. The figures you quote are for 2009. The figures for 2010 were published last week. They showed an 8% fall in the number of suicides in Ireland in 2010 over 2009 (from 526 to 486).

  30. Well, it doesn’t look to me that there’s any different thinking going into this ‘Advisory Council’ from the neo liberal ‘theology’ that is responsible for the economic mess that we find ourselves in. (Give or take some minor tinkering.)

    Continuing with this approach does nothing to address the fundamental problem which is the crushing burden of under utilisation of resources – principally labour. It is a plan for permanently high unemployment. underemployment, low wages & decimated public services. This does not make sense economically or morally. But I guess most of the economists here don’t feel too personally threatened by that.

    I’d like to see someone like Prof Bill Mitchell, University of Newcastle, NSW, Australia, heading up this advisory council. For those not familiar with his work (or that of other MMT economists) a nicely topical item on his blog here:

    http://bilbo.economicoutlook.net/blog/?p=15211#more-15211

    “What is government waste?”

  31. JtO
    you are aware of the vast amounts of international research on the actual v reported rates of suicide are you not? The Irish Association of Suicideology has some work if you can come down from your mountain…

  32. @Philip II

    When they open a thread on suicide, I will post on it. I can’t see the relevance of suicide to a thread dealing with John McHale’s appointment. It wasn’t me who introduced it. I merely corrected the one who did introduce it because, although totally irrelevant to the subject of the thread, he can never resist having a go at Fianna Fail.

  33. @Mike Hall
    If you want to get into fantasy economists time, for the downunder slot, I’d prefer Steve Keen… Mr. Mitchell’s autarky only ‘works’ in an dynamic equilibrium system.

  34. @ Mike

    from your link:

    “the fact that unemployment and underemployment rose several percentage points during the crisis and are still well above the pre-crisis levels is evidence that the overall fiscal stimulus was insufficient in its impact on aggregate demand. In that sense, the waste of the stimulus are the lost jobs that arose because the Government were too cautious”

    How much do you reckon it would take in government stimulus to get Irish unemployment back down to their pre-crisis levels? Couple of hundred billion? More?

    Wanting to get back to Q2 2007, whether in Ireland, the US, Ozzieland is a tad asperational in my view. Ozzie unemployment is currently 4.9% (and falling), it peaked during the crisis at 5.9%, and its pre-crisis level was 4.0%. Its 20yr average is 7%, its 10yr average is 5.3%. I dunno, whats normal, whats acceptable? Is 4% supposed to be normal and sustainable? The Ozzie govt doesn’t seem to be doing too bad a job.

  35. @ Mr Bond, Hoganmahew

    Correct me if I’m wrong, but at the start of this depression, we had €30 billion in cash balances and a pension reserve fund of approx €25 billion. We also had the lowest government debt to GDP/GNP/GNI, or whatever in the EU.

    We had a choice. We could have accepted that the housing market was toast for a considerable period, but that there was a raft of infrastructural spending required: in schools (lots of prefabs out there – which cost a mint to run and maintain); in broadband (serious case for development of a very productive piece of infrastructure and that Google et al, are lobbying for); in energy conservation (obvious macro benefits); in flood defences; railway infrastructure; port facilities, etc. etc. etc. The benefits of such investment would have been enormous: in maintaining employment (in particular for many of the construction workers that the housing downturn laid off); in productive capacity; in maintaining a positive dynamic that would have supported domestic demand.

    Now, I’m not an expert, so I’m willing to admit that this might well have been a gamble, and could well have led us into default territory on national debt, but is that not where we are now?

    But I don’t need to be an expert to see that the proponents of austerity have led us up the garden path. Where MMT is absolutely correct is that unemployment is a political choice. We’ve listened to austerity merchants for too long, and yet when their policies fail we reward them. It don’t seem too smart to me.

  36. @ disgruntled observer

    Conventional wisdom certainly has served the country well over the last 2 years.

  37. @ JohnTheOptimist

    Take your choice: the camel seldom sees his own hump; let he who has not sinned cast the first stone.

    Recall a few weeks ago, you raised the issue of rezoning density in an unrelated thread; you had stupidly claimed that the size of Irish housing units had not fallen during the bubble; apart from the common evidence for those who weren’t afflicted with myopia, the Irish government had issued guidelines in the 1990s on increasing zoning density.

    Thank you for the 2010 suicide statistics; I had already provided them in a prior post.

    As for your self-congratulations on migration statistics, you must have been impressed with the the boom data and that’s where wisdom can appropriately trump figures.

    @ disgruntled observer

    You appear to ignore a few inconvenient truths.

    Bubble revenue collapsed and most of the new foreign debt had to be funded by foreigners.

    All these big projects would have been nice to have but you seem to also ignore that the pathetic record on broadband implementation was not related to shortage of money during the bubble; we simply weren’t very professional in managing big projects during the time of plenty.

    We eventually got a 140 mile motorway from Naas to Cork operational, after 42 years.

    We could even give farmers almost a quarter of the national roadbuilding budget – – over €4bn.

    @ seafóid

    Conventional wisdom was denial that we could not maintain a system of inflated costs and entitlements built on housing transactions, fuelled by credit.

    That was simply it as there was effectively no employment growth in the international tradeable goods and services sectors.

    The denial is still prevalent today but the perception that default could avoid facing reality, is a fairytale.

  38. @ Michael Hennigan

    It’s a mess and it’s not just the locals who have led the country to where it is today. The bank collapse was bigger than the capacity of the country to fix it. The idea that a programme of austerity combined with the repayment in full of all banking debt (rather than a structured resolution) would lead to a quick return to the markets has run into the sand, I’m afraid. The decay has now spread to Italy and Spain. Belgium should be sucked in by year end. It’s supposed to be a currency union, not an every country for itself arrangement.

    Ireland won’t default without dragging a lot down with it.

    I wouldn’t put Trichet in charge of an under 14 team.

  39. @ Michael Hennigan,

    I wasn’t aware that we undertook a broadband rollout during the bubble.

    Also, during the bubble was the most expensive time possible to do infrastructure work. A deflating economy is the optimum time. How many infrastructure projects have come in ahead of schedule and below budget in the past couple of years? All, perchance?

    “Bubble revenue collapsed and most of the new foreign debt had to be funded by foreigners.”

    Of course bubble revenue collapsed, as it did right throughout the western world. Other than our assuming banking debts, our deficits were marginally larger in relative terms. No western economy required stimulus more than us. None had the spare capacity we had. Few if any had such low government debt going into this, let alone had a sovereign wealth fund. What was different about other countries was the taxation regimes, and the fact that they ran stimulus programs. Others said it at the time, but hell, they had beards, so what did they know?

    So besides the NPRF and a cash balance of €30 billion, we had the option of raising taxes to drive investment programs, to rebalance our economy whilst increasing productive capacity. We didn’t have to let the entire construction industry collapse, nor accept an absolute explosion in unemployment and all that entails. And now we can’t contemplate increasing taxes without also contemplating debt defaults. You couldn’t make this stuff up.

    You see, what has me disgruntled is the failure to acknowledge that choices existed and exist and that the choices we made were not primarily economic choices but political and pseudo-religious ones at that. We had an insane consensus on the way up and we have an insane consensus on the way down. We congratulated ourselves extensively on the way up and we’re congratulating ourselves on the way down (I obviously exclude yourself from that last point!).

    @ Seafoid,

    “I wouldn’t put Trichet in charge of an under 14 team.”

    +1

    It’s scary the lack of dissent amongst these people. What must the Spanish be thinking?

  40. @ hoganmayhew

    “fantasy economics” ?

    What do you call the Greek ‘bail outs’ ? The entire eurozone approach so far is fantasy economics. Thinking that protecting & maintaining a global financial (non-productive, casino) economy 20 times the size of the real economy & believing that is sustainable is pure fantasy, going on religeon.

    (ps how d’you think the ‘equilibrium’ is working out now?)

    @ Bond

    If you took the trouble to read something of the MMT approach you might realise that a currency issuer is not (ever) credit constrained. Unless it takes an ideological position that a private banking cartel should own & control our society’s money. Ireland is a currency user of course, but only politics & ideology (& lack of intellectual curiosity) stands in the way of the Eurozone taking a view that it’s citizens are a higher priority than private bankers.

    Frankl, tho’, the way the ECB is behaving (& politicians allowing it), Ireland would be far better to leave the euro & rightly declare most of its sovereign debt formally ‘odious’. (If that principle is good enough for the US following its occupation of Iraq, it’ll do for us.) Ireland can then get on with the urgent job of using its natural & labour resources to full capacity, credit unconstrained, to provide some resilience for the global material resource (esp energy) supply crunch & further economic collapse coming this decade.

    It’s fair to say that whatever MMT, Job Guarantee, Douthwaite’s ‘qualitative easing’ etc. type of policy is chosen, a far higher standard of fiscal & distributional governance than at present would be needed. But an unwillingness to address that is no excuse for heading to the cliff like lemmings.

  41. @disgruntled
    “Correct me if I’m wrong, but at the start of this depression, we had €30 billion in cash balances and a pension reserve fund of approx €25 billion. We also had the lowest government debt to GDP/GNP/GNI, or whatever in the EU.”
    Erm, the 30 bn in cash balances was built up after the onset of the depression. It was all borrowed money, much of it short-term. It would have needed to be rolled over in short-order, so we would be long defaulted by now with half-completed projects littering the country.

    Austerity? What austerity? The government will spend 68 bn ex the banks this year. What did it spend during 2006? What has CPI been since then?

    According to Mr. Mitchell, we have done exactly the right thing. We have increased spending (drastically in real terms). None of it, after all, is wasted. Where has it got us? Another year and deeper in debt, beholden to outside powers.

  42. PS “I wasn’t aware that we undertook a broadband rollout during the bubble.”

    The wretched project was called Wimax – I can’t believe you are not aware of it; the ads have tortured me for years.

  43. @Mike Hall
    ““fantasy economics” ?

    What do you call the Greek ‘bail outs’ ? The entire eurozone approach so far is fantasy economics. Thinking that protecting & maintaining a global financial (non-productive, casino) economy 20 times the size of the real economy & believing that is sustainable is pure fantasy, going on religeon.

    (ps how d’you think the ‘equilibrium’ is working out now?)”
    Eh, I don’t believe in equilibrium, but for Mr. Mitchell’s sums to work, it has to be in place. You tell me how equilibrium is working out.

    What do I call the Greek ‘bail outs’? I call them unsustainable loans to an already over-indebted country at an untenable interest rate that will necessarily speed default, a default that can be structured or unstructured as the political leaders in Europe choose. So far they are choosing unstructured. What do you call them?

    You are fooled by traded pieces of paper with notional wealth on them; fooled into thinking the shadow financial system is important. By believing it is important, that it is systemic, you give them power over your decision making.

  44. To get back on topic – this board is a good idea in theory. The chair is excellent but O Donovan is from the IMF’s worst era who will arrogantly ram austerity down the throats of the Irish people. He will be hard to contain and a strong influence.
    There are good and bad things in every situation.

  45. The bottom line in our crisis is:
    How much do we want to sacrifice to save a currency that nobody else wants to save.
    The markets want Germany – everything else is collateral

Comments are closed.