Muiris MacCarthaigh on Budget 2018

Guest post below from Muiris MacCarthaigh from Queen’s University Belfast:

Budget 2018 and a tale of two Departments

The budget to be published this Tuesday will be the first since 2010 to be prepared and delivered by a single Minister, Paschal Donohoe T.D., who holds both Finance and Public Expenditure and Reform portfolios.

As will be widely remembered by readers of this blog, following the 2011 general election the Department of Finance was essentially split in two, with that Department retaining control over taxation and reform of the financial services sector. (Indeed for a while consideration was given to renaming it the Department of Finance and Taxation). The ‘spending’ side of the Department was removed and combined with public service reform and industrial relations into the Department of Public Expenditure and Reform (DPER).  As well as providing for a significant reallocation of central government functions, and an organizational focus for administrative reform, DPER served the useful political purpose of allowing the Labour Party hold another central government portfolio.  This also gave it co-equal status with Fine Gael at the Economic Management Council or ‘War Cabinet’.

What is not widely appreciated is the enormity of the task faced by officials in the Department of Finance over the pre and post-election period to prepare for and then execute the process of creating the new Deparment, all in a matter of weeks. When beginning the research for my recently published book on DPER over the 2011-16 period, the sheer scale of this undertaking quickly stood out.  Led by a small group of officials, it involved trawling the Irish statute book for all primary and secondary legislation concerning the responsibilities of the Minister for Finance in law from 1922 onwards (as well as some pre-1922 treasury-related functions), before that Department could be disaggregated into two.

The range of responsibilities for which the Minister for Finance had a legal responsibility included such diverse issues as provisions for compensation applications arising from property damage during the 1921-23 Independence and Civil War period, to consenting on borrowings for capital investment for commercial state enterprises. All told, it resulted in a process involving the transfer of over 4000 specific legal functions originally assigned to the Minister of Finance.

In respect of Budgets, a number of interviewees for my study identified how the institutional split between revenue-raising and expenditure functions had created a useful ‘buffering’ effect on demands for increased expenditure by line Departments. Prior to DPER’s existence, the relevant section in the Department of Finance assessed new expenditure proposals from a line Department, and the merits of raising taxation or other forms of revenue to support the measure were also considered in that same Department. With the decoupling, appeals to DPER for extra resources fell largely on deaf ears as the Department and its Minister had no say in taxation matters.

The quality of engagements between DPER and other Departments were also deemed to have taken a step change by virtue of the economic evaluations provided for them by the IGEES.  Additionally, the strong relationship between Ministers Howlin and Noonan were consistently referred to as being vital to the Irish crisis response, including budgetary coherence, and by proxy to the stability of the government as a whole.

At the launch of my book, Minister Donohoe identified that the Taoiseach had been keen to maintain the two Departments when announcing his Cabinet following his election in June. Whether this was to preserve the integrity of DPER’s reform agenda, to place coordination of fiscal and budgetary policy in one Minister, or to avoid accusations of a return to pre-crisis arrangements for government departments is hard to say. As is how long DPER will continue to operate as a separate Deparment .The economic crisis may be a decade old, but its effects on budgetary policy and the organisation of Irish government continue to be felt.

Dr Muiris MacCarthaigh is Senior Lecturer in Politics and Public Administration at Queen’s University Belfast. His new book, Public Sector Reform in Ireland: Countering Crisis, has just been published by Palgrave.

One reply on “Muiris MacCarthaigh on Budget 2018”

This looks like an interesting and useful contribution to a deeper understanding of Irish public policy formulation and administration. I’ll probably have to wait until I read it, but I wonder has any consideration been given to the possibility that the establishment of the Economic Management Council (EMC) either deliberately or unwittingly mirrored the establishment of the ‘Quad’ comprising David Cameron, Nick Clegg, George Osborne and Danny Alexander which oversaw the fiscal and economic policies of the Tory-Lib Dem Coalition government established in May 2010 and ensured that the Lib Dems were fully locked in. Given that the Chief Secretary of the Treasury sits in the cabinet, there was no need to create a separate senior cabinet level position for Danny Alexander, as there was for Brendan Howlin in Ireland.

From FG’s perspective, the EMC had the same function in Ireland as the ‘Quad’ had in Britain – making sure Labour was locked in. In contrast, however, the Tories were driving policy in Britain; the Troika was driving this in Ireland for the first three years of the FG-Lab government. There appears to be little recognition that much of the fiscal heavy lifting had already been performed by the FF-Green coalition and the main requirement of the new government was to hold things steady and not to screw things up. But the Troika was sensitive enough to allow the Government to throw its shapes, generate its spin, project its optical illusions and seek to suspend disbelief to convey the impression that it was in charge and making the decisions. The irony, but probably not a surprise, is that once direct Troika supervision ended, the government seemed to lose purpose and direction. Powerful and pompous ministers, such as Phil Hogan and Pat Rabbitte, were so focused on watering down specific sectoral policy directions imposed by the Troika and mangling their implementation for political purposes and to favour powerful special interest groups that they gave us the water charge debacle – all with the apparent full knowledge and consent of the all-powerful EMC.

The electoral outcome in both Britain and Ireland was broadly similar, with much of voters’ justified ire directed at the junior partners in government. Given the extent to which the pursuit of naked political advantage and the protection of rent-seekng trump all, it is perhaps surprising that public administration works as well as it does.

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