Brendan Burgess
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Séamus Coffey the Chairman of the Government's fiscal watchdog was on Morning Ireland today:
[broken link removed] headed "Budget 2019 Fiscal Advisory Council
Not sure how to link directly to it
Intro:
A Budget that leaves Ireland unnecessarily vulnerable. That is the view of the Irish Fiscal Advisory Council set up during the bailout to advise Government so that we don't make the same mistakes which led to the last crash.
The Council says that the Budget is right at the limit of what is prudent with little scope for error:
"unnecessarily vulnerable" why?"
Seamus Coffey
If you look at the overall impact of recent government decisions, and not just what happened on Budget Day..
we see that government spending will rise by €4.2 billion to hit just over €85 billion for 2019 - that is an increase of almost 6%.
While some of that is coming from tax increases, in the main it's coming from the government account itself.
A 6% growth rate is high in relation to the expected growth rate of the Irish economy.
And the Budget documents show some breaches of the expenditure rules built into our fiscal framework.
We are seeing government spending rising quite rapidly in an economy which itself is growing very strongly and one that faces risks on the horizon so it is not leaving us in a sufficiently strong position to deal with the inevitable down turn when it happens.
There is no savings going into the rainy day fund. If you look at the government accounts for 2019, they are close to balance. The difference between revenue and spending is a projected deficit of €75m - so spending a tiny bit more than revenue.
There is no surplus to go into the rainy day fund.
If you look at the source of some of the revenues which are funding these spending increases, some is coming from growth, some is coming from corporation tax. But we also have additional interest savings as interest rates are very low
And both the additional corporation tax and low interest rates arise, in the main, from outside our economy and spending that money gives a fiscal boost or a stimulus to our economy as the Corporation Tax in the main comes from multi-nationals and most Irish government debt is held by bondholders outside Ireland
The increases in Health, Justice and Education should come from a domestic, sustainable revenue sources not the volatility of Corporation Tax and interest rates which means that cutbacks may be made in the future when we don't need to do them.
Health spending
We would hope that the cycle of supplementary estimates in health has come to an end.
The extra allocation is €1bn to €17 bn. But we added an extra €700m last Friday for 2018.
That will be repeated in 2019. So overall spending in 2019 will be €1.7 billion higher than it would have been previously
Interviewer: If we took out that €1.7 billion would the budget be on course?
Coffey: (I found this bit hard to follow)
Because of the extra €1 billion, there should be no need for a supplementary estimate in 2019.
Interviewer: Is this Budget Brexit proof?
Coffey: From an overall macro point of view, there is little indication that the Budget is Brexit proof because as money is coming in, it's being spent as quickly. It's not quite back to the days of "I have it, I will spend it" but spending growth at 6% when receipts are not generated from the domestic economy, does leave us overly vulnerable.
If there is a downturn, that is when we want to increase government spending. Not now when the economy is growing quite rapidly.
Health employment has increased from 100,000 in 2014 to 120,000 in 2019 . That is at a time when the private sector is creating employment and there is demand for labour .
While we are not saying that there should not be that increase in employment, there are no offsetting measures elsewhere to create space in the economy and buffers to deal with something like Brexit which is why this Budget leaves us vulnerable to that inevitable downturn.
[broken link removed] headed "Budget 2019 Fiscal Advisory Council
Not sure how to link directly to it
Intro:
A Budget that leaves Ireland unnecessarily vulnerable. That is the view of the Irish Fiscal Advisory Council set up during the bailout to advise Government so that we don't make the same mistakes which led to the last crash.
The Council says that the Budget is right at the limit of what is prudent with little scope for error:
"unnecessarily vulnerable" why?"
Seamus Coffey
If you look at the overall impact of recent government decisions, and not just what happened on Budget Day..
we see that government spending will rise by €4.2 billion to hit just over €85 billion for 2019 - that is an increase of almost 6%.
While some of that is coming from tax increases, in the main it's coming from the government account itself.
A 6% growth rate is high in relation to the expected growth rate of the Irish economy.
And the Budget documents show some breaches of the expenditure rules built into our fiscal framework.
We are seeing government spending rising quite rapidly in an economy which itself is growing very strongly and one that faces risks on the horizon so it is not leaving us in a sufficiently strong position to deal with the inevitable down turn when it happens.
There is no savings going into the rainy day fund. If you look at the government accounts for 2019, they are close to balance. The difference between revenue and spending is a projected deficit of €75m - so spending a tiny bit more than revenue.
There is no surplus to go into the rainy day fund.
If you look at the source of some of the revenues which are funding these spending increases, some is coming from growth, some is coming from corporation tax. But we also have additional interest savings as interest rates are very low
And both the additional corporation tax and low interest rates arise, in the main, from outside our economy and spending that money gives a fiscal boost or a stimulus to our economy as the Corporation Tax in the main comes from multi-nationals and most Irish government debt is held by bondholders outside Ireland
The increases in Health, Justice and Education should come from a domestic, sustainable revenue sources not the volatility of Corporation Tax and interest rates which means that cutbacks may be made in the future when we don't need to do them.
Health spending
We would hope that the cycle of supplementary estimates in health has come to an end.
The extra allocation is €1bn to €17 bn. But we added an extra €700m last Friday for 2018.
That will be repeated in 2019. So overall spending in 2019 will be €1.7 billion higher than it would have been previously
Interviewer: If we took out that €1.7 billion would the budget be on course?
Coffey: (I found this bit hard to follow)
Because of the extra €1 billion, there should be no need for a supplementary estimate in 2019.
Interviewer: Is this Budget Brexit proof?
Coffey: From an overall macro point of view, there is little indication that the Budget is Brexit proof because as money is coming in, it's being spent as quickly. It's not quite back to the days of "I have it, I will spend it" but spending growth at 6% when receipts are not generated from the domestic economy, does leave us overly vulnerable.
If there is a downturn, that is when we want to increase government spending. Not now when the economy is growing quite rapidly.
Health employment has increased from 100,000 in 2014 to 120,000 in 2019 . That is at a time when the private sector is creating employment and there is demand for labour .
While we are not saying that there should not be that increase in employment, there are no offsetting measures elsewhere to create space in the economy and buffers to deal with something like Brexit which is why this Budget leaves us vulnerable to that inevitable downturn.