Brendan Burgess
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Great article in today's Irish Times by the Acting Chairman
In Ireland, the “national spending rule” plays this role [of a fiscal framework]. By committing to having no more than the 5 per cent net growth in core spending allowed under the rule overall, the Government achieves several things. As it is a net rule, the Government can give itself extra space for additional spending, by increasing taxes.
The basis of the 5 per cent limit is a combination of medium-term economic growth (3 per cent) and inflation (2 per cent). The national spending rule also helps stabilise the economy. When inflation is high, the costs of maintaining spending in real terms is higher. If the Government chooses to cover these costs, it will have fewer resources available elsewhere.
At these times of high inflation, the 5 per cent limit automatically binds more and this pushes the Government to make the tough choices. When inflation is low, typically in periods when the economy could do with more support, the same 5 per cent limit in the spending rule affords the Government more space, by virtue of the lower costs associated with standing still, and choices become easier.
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We at the Fiscal Advisory Council are concerned at the Government’s spending plans
This will be the third year of breaching the limit of the ‘national spending rule’
www.irishtimes.com
We at the Fiscal Advisory Council are concerned at the Government’s spending plans
This will be the third year of breaching the limit of the ‘national spending rule’
In Ireland, the “national spending rule” plays this role [of a fiscal framework]. By committing to having no more than the 5 per cent net growth in core spending allowed under the rule overall, the Government achieves several things. As it is a net rule, the Government can give itself extra space for additional spending, by increasing taxes.
The basis of the 5 per cent limit is a combination of medium-term economic growth (3 per cent) and inflation (2 per cent). The national spending rule also helps stabilise the economy. When inflation is high, the costs of maintaining spending in real terms is higher. If the Government chooses to cover these costs, it will have fewer resources available elsewhere.
At these times of high inflation, the 5 per cent limit automatically binds more and this pushes the Government to make the tough choices. When inflation is low, typically in periods when the economy could do with more support, the same 5 per cent limit in the spending rule affords the Government more space, by virtue of the lower costs associated with standing still, and choices become easier.