Oireachtas Joint and Select Committees

Wednesday, 22 September 2021

Committee on Budgetary Oversight

Pre-Budget 2022 Scrutiny: Irish Fiscal Advisory Council

Mr. Sebastian Barnes:

To give a slightly longer-term perspective, we went into the pandemic in a glass half full and half empty situation. On the one hand, we had achieved two years of budget balance, which was welcome. On the other, had the Government stuck to its earlier plans, that would have been achieved earlier and we would have gone in from a stronger position.

There can be little doubt the management of the crisis has been very effective from an economic point of view. The economy took an extraordinary hit in terms of the level of activity falling, everyone having to stay at home and most places being shut. It was quite incredible. The government supports mobilised in Ireland and other places have helped the economy through that period in an effective way. It is exactly the kind of countercyclical policy governments should run when the economy gets into trouble. The Government also did a good job with the contingencies it put in place, both for Brexit and Covid. Those also helped from a budgetary planning perspective so that even as some supports had to be extended, it was not moving the headline numbers, because the Government had made allowances. That is a good strategy and one the council recommended. It was good that is was pursued. We are now in a different environment and people must understand that in a crisis it is possible, for a short time, to run generous supports for the economy and large deficits but that cannot carry on into normal times.

As we come back to normal times we must think beyond that and that is why we have the concerns in the report. We must make kind of hard choices and those choices are being avoided with a strategy that involves this big catch-up in investment, the additional current spending and the desire to cut taxes all at the same time.


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