Regina Doherty (Meath East, Fine Gael) | Oireachtas source

I thank the Leas-Cheann Comhairle for the opportunity to speak in this debate. The Bill represents a fundamental shift in the Irish political system. What is fiscal responsibility? By definition, "fiscal" means financial or pertaining to the treasury or revenue parts of a government. "Responsibility" refers to having a legal or moral obligation to or being accountable for something or someone. The words "fiscal responsibility" evoke ideas of penny-pinching and debt but their real meaning is more complex.

The intention of the Bill is to tighten public finance management. It encapsulates what the Government is all about: fiscal responsibility and delivering better services and the State infrastructure that the electorate deserves. When enacted, this legislation will implement the key provisions of the fiscal treaty, which Ireland accepted in a referendum at the end of May. The Bill also provides for the establishment of the Irish Fiscal Advisory Council on a statutory basis.

The Bill, when law, will provide for the implementation of Articles 3 and 4 of the fiscal treaty.

We all must be in favour of legislation that will strengthen rules on the management of the public finances and put the Irish Fiscal Advisory Council, IFAC, on a statutory basis.

The first rule to be enshrined in national legislation relates to revenues and spending. In future, the deficit between revenue and spending cannot exceed 1% of gross domestic product once one-off and business-cycle factors are accounted for. This is designed to ensure that governments do not lock-in spending commitments based on unsustainable revenues, such as those generated in the past by property bubbles.

The second rule obliges governments to reduce their total indebtedness by a minimum amount each year if it is above 60% of GDP. The Minister for Finance, Deputy Noonan, recently stated that these rules are sensible and prudent and represent a responsible approach to Government budgeting.

This Bill does not change the structure of the IFAC, but enlarges its role in deciding whether a significant deviation has occurred and if a correction is proceeding in accordance with the correction plan. These powers will be granted to all the IFAC's European counterpart agencies.

The Bill strengthens the independence of the agency by limiting the Minister for Finance's power to fire its members, and any dismissal will need a Dáil resolution.

The IFAC was established last year to provide an independent assessment of the soundness of fiscal policy. lnternationally, such independent entities have been found to lessen the chance and scale of budgetary crises. As lessons of the recent past have shown us, we need those safeguards.

The general scheme of the Fiscal Responsibility Bill underpins the fiscal rules in the stability treaty. The Bill also reflects commitments in the Fine Gael manifesto and programme for Government, and was part of undertakings of the Government in the EU-IMF troika agreement. These rules are sensible and prudent and represent a responsible approach to budgeting.

The Bill provides for the implementation in national law of Articles 3 and 4 of the treaty. The other articles of the treaty are binding obligations under international law that do not require to be reflected in national law. Article 3 of the treaty requires provision in national law for the fiscal rules set out in that article. These include a commitment by governments that the budgetary position of the general government shall be balanced or in surplus; and provision for an automatic correction mechanism that will be triggered if there are significant deviations from the budgetary target or the adjustment path towards it. The treaty also requires that there is an independent institution at national level responsible for monitoring compliance with the rules in Article 3, and we have invoked that.

Fiscal policy involves the level of Government expenditure, transfers or taxes in an economy. Fiscal rules are constraints on fiscal policy, often expressed as numerical limits. Rules to be set out in the Fiscal Responsibility Bill set fiscal rules in domestic legislation.

As a complement to introducing more flexibility into the proposed fiscal rules, the Irish fiscal council has also recommended strengthening the measures that would be taken when policy fails to comply with the rules. It said the principles of sound public finances should be set out in law and that each new Government should set out explicit five-year targets for debt to GDP ratios that would include planned consolidation measures.

This Bill, together with the fiscal council, can provide a mechanism for raising the political costs of pursuing inappropriate policies, while continuing to allow a role for necessary judgment. This will strengthen the balance sheet over time and build a buffer against cyclical shocks and longer-term structural changes. This Bill is about financial sustainability and operating our business in such a way that it can always prosper. This calls for financial stewardship in making a future, not just a living.

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