Feargal Quinn (Independent)

I second the motion and welcome the Minister of State. This is an interesting Bill and we should be grateful for the opportunity to have Senator Sean D. Barrett in the House. We do not often have an economist of such stature in the Seanad who is able to do what is contained in the Bill. While I studied economics in UCD, I never really got on top of some of its ideas. I attended the presentation last night by the Senator and when I went through the details, I was still somewhat confused. We should be appreciative of him as he can help us on that basis.

I was in business for many years and one would run a business by considering how much money was brought in and how much could be spent. Every now and then that is misjudged; the same idea applies to running a country. The Government must estimate how much money will be taken in and how much will be spent, and every now and then it will be wrong. The Senator used some lovely terms. He spoke about rolling a rock up a hill, which sometimes can come back down. He also spoke about adopting a belt and braces approach.

It could be argued that enshrining a provision in legislation that would push us towards a balanced fiscal budget would be somewhat superfluous as cuts amounting to almost €4 billion have already been announced. It is very clear to Irish citizens that there is little fear that the Government will stray from the EU-IMF path. If we are going to play at being the best boy in the classroom, we must be willing to negotiate much harder with our masters. One must not forget that the IMF is making significant interest on our loan every day. When I was starting in business my father gave me advice to the effect that one's good name is much more important than any money one might save by not paying one's debts. I am one of those who believe we should pay the debts even if we believe they are not our debts to pay and that the banks have to be paid off. Again, from a business point of view, that does not stop us negotiating hard with those who supply us with goods or with money. I would like to strengthen the Government's hand in ensuring that we do negotiate to get the best terms and the best interest. That should not distract us from what Senator Barrett has put forward in the Bill. I am firmly of the belief that we must do our utmost to strive towards fiscal responsibility. As the economic and financial crisis has hit almost every country in the world, it is those countries who get their finances back in line the quickest and the most soundly that will reap the benefit. I want to ensure that we are one of those. Such countries will be able to attract more overseas investment which will spur on their economy. This country must strive to be one of those countries which reaches that level.

The argument in favour of such a fiscal responsibility law is that because politicians are supposedly so terrible at controlling spending — there have been some examples of that — they need some type of check to ensure that they do not allow the public finances to unravel. As Senator Barrett indicated, Germany introduced a similar law in recent years, but we are also following other less developed countries such as Nigeria and Ghana in introducing such legislation. It is interesting to note that a study of budget crises throughout history in the developed world by the Policy Exchange think-tank in the United Kingdom shows that neither legislation nor fiscal watchdogs had much effect on deficits in the countries studied. Mostly, it was down to political will. What Senator Barrett is putting to us is that this is what we should be doing but it is still is going to rest on political will. I refer to the political will of the Government backed by the two Houses of the Oireachtas.

The law is being pressed upon us by the IMF. It is interesting to delve into IMF research to find a 2010 research paper by the IMF itself entitled, Structural Breaks in Fiscal Performance: Did Fiscal Responsibility Laws have Anything to Do with Them? I say this in the manner of a devil's advocate in regard to Senator Barrett's Bill. That paper found that fiscal responsibility laws have had little direct impact on fiscal performance in a country. The authors found limited empirical evidence in support of the view that fiscal responsibility laws have had a distinguishable effect on fiscal performance. However, they noted that fiscal responsibility laws could still have other positive effects on the conduct of fiscal policy, such as enhanced transparency, guidance in the budget process and lower risk premia.

Another recent paper by Professor John Thornton of the University of Wales in Bangor is entitled, Do Fiscal Responsibility Laws Matter? It asked whether the adoption of fiscal responsibility laws have improved fiscal performance in nine emerging market economies. The paper suggests that improving economic performance had little to do with fiscal responsibility laws. Given such research we must be more sceptical as to whether such a law will be a magic bullet. It seems that political will is the number one driver of change. That is the point that Senator Barrett is putting forward in the legislation. On its own legislation will not be enough unless we have the political will to do it.

One could ask how the rule will sit given the recent developments in the European Union or whether there is even a need for such a law given that it seems the European Union will monitor the fiscal policies of member states and will punish those who fail to keep their budget under restraint. As for the EU's so-called golden rule, inserted into each country's constitution which prevents a country from running a budget deficit of more than 3%, irrespective of the economic cycle, we must examine it to see whether we could manage to achieve that goal. The effect of the Bill, to which I urge the Minister of State to give serious consideration, will place us in a position that outlines the limits we must achieve, but on its own it will not be enough unless we have the political will. I believe the Bill should be accepted. We urge the Minister of State to accept the Bill but also to recognise that it will not be enough on its own. We need the political will and determination and for the Government to say it is something it is determined to achieve.