Tuesday, 20 November 2012
Fiscal Responsibility Bill 2012: Committee and Remaining Stages
Amendments Nos. 1 to 4, inclusive, tabled by Senators Reilly, Cullinane and Ó Clochartaigh are in conflict with the principle of the Bill and must be ruled out of order in accordance with Standing Order 124. The purpose of the Bill is to give legislative effect to key provisions of the stability treaty already ratified by the State relating to fiscal policy rules, a budgetary rule, a debt rule and a correction mechanism if there is a significant deviation from the budgetary rule. This requirement is binding and mandatory on the State and a consequence of the ratification of the treaty.
Amendments Nos. 1 and 2, in the names of Senators Reilly, Cullinane and Ó Clochartaigh, propose to modify the obligations under section 2 and to comply with the fiscal policy rules by deleting ?shall endeavour? and substitute ?may decide? to secure the fiscal rules ?so long as doing so is conducive to the social and economic development of the State?. Amendment No. 3 proposes to modify the obligation under section 4 to comply with the debt rule requirement by providing that the debt rule will be complied with ?so long as doing so is conducive to the social and economic development of the State?. Amendment No. 4 proposes to modify the obligation under section 6 to put in place a correction mechanism by proposing that a Government may put in place a corrective measure.
These amendments are in conflict with the principle of the Bill as agreed on Second Stage and, accordingly, must be ruled out of order in accordance with Standing Order 124.
I move amendment No. 5:
This series of amendments has been designed to ensure the Government's plan, in the event that there is a breach of the austerity rules, would take into account "the generation of economic growth, job creation and delivery of high quality public services". The aim is to avoid the plan becoming a box-ticking exercise. If we are to run the economy by rules, we should include rules which would ensure our economic policies were designed to reduce poverty or create jobs. Any such plan should be realistic and any plan which did not take these goals into account would be doomed to fail. The current plan just includes compliance with the budgetary rules, with annual targets for the size and nature of revenue and expenditure measures to be taken and how they relate to different sectors. While this is required to meet the rules under the treaty, it does not negate or rule out the possibility of including in the plan measures that would lead to economic growth, job creation, a reduction in poverty and the delivery of high quality public services. While taking account of these targets, it is important to take cognisance of what is happening in the real domestic economy and to citizens. We cannot continue to chase targets that will further depress economic growth. Any such plan should be brought before the Oireachtas and fully debated.
In page 7, subsection (2), between lines 4 and 5, to insert the following:?(a) prioritise the generation of economic growth, job creation and delivery of high quality public services,?.
Amendment No. 5 seeks to require the Government to take into account issues such as the generation of economic growth, job creation and the delivery of high quality public services when drafting a plan to meet the debt and deficit targets contained in the Bill. Amendment No. 6 aims to strengthen the requirement on the Government to include these important social and economic indicators. Amendment No. 7 seeks to broaden the scope of the plan to include an impact assessment of any measure proposed in respect of key social indicators such as income equality, social inclusion and poverty reduction. Amendment No. 8 seeks to place an obligation on the Government to carry out equality and anti-poverty impact assessments of all expenditure and revenue measures proposed in the plan. Amendment No. 9 would require the seeking of the approval of the Oireachtas for any plan rather than Government approval only. The purpose of the amendment is to ensure there would be adequate debate, public scrutiny and parliamentary oversight in the final agreement of the plan. Given the significant impact its measures will have on the social and economic well being of the State and its people, such a debate and public and parliamentary oversight are crucial. Amendment No. 11 seeks to introduce a provision that would allow a future Government to derogate from the debt and deficit rules if it believed that doing so would be in the best social and economic interests of the State. If the Government did so decide, the amendment would place a requirement on the Government to explain why that was the case.
I have tabled an amendment in this group, namely, amendment No. 10, which proposes to change the timeframe from two months to one month. If it is a crisis or there is good news, why not do it quickly? That is the essence of the amendment. In general terms - I hope this does not sound demeaning - the Minister is categorised in the legislation as a kind of Goldilocks. The mixture is too week, although Senator Kathryn Reilly thinks it is too strong. The Minister of State has to prove that it is just right. I see the Fiscal Responsibility Bill as essential for us to obtain low interest rates on our borrowings and prove we can manage our affairs. I support the targets set, but I appreciate that my colleague, Senator Kathryn Reilly does not. My amendment proposes that we prepare the plan in one month rather than two months.
I have a related query for the Minister of State on section 6(4) which reads:
If the Government considers that exceptional circumstances have arisen during the period specified in the plan, the things specified in the plan are no longer required to be done; but when the Government considers that the exceptional circumstances have ceased to exist, the Government shall, unless there is no longer a failure such as is mentioned in subsection (1), within 2 months prepare and lay before Dáil Éireann a new plan under that subsection.However, in the following subsection the word "may" rather than "shall" is used. If I am reading the two subsections correctly, if the news is good, the Government "shall" act, but if the news is bad, it "may" act. What is the difference between the two? Is this an issue that might be revisited on Report Stage?
I thank the Senators for their amendments. As stated during the Dáil debates, on both Committee and Report Stages, the policy issues raised in the amendments are of much wider scope than the substance of the Bill. The Senators have identified some of the issues any Government would have to consider in preparing a correction or budgetary plan. However, it should be noted that we are talking about a plan, not the actual detailed legislative and budgetary proposals that would have to be brought before the Oireachtas in the normal way.
A key purpose of the Fiscal Responsibility Bill and the stability treaty is to correct budget imbalances where we have deviated from converging with our medium-term budgetary objective, from the adjustment path or complying with a debt rule. Section 6 was drafted on the basis of common principles, as required by the treaty. While the Government - or any future Government - will always seek to promote economic growth, job creation and the delivery of high quality public services, it is highly likely that deployment of a correction plan could result in unpalatable choices that might not be in compliance with the suggested amendments, at least in the short term. Having sustainable public finances is a key element of sustainable economic growth. Giving priority to economic growth, job creation and the delivery of high quality public services could, therefore, prove to be an obstacle to or a limitation on the Government's choice in terms of the actions needed to ensure sustainable public finances.
In working to ensure the sustainability of public finances, any government should be able to access all possible policy levers. Every budget day the Government publishes illustrative cases showing the effect of major changes in revenue and certain social welfare payments on the categories of married couples, civil partners and single income earners. The impact of the budget on the various groups of people is set out.
With regard to requiring Oireachtas approval before adopting the plan, amendments which could result in the contravention of our treaty obligations cannot be accepted. The stability treaty requires the triggering of a correction mechanism if there is a significant deviation from the medium term objective or the adjustment path towards it. Furthermore, non-compliance with the budgetary rule would contravene the stability treaty.
I do not propose to accept Senator Barrett's amendment No. 10, which would require a statement to be laid before Dáil Éireann within one month. I am grateful for the comprehensive Private Members' Bill which the Senator introduced to this House. His Bill was in effect parked because the Government is bringing forward its own legislation. I assure him there is convergence between his legislation and what the Government proposes to do. I hope the final Government Bill will reflect the key objectives he set out. The Seanad decided not to oppose his Bill because it made a constructive contribution towards the final product that we are now debating.
While amendment No. 10 makes an interesting contribution to the debate and suggests a need for urgency, I remind Senator Barrett that the plan under discussion involve steps aimed at avoiding the breach of the budgetary rule. Such a plan could involve information on budgetary and expenditure measures. The preparation of such material takes time and a tight deadline would only contribute to an increased risk of error. The recent economic history of this country suggests that events have a tendency to overtake us. Two scenarios spring to mind. The first is where the Government concludes that it may fail to comply in the run up to the annual budget. A requirement to present a plan within one month could result in two major budgetary announcements being made in a matter of weeks when it may be more appropriate to await the national budgetary announcement. A second scenario would be where a requirement falls due during or just after a general election campaign. Such matters should be left to an incoming Government to decide. For these reasons, the provision was drafted using the word "may" and the period of two months. There is nothing to prevent the Government from publishing its plans within one month and that would be the optimal timeframe but the Minister for Finance believes that setting a deadline of one month is too prescriptive. The general framework of two months allows greater latitude in terms of what has to occur under this section.
I move amendment No. 7:
In page 7, subsection (2), between lines 14 and 15, to insert the following:?(e) outline how revenue and expenditure measures will contribute to the objectives of greater income equality, social inclusion and poverty reduction.?.
I move amendment No. 8:
In page 7, between lines 14 and 15, to insert the following subsection:?(3) All revenue and expenditure measures contained in the plan must be subject to equality and anti-poverty impact assessments the details of which will be published as appendices to the plan.?.
I move amendment No. 11:
In page 7, subsection (5) lines 32 and 33, to delete all words from and including ?outlining? in line 32 down to and including ?failure? in line 33 and substitute the following:?outlining the reasons it considers non-compliance with the budgetary rule to be in the best social and economic interests of the citizens and the State?.
If I read the sections correctly, which of course may not be the case - I thank the Minister of State for his earlier remarks - "shall" applies if the news is good and "may" applies if the news is bad. Should the Government not be required to announce the bad news to allow us to address the problem? I ask the Minister of State to consider this issue on Report Stage.
The issue was also raised in the other House. Subsection (4) applies where a correction plan is in operation, as required under section 6(1). If exceptional circumstances arise during the implementation of the correction plan, its implementation will be stopped when the circumstances change. That is straightforward. A new plan under section 6(1) would then be required. Subsection (5) deals with a potential future breach of the budgetary rule, hence the word "may". One cannot be as prescriptive about a potential problem.
I move amendment No. 12:
We welcome the establishment of the Irish Fiscal Advisory Council because the more independent analysis provided, the better. We have been critical of some of the council's recommendations but that should not be understood as an objection to its establishment. However, its terms of reference as outlined in the Bill restrict its ability to assist governments in making the right economic decisions. This amendment would expand the council's remit to include the stimulation of economic growth, job creation, the delivery of high-quality public services and poverty reduction in its assessments of the impact of fiscal policies.
In page 8, subsection 4, between lines 15 and 16, to insert the following: ?(a) provide an assessment of whether the fiscal and budgetary policy of the Government is contributing to economic growth, job creation, the delivery of high quality public services, greater income equality, social inclusion and poverty reduction,?.
I thank Senator Reilly for tabling amendment No. 12.
We do not propose to accept amendment No. 12. The fiscal council has been established to address gaps in fiscal policy analysis and to provide assessments and recommendations on fiscal policy. Imposing a wide mandate on the fiscal council would require larger resources, both in staff and budgetary allocation. Expanding the mandate would likely impede the council's ability to fulfil its core functions, including those specified in the treaty. Furthermore, some of the suggested functions are the job of the Government. It is important to note that a number of bodies are supported by the State, such as the ESRI and the NESC, and their reports consider all aspects of policy development, including the social impact.
In addition, we are not willing to assign functions that are not outlined in the Bill to the fiscal council. The view is that the task of the fiscal council is quite straightforward. It is to give its view to the country and the Government on fiscal policy generally. If the intention of the amendment is to widen that remit, it could take away from the core function, which is to give independent advice to the Government. As I mentioned previously, the council's remit is to be the contrarian, to take the opposite view and put pressure on the Government to justify its position. If we extend its remit into a range of other areas, not only do we take from other agencies that comment on these matters, but we take the focus of the council's fundamental task. We wish to ensure that the fiscal council has the resources it needs to complete its core functions. Expanding the functions would stretch the resources of the council to a point where its focus and attention would be removed from its primary role. We do not want that to happen.
Amendments that add requirements which are already covered by the requirements of the Stability and Growth Pact, which are published in the annual stability programme update, are unnecessary. Section 2, Article 3, of the 1997 surveillance and co-ordination regulations requires the State to take into account the future pension liabilities of the State and this information is contained in the annual stability programme update. The fiscal council is required to provide an assessment of the official forecasts, which includes an assessment of the stability programme update. For these reasons, we do not propose to accept amendment No. 12.
I move amendment No. 13:
The Bill is a fiscal responsibility Bill and we have set up a fiscal council. I have a little less confidence in the bodies mentioned by the Minister of State. They were all in place when we got into this trouble, hence we need a new institution. The NESC represented the Secretaries General of approximately six Departments and the social partners and I would hate to rely on it for much advice as we move forward trying to address this problem. The same could be said of certain other institutions, including perhaps the ESRI, which told us the banking crisis was manageable.
In page 8, subsection (4)(b), line 22, to delete ?Pact.? and substitute the following:?Pact, and the attainment and retention of fiscal responsibility and international evidence on the problem of fiscal imbalance.?.
We got into trouble to such a degree between 2008 and 2010 that we need this new institution. Therefore, I would like it to comment on these issues. The council has been set up under the umbrella of fiscal responsibility and should comment on anything it wishes to in order to retain fiscal responsibility in this country. For instance, we might say the IMF has a cheek advising us on the health service, but if it genuinely believes the way we run the health service has contributed to the problems we are all trying to address, it should be entitled to say that. It may not look for funds to reorganise the health service, but if it sees problems, it should be able to point them out.
We know the problems it saw. The regulatory capture of the Exchequer by the banks on that notorious evening, the success of lobbying by various groups, such as construction and banking, poor appraisals of capital and the health case it is concerned about. When the IMF is gone, will the impetus it has given to the Minister of State and Ministers Howlin and Noonan to speak out be gone? Will they continue to be able to say to the Minister for Health, for example, that they are sorry, but compared to what they are trying to do to run the country, with a 60% debt to GDP ratio and unable to borrow more than 0.5%, they require the problems of the spending Departments which have a proven track record of attracting the annoyance of the IMF during our rescue period to be addressed. Issues such as stealth taxes and so on must be addressed. We must also address weaknesses in monetary policy, such as that we spoke about earlier with the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, namely, the vast increase in lending outside manufacturing and agriculture. To retain the fiscal responsibility status to which we all aspire requires the fiscal council, as the guardians of that, not to be bound by the fact that other institutions, like the Central Bank, the ESRI and the NESC, did not do their job. That is why we have set up this new institution, the fiscal council. Having the contrarian view, as described by the Minister of State, would be viable. I recall an article in The Sunday Business Post some weeks ago by two former assistant secretaries in the Department of Transport, Pat Mangan and John Lumsden. We need that contrarian culture, but we do not have it.
How are we to ensure all the mistakes we made do not happen again? If the fiscal council can help us, as the independent voice described by the Minister of State - which we support - let it speak out, rather than have a lawyer go through the Stability and Growth Pact saying the council cannot say anything about the health service because it is not in the pact agreed by 27 other countries or whatever. Instead, we should say: "Yes, it is addressing the Irish situation." It is about time certain lobby groups and certain successful cases of regulatory capture had in fact a contrary voice to assist the Cabinet in bringing the country to solvency and keeping it there. Whatever forces undermine that, it is a good idea if the fiscal council can give them a lash, particularly since some of the other watchdogs were asleep and did not bark during critical periods. Hence the need for this Bill.
I thank the Senator for his amendment as it has opened up this debate. The fiscal council is entirely independent of the Government. Professor McHale and his colleagues are doing a very constructive job in speaking out and giving their assessment as to where we stand in terms of the current fiscal imbalance, referred to in the Senator's amendment.
I agree with the Senator that the objective of this exercise is to prevent group think from happening again. Group think is the predominant culture upon which the economy crashed. This was highlighted in a number of reports on the financial crisis. We are entirely satisfied that the fiscal council has the independence and the ability to manoeuvre and speak out on all of these issues. Its task is primarily to highlight questions of fiscal imbalances. The reason fiscal imbalances occur is because expenditure gets out of kilter or tax revenues from one year to the next do not meet their target. With regard to why this has happened, it is logical the fiscal council would comment on the reasons or point out that under a particular subhead, we have not obtained what we wanted or another area of expenditure is way out of kilter.
The considered view of the Minister for Finance is that the council's independence and ability to speak out and assess the situation is unlimited in terms of what it must say. One of the objectives in any process of legislation is for colleagues to talk around the sections. This process gives an interpretation of itself, ultimately to be challenged in the courts. Woe betide any Government that would attempt to muzzle the fiscal council. Is it genuinely being suggested that if the fiscal council takes a position on an item of expenditure or takes a stern view against a Minister or expenditure items in an area, a Government will attempt to muzzle that council?
I do not think that would happen by virtue of the fact that a stand-alone body is being established under this legislation, as the Senator has indicated. The first thing we would like to say is that we do not think this is going to happen.
One receives wonderfully detailed notes on every amendment. When I was reading the note on Senator Barrett's amendment, I turned to my colleagues and said I did not understand the note. My colleagues said they did not understand the amendment. There is some déjà vuin this regard.
I assure anyone who is concerned that the work and functions of the council will be limited in some way that that is not the intention of the Government. No limit will be put on whatever it wants to talk about. I will give an example. I do not want Senator Reilly to think I am being overtly political. I understand that Sinn Féin produced a pre-budget submission today. We encourage all parties to do that. We thank Sinn Féin for its input. Why should the fiscal council not be allowed to express its views on the pre-budget submissions of Sinn Féin, Fianna Fáil or individual Members of the Oireachtas like Senator Barrett?
What is sauce for the goose is sauce for the gander. I think it would be entirely appropriate for the council to comment on what aspects of those submissions are achievable and what aspects are not. This is an entirely independent body. It determines its own work plan. Obviously, its functions for the purposes of the question of fiscal balances are set out. It is the strong view of the Government and the Minister of Finance that the fiscal council will not have its hands tied in any way. The scope of the work it would like to do will not be limited.
His remarks were important. Ireland is not the only country in this situation. According to a book published out of the University of Cambridge last year by the retired director general of the IMF, Dr. Vito Tanzi, most countries in the world are facing debt to GDP ratios of approximately 120%, regrettably. They spent beyond their taxable capacity. They borrowed in a way that destroyed capital markets and caused property booms. It would be extremely good if Professor John McHale and his inestimable colleagues were able to write about whatever they wish to write about. It struck me as the Minister of State was talking that many of the things which got us into this trouble were commented on over many years by the Committee of Public Accounts and the Comptroller and Auditor General, who is an officer under the Constitution. As we make decisions on how to put our finances right, we should draw on a great deal of the material that is available and give full powers to the learned people concerned. I think the Minister of State has said he agrees with that. This is a multifaceted problem. Many things went wrong. It is up to all the people working in the Houses of the Oireachtas to make a contribution to seeing how fiscal responsibility can be restored and retained in this country. This will be a problem in a number of other countries as well. I will not press the amendment. I thank the Minister of State for his reply.
I thank the Senator for withdrawing his amendment. We are providing for the formal establishment of the council in legislation. The council has already been hugely proactive and constructive in the assessments and reports it has issued. Now that the council is in place, the Government is required to respond quickly to its assessments. I had to defend the Government in such circumstances on two occasions in the last 12 months. I expect that the Senator has some sympathy with the fiscal council's view that the adjustment should be bigger. The council's statements immediately put the Government on the spot. It is a good thing that the Government has to justify quickly the parameters used when setting a budget or the rationale used for a particular adjustment. That will help the entire political culture to change over a period of time. We will have to make sure we reflect on these matters before we make decisions.
I have described previously in this House some of the dreadful examples of projects in various areas that were driven purely by politics with no long-term benefit to the country. I know Senator Barrett has spoken about this in the past. That whole culture will change as a result of the establishment of the fiscal council and the requirement on the Government and others to reply to what the council has to say. When the council issues a public view, the Government and others have to reply to it. That will help the political and economic culture by ensuring we have a more sustainable economy in the long run.
I move amendment No. 14:
I thank the Minister of State for attending this debate. I look forward to debating our pre-budget submission with him at a later stage. Amendments Nos. 14 and 16 essentially aim to ensure there is adequate public scrutiny of the advice of the fiscal council and the Government's response to that advice. Amendment No. 14 seeks to place an obligation on the Government to respond to all assessments and advice made by the council. I refer not only to advice stemming from the fiscal treaty, but also to advice on budgetary and stability programmes, official forecasts and the Stability and Growth Pact. Amendment No. 16 seeks to ensure the assessments of the council are debated in the Dáil, for example, when its advice is not heeded by the Department.
In page 8, subsection (6), lines 28 and 29, to delete "in subsection (3)" and substitute "in any of its assessments".
If we are establishing a fiscal advisory council on a statutory footing to give us independent advice - I am not saying we have to heed or implement that advice all the time - surely that advice merits some type of statement in the Dáil. That would be of particular importance under section 3 of the Bill, which deals with non-compliance with the rules of the treaty. Reference has been made to certain advice that was unheard, unnoticed or dismissed in the past. That has been well documented in the independent reports on the Irish economy that have been released in recent years. If a statutory body is to give advice to the Department of Finance, I suggest that advice deserves a response in the form of an Oireachtas debate. These two amendments call for that to happen. The Government needs to make a comprehensive response to these assessments and ensure they can be teased out in the Dáil.
Yes, it is the familiar proposal to change the response period from two months to one month. If the Government disagrees with the council, it gets two months to respond. Given that the Minister of State is already being sent out there for these great discussions - I would like to be a fly on the wall when that happens - I am really asking why the advice of the council cannot be responded to more quickly.
Two of these amendments were discussed thoroughly on Committee Stage in the Dáil. At the time, Senator Reilly's colleague, Deputy Pearse Doherty, asked for a fuller response from the Department of Finance to the reports of the fiscal advisory council. When the Minister, Deputy Noonan, committed to get such a response, that was accepted by Deputy Doherty. The same amendment was not moved on Report Stage by Deputy Doherty, who noted the Minister's response. The evidence of the commitment given by the Minister, Deputy Noonan, can be seen in chapter 6 of the medium-term fiscal statement that was published last week. I understand that the chapter in question includes an assessment along the lines of that requested by Deputy Doherty. The Bill does not require to be amended because we have agreed to act in this manner from now on when we publish medium-term fiscal statements. A section covering the matters that Deputy Doherty asked about will be included. We do not think there is a need to put it into the Bill because we are already doing it. I hope I have explained that properly.
The common principles adopted by the European Commission require Governments to comply with the assessments set out in section 8(3), or explain why they are not complying with them. If I were to accept the amendments that have been proposed, the Government would be required to respond to all assessments and reports provided by the council. The Government does respond to the assessments of the council. The Minister, Deputy Noonan, has responded to the council's reports in its stability programme updates and in its medium-term fiscal statements.
Placing this requirement on a legislative basis would be difficult. The assessments arising from the council's general functions under subsection (4) can be wide-ranging and contain a great deal of analysis and a large number of recommendations. Would Government have to respond to every line of the recommendations or analysis or just a few of the main items? In any event, the Government answers to the Oireachtas and the mechanisms available therein can be used to elicit further responses to council reports.
It is a matter for the Houses to decide what they want to debate. It would be a little previous for the Government to dictate what the Houses should do. It is a matter for them to decide what they want. There is nothing to prevent the Houses from deciding to debate these reports at times suitable to them.
The reference to subsection (3) is a reference to the core functions of the fiscal council under the treaty. In the assessments in question, the fiscal council will analyse, if exceptional circumstances exist or have ceased to exist, and also examine the Government's compliance with section 6 regarding the corrective mechanism. The specifics of the assessments arise from the provisions of the treaty and are precise requirements. They are treaty requirements with which we must comply on the basis of acceptance of the treaty.
With regard to providing for placing requests for a debate in this legislation, requests for debate are as I said earlier, a matter for the Oireachtas. As stated by the Minister, Deputy Noonan, on Report Stage the Government is never reluctant to have debates on any issue. It is clear that a special report of a more crucial nature should take priority and we will be bound to debate that. However, the provision for a Dáil debate need not be written into every piece of legislation. Debate is the normal work of the Dáil and is arranged between the Whips. In addition, it is not appropriate to place in legislation a requirement for debates.
With regard to the shorter timeline as set out by Senator Barrett, as stated earlier this legislation aims to prepare for all eventualities. At the risk that a Government could not prepare such a statement due to an event such as a general election could result in non-compliance with the legislation. It is a type of unintended consequence argument that frequently crops up in legislation, if one attempts to be too prescriptive. While this could be the case with a two month deadline the chances are lessened. As such, I do not intend to accept this amendment, although I do understand the intent behind it. It is the intention of the Government to do so within a month anyway but there could be difficulties if it is prescribed that it do so within a month.
I move amendment No. 17:
As a result of all of the trouble we are in, we are now conscious of the need for competent, professional people on our boards, etc. While previously this was not the case, an attempt is now being made to try to remedy that situation, in respect of which we support the Minister of State. The period between 2008-2010 was a disaster in this regard. We would not, when recruiting a veterinary surgeon, say that it is "desirable" that he or she have particular qualifications rather we would say that it is a "requirement" that that be the case. We would not say that it is "desirable" that people in the health service should have a knowledge of medicine rather it is a "requirement" that that be the case. We do not desire that architects have qualifications, it is a requirement that they have such a competence. It is an absolute essential.
In page 10, paragraph 1(3)(a), line 9, to delete "desirability" and substitute "requirement".
To attempt to remedy the situation in which we find ourselves by saying that it is "desirable" that we appoint qualified people is too weak in terms of what we are trying to do. It is stated on page 44 of the Wright report that of a cadre of 542 staff in the Department of Finance only 39 are economists. It is a requirement that we step up in these matters. Economics is no longer only for amateurs. We are all aware of the problems that arose when we previously had amateurs in this area. Let us ensure we appoint people with the highest possible qualifications and move away from the tradition of it being an optional extra type of subject.
Paragraph 3(1)(a) provides that the Minister in appointing members to the fiscal council shall have regard to the desirability of their having competence and experience in domestic or international macro-economic or fiscal matters. Amendment No. 18 seeks to delete "or" and substitute "monetary and". It was in the monetary sector that the problems were created not alone in Ireland but in other areas. Wall Street versus main street and quantitative easing to solve the problem of the decline in the computer industry at the beginning of the decade have huge influence down the line in terms of causing property bubbles and destroying banking systems. We need to ensure those appointed to the fiscal council are qualified. The monetary sector can and did do huge damage because many of the watchdogs working therein were fast asleep.
The amendment seeks to ensure that people are properly qualified and that what is going on in banking is monitored. I note references in some of the UK newspapers today to the Bank of England needing to be cleaned up. We will end up in trouble again if we continue with these monetary policies. In broader terms, we need a Government economic service not alone in the Department of Finance but the other spending Departments. We are trying to remedy where in the past there has been a lack of this expertise, plus the other facts referred to by the Minister of State.
I thank Senator Barrett for tabling these amendments. This is an important debate. I have previously been in the House when Senator Barrett raised the issue of the number of people in the Department of Finance with economics qualifications. I expected the Senator would raise the issue again today and have with me the statistics in this regard.
I am glad to inform the Senator that 99 civil servants in the Department of Finance have qualifications in economics, including two PhDs, 37 masters, 46 degrees, 7 diplomas and 7 certificates. There are approximately 300 people working in the Department of Finance which means at least one third of them have economics qualifications. I am reliably informed that, since coming into office, the Government has been focused on bringing in people from the outside who have another perspective to add to the dimensions of the discussion. Approximately 40% of new recruits are from outside the public sector and have economics qualifications. The Senator's figure of 36 is as such outdated.
I do not propose to accepts amendments Nos. 17 and 18 for the following reasons. In filling vacancies on the council, the Minister for Finance will have cognisance of the need to have people with the right competence and experience. However, other factors may need to be considered. For example, gender balance or the provision of local knowledge and presence if the remainder of the council are from abroad. In such circumstances, it is prudent to retain some slight flexibility in the legislation. We are not against what the Senator is suggesting. However, tying this to legislation may prove difficult. The existing council is made up of Professor McHale based in Galway, Dr. Barrett based in Dublin, Dr. Barnes from the OECD in Paris, Ms Róisín O'Sullivan, USA, and Dr. Donal O'Donovan who is retired from the IMF and lives in Washington. One could argue that this composition of members represents a broad reflection of international and domestic experience. These are people with knowledge internally and externally, coming from an academic background having worked with large scale international organisations and, like Senator Barrett, universities.
That is reflected in the composition of the council. However, I suspect it will never be possible to get it entirely right. The Minister requires flexibility in order to ensure he can balance all of these factors in reaching a decision on the membership of the council.
I cannot accept amendment No. 17 for two reasons. First, the Fiscal Advisory Council is in place to advise on fiscal matters. The Government may or may not take advice on such matters. However, in the case of EMU, monetary policy is a matter for the European system of central banks. The Government has no functions or powers in respect of such a policy. The second reason is that the amendment would require any person appointed to the council to have competence and experience in domestic or international macroeconomic monetary and fiscal matters, that is, all three subject areas. This might make matters difficult in identifying candidates with the correct qualifications.
The spirit of amendments Nos. 17 and 18 is very much in keeping with what we are trying to do, namely, achieve the correct balance between international and domestic experience such as that possessed by persons who work with large-scale international bodies and in universities in order that the council will speak with authority. To date, we have done a good job in getting the balance right, particularly in the case of the five individuals whose names I have given to the House. I am sure that would be the intention of any future Minister for Finance, but Senators may be of the view that I would say this anyway. However, there might be unintended consequences if we were to accept amendments Nos. 17 and 18. As a result, we do not propose to accept them.
We are making progress. It took from 1922 to 2010 to recruit 39 economists. That is a rate of less than one every two years. In the 23 months since publication of the relevant report in 2010, we have recruited a further 60. I compliment the Minister for Finance on bringing the number up from 39 to 99. That is progress. The people concerned should, of course, possess the relevant expertise. I agree with the Minister of State that the five recruited prior to our dealing with this legislation are top class. Everybody acknowledges that fact. They all appeared before the Joint Committee on Finance, Public Expenditure and Reform and the members thereof who come from different sides of both Houses accepted their bona fides. It is critical that we find people with the necessary expertise. We need not just the 60 individuals who have been recruited, we also require additional and similarly qualified individuals for other spending Departments. Is there a health economist in the Department of Health? Is there anyone in the Department of Transport, Tourism and Sport who possesses expertise in economics? It was the position in respect of the latter that caused two people to write an article in a Sunday newspaper in which they stated contrarian views were required.
There are huge budgets at stake and they are being spent by a very small number of qualified individuals. Admittedly, we are moving in the right direction. I commend the Minister for Finance on more than doubling the number of suitably qualified staff in the 23 months since Mr. Wright published his report in December 2010. The improvements are commendable. Economics for amateurs got us into the current mess. However, we are not going to proceed further down that road. The Fiscal Advisory Council has a vital role to play in that regard. As indicated, I want the economists recruited by the State to provide advice to display the same professionalism as that shown by veterinarians, doctors and architects. This is an important matter and we need the level of expertise to which I refer. I commend the Minister for Finance on the improvements he has made through recruiting an additional 60 suitably qualified individuals into his Department. I hope similarly qualified individuals will be recruited into other major spending Departments in order that we will not repeat the mistakes of the past.
The Senator has highlighted a very important point, namely, that it is important to have economists not just in the Department of Finance but also in other high spending Departments. The Departments of Social Protection, Education and Skills and Health are responsible for 82% of all Government expenditure. As the Senator points out, it is crucial that these Departments have in their employ suitably qualified and competent staff. Many people who previously worked in the Department of Finance have gone on to enjoy very illustrious careers in other Departments. Much of their training, both in the area of economics and in more general matters relating to the Department, has been of assistance in the formulation of policy in the Departments to which they have transferred. I was obviously in opposition at the time, but there is anecdotal evidence that during the financial crisis it was not just the Department of Finance which tried to respond to the enormous difficulties which had arisen. Staff in other Departments who had previously worked in the Department of Finance and trained economists assisted in the general effort which was required at that stage. However, I take the Senator's point on the need to ensure it is not only the Department of Finance which requires suitably qualified staff. While progress has been made, there are gaps which must be highlighted.
I move amendment No. 19:
The Minister of State has impressed on us the importance of this body. In such circumstances, why leave positions vacant for six months? Let us bring it up to strength immediately when there is a vacancy. This is one of the many amendments I have proposed, but it is also one of the most important. If someone leaves or the chairman resigns, we should bring in a replacement quickly rather than waiting for half a year to do so. As the Minister of State indicated, circumstances can change rapidly. It was not the Government's intention for the council to have four members instead of five for a lengthy period. That is the purpose of the amendment. It is important to ensure the team will not be a man short when it takes to the field.
In page 10, paragraph 1(4), line 18, to delete "6 months" and substitute "1 month".
I agree with the Senator. The team should not be a man or a woman short. The difficulty with the amendment is that it would remove the maximum stipulation of six months and reset it at one month. As the Minister for Finance has previously indicated, that is a very short period. Some reflection might be required across government in bringing forward a suitable candidate to replace someone who leaves the council. In addition, the chosen individual may need to consider whether he or she wants to serve on the council. The six month period proposed in the legislation would be the exception rather than the norm. It would be the intention of the Government and the Minister of Finance to make appointments in a shorter timeframe. As far as I am aware, it is solely a matter for the Minister to actually appoint replacements. However, I am sure he would want to engage in reflection with a number of Government colleagues on any person who might be put forward as a replacement. It is not his intention to take six months to fill a vacancy. Limiting the period to one month would create difficulties from the perspective of the Minister and his ministerial colleagues engaging in discussions. It would also give rise to problems for an individual being offered an appointment in the context of his or her having very limited time in which to decide whether to accept or decline such an offer. That is the rationale behind not accepting the amendment.
No. Prior to Report Stage the Minister for Finance might consider reducing the period to three months. I accept that he should be in a position to survey the field of those suitable to fill vacancies. We must stress the importance of the council.
I move amendment No. 20:
All of the members of the council are obliged to appear before the Joint Committee on Finance, Public Expenditure and Reform. That is both stimulating and useful and all of the members of the joint committee appreciate it. Why not proceed in the same way? The council is a collegiate body and, as the Minister of State indicated, its members are all eminently qualified.
In page 15, paragraph 11(2), line 8, after "chairperson" to insert "and members".
The chairperson does not assert himself as chairperson. He might like to come along with all of his colleagues. Those of us on the Joint Committee on Finance, Public Expenditure and Reform like to see them all there. One would get a much better diversity of views and maybe even a little contrarianism, as the Minister of State mentioned. If it is a collegial body of equals, let us hear them all rather than create a different power structure that operates through the chairperson. A future chairperson might assume to speak on behalf of all the other members and we would never get to hear what those members had to say. That is the purpose of amendment No. 20. I will discuss No. 21 later.
As I understand it from colleagues, the arrangement proposed is standard. The chairperson is the chairperson of an organisation in the same way as the CEO is the CEO of an organisation, and that individual is invited before a committee. However, nothing precludes other members of the council from being there. Demanding that they all attend could present difficulties because some of them work in Washington or Paris and might not be able to attend at short notice. Perhaps they should come at short notice. The first point is that there is nothing to stop them from coming. I agree with the Senator that having a broad range of views from the council adds to the debate in the committee, but there is nothing to prevent all members from attending if they are requested to do so. If the view of the committee is that the chairperson and others should be available to come before the committee, I cannot foresee a circumstance in which the fiscal council would not accept that.
I accept what the Minister of State has said, but the Chairman of the committee does not have to ask them and they do not have to come. If the existing wording stands then only the chairperson will appear. I do not know whether anyone will look back and say the Minister of State, Deputy Brian Hayes, said all the council members ought to appear even though the Bill states it is just the chairperson who must appear. I do not see him as a CEO. It is not a bureaucracy. The strength of the council is that it is a collection of people who have given their time and ideas on how to improve the economy. I see them as equals and the chairperson as primus inter pares. I do not like the all-powerful CEO model. In a world of ideas that does not work. It could be the fourth or fifth member of the council who gives the most ideas when the Oireachtas committee meets the council. Perhaps a reference to the ?council? appearing before the committee rather than the ?chairperson? might be considered.
Any council or committee making public utterances generally does so by means of an agreed position through the chairperson. It would be a recipe for chaos if we identified individual members who might express an individual opinion that is not representative of the Fiscal Council.
The view of the Minister for Finance, and ipso facto my view, is that we cannot accept amendment No. 20. It depends on the subject matter of the committee debate. With the greatest respect to committees, the point has been made by Senator Gilroy that frequently a view of a council or any body corporate is made through its chairperson, who makes-----
Exactly. Public utterances come from the chairperson. I note that when the council issues its report it is usually the chairperson, Professor McHale, who speaks in public on its behalf and sets out the views of the council. It is a matter for the council to determine that; it is not a matter for Government or the Legislature to tell the council how to speak in public. There may well be occasions when, in the view of the council, all of its members in total, or a group of them if there is a specific area that requires discussion, should come before the committee. We do not propose to accept amendment No. 20. We have not discussed No. 21 yet.
The current practice is that all of the members come and they are all valued. It is an excellent council. The Minister of State, Deputy Alex White, was the previous Chairman of the committee and Deputy Ciarán Lynch is the current Chairman. They are valued, but I do not like routing knowledge through one person. It is a model which in education leads to all sorts of trouble. One gets the views of the boss and everyone else is in fear of him. All members are worthy of being heard.
On amendment No. 21, section 11(2) states: "The chairperson of the Fiscal Council shall, whenever requested to do so, account for the performance of the functions of the Fiscal Council." That is the uninteresting bit. We would hear that the council rented offices from the ESRI, went to 24 meetings and spent so much in bars. We want to hear the views of council members on what is happening to the country. That is the reason I specifically wish to refer to how we are doing on fiscal stability. The performance of the Fiscal Council is an administrative exercise. We hope that it did not spend too much money out of the tea fund but we really want to know its assessment of the Department of Finance and how we are doing on policy. The fact that the chairperson must account for his own body is minor; it is what is happening in the macroeconomy that interests us.
The Minister of State will say that is covered, but it seems to be the type of accountability that would relate to part of a county council. The job of the chairperson of the Fiscal Council is to advise the Government of a country being rescued by the IMF how to get back on the rails and how to run our affairs so that it never happens to us again. How he spends his own money or allocates his own time is the minor part - the uninteresting part. We want to hear his advice to either House of the Oireachtas on the attainment and retention of fiscal stability. The Bill is extremely narrow in referring only to the performance and functions of the Fiscal Council. The amendment is about the macroeconomy and, as it says in the title of the Bill, the delivery of fiscal responsibility.
I thank the Senator for tabling amendment No. 21. This point was raised on Committee Stage in the Dáil by Deputy Michael McGrath of Fianna Fáil. He put forward a similar proposal which required the Fiscal Council to provide an assessment of a policy proposal when requested to do so in writing by a committee of Dáil Éireann. The proposal was rejected by the Minister, Deputy Noonan, who said it would not be acceptable under the common principles as it could be seen as a threat to the independence of the council. One concern expressed to the Department by the Fiscal Council during the preparation of the legislation was the possibility that a Minister would allocate additional functions without additional resources. This concern was echoed by the troika. The Minister, Deputy Noonan, took that on board by ensuring that the functions of the Fiscal Council, as stated in the Bill, do not provide for additional functions to be given to the council. The allocation of additional functions will require amending legislation which would ensure an opportunity to discuss appropriately matching resources. The same point applies to this amendment. I am sure the Senator does not intend this, but demanding that the council appear to discuss the attainment and retention of fiscal stability in front of any or all of the committees of the Oireachtas would be akin to giving the Oireachtas a blank cheque to demand its input on issues of fiscal stability for any policy and could put pressure on the council?s performance of its essential duties.
The critical task we are asking the council to do in terms of the performance of its functions is set out in section 8. That is what we are asking it to do in accepting the legislation. Senator Barrett may be confusing this with another aspect of the provisions relating to the council's appearance before committees, as outlined in section 11 on page 14. This is to do with the appropriation of funds to an organisation, which is standard practice for any organisation funded by the Oireachtas for the performance of its duties. There might be some confusion as to what the position is in that regard. Reference to appearance before Oireachtas committees is a standard provision which appears in other Bills and provides for an agency such as the Fiscal Council to come before a committee to make sure it has used public funds appropriately.
I do not think we should confuse that with the essential functions as set out in section 8 of the Bill, which the fiscal council independently carries out and on which it independently reports to the Government. For those reasons, we do not propose to accept the amendment.
I am sorry that I am rejecting the amendments, but the debate is useful in obtaining clarity on the role of the council.
As the Official Report will show what was said and the Minister of State said that he expects all members to attend, it is not necessary to press the amendment. I would be most disappointed if anybody used it to prevent the members from attending.
I move amendment No. 21:
I will press this amendment because we must discuss the macroeconomic issues. We have the expertise here.
In page 15, paragraph 11, between lines 10 and 11, to insert the following:?(3) The chairperson and members of the Fiscal Council shall, whenever requested to do so, advise a Committee of either House of the Oireachtas of the attainment and retention of fiscal stability.?.
I thank the Senators for their very constructive engagement on the Bill. The Minister for Finance was in the House during the Second Stage debate. I thank Senators for allowing the Bill to progress this evening by agreeing to take all Stages. I thank all of the Senators who contributed and in particular those who tabled insightful amendments. We are entering a new era of fiscal responsibility. There is a clear need to have an independent authority vetting the work of government and independently assessing how we are doing. It is important to note that in order to ratify the stability treaty, we must fulfil the fundamental condition of enacting this legislation. The immediate concern is that the Bill is passed by both Houses and is then signed by the President. Ireland will then be able to sign the stability treaty. I again thank Senators for their co-operation.
I thank the Minister. The fiscal council that has been assembled is a very good body. Many institutions, people and bodies got us into this trouble and none should be exempt from scrutiny by the fiscal council. We are spending much time and effort, not least on the Government benches, trying to rectify these problems. We must ensure it never happens again. The real moral hazard is that those who caused these problems escape. There is no point in the banks saying that moral hazard is caused by people who borrowed too much to buy a house. Those who got this country into such dire straits will now face independent scrutiny, which is to be welcomed. I commend the Minister on bringing the Bill through all Stages in the House.