Fiscal council’s work lacked basic coherence, says civil servant

One of the Department of Public Expenditure’s most senior civil servants said some of the economic analysis carried out by the State’s financial watchdog lacked “basic coherence” in a harshly worded email.

In correspondence obtained under Freedom of Information, William Beausang, assistant secretary at the Department of Public Expenditure, said the Irish Fiscal Advisory Council had ignored offers to work directly with departmental officials.

The email was sent just before the council had issued its pre-budget statement, warning that the Government’s plans were close to “prudent” limits.

Mr Beausang wrote to both Thomas Conefrey, the council’s chief economist, and Prof John McHale, its chairman, saying it was “disappointing” they had not made more contact.

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“The reluctance to engage with this department on the substantive points we raised in the Mid-Year Expenditure Report has now culminated in a situation, where – as evidenced by our detailed comments – that the council’s analysis . . . falls short of the quality standard I would have expected,” Mr Beausang wrote.

He said the council’s work on the setting of expenditure ceilings by the Government “lacks a basic coherence”.

Mr Beausang said he wanted “open dialogue” with the council so that its assessments and recommendations could take advantage of departmental expertise.

He wrote: “Consequently, I very much hope that in developing your proposals for the future technical note on this issue, you will take the opportunity we have previously offered to discuss your ideas with the department.”

In response, the council said it had wanted to emphasise the importance of realistic expenditure estimates, which it said are continuously being revised upwards.

Mr Conefrey wrote to the department saying: “We regret if there has been a misunderstanding on the nature of the dialogue you envisaged. We continue to have a very fruitful engagement with your department at a technical level and hope that this continues.”

Absence of engagement

Mr Beausang again responded by asking for increased discussions between the council and his department. He wrote: “I have difficulty in seeing how the council could be fully informed on this department’s assessment and perspectives on expenditure ceiling[s] in the absence of engagement with the relevant senior officials in the department.”

In a detailed explanatory note, the fiscal council said it has been trying to emphasise multi-year planning, which could help prevent some of the mistakes made prior to the financial crisis. It said continual revision of ministerial expenditure ceilings went against good expenditure planning, which needed the best possible forecasts.

It continued: “A negative feedback loop between unrealistic plans and poor expenditure control has been especially evident in the health area in recent years.”

The council said it was “never envisaged that our published assessments would be a joint product with the department following high-level engagements”.

Asked to comment on whether any difficulty with the Irish Fiscal Advisory Council (Ifac) had been resolved, the Department of Public Expenditure said: “Ifac is statutorily independent in the performance of its functions – as explicitly recognised in the relevant email – so the question of agreeing a position in relation to any aspect of its mandate does not arise.”

Separately yesterday, UCC academic Séamus Coffey was appointed as chairman of the council, replacing Prof McHale, who served as chairman since the council was established in the summer of 2011.

Mr Coffey, a lecturer in economics at UCC, takes up the new role in January. Mr Coffey was recently appointed by Minister of Finance Michael Noonan to review the State's tax code after the recent EU Apple ruling.