Budget discipline breaks down as Ministers loosen the purse strings

If there’s one thing that causes alarm in the Department of Finance and the Department of Public Expenditure at this time of the year, it’s the sight of Ministers receiving a warm reception at the public service trade union conferences that proliferate .

That means only one thing, notes one senior source. And it’s not good.

Signals from Minister for Education Joe McHugh and Minister for Health Simon Harris that they were prepared to loosen the purse strings to meet pay demands from teachers and health service personnel were met with enthusiasm at recent conferences.

However, there was alarm in Merrion Street where senior sources said they had not been given the go-ahead to make such announcements. And as officials were quick to point out – line ministers are not supposed to have control of the purse strings.

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The scars of the financial crisis have not healed completely

Those at the conferences, and many of those who rely on the public services provided by the conference delegates, might have a different view, and consider the provision of extra cash for teachers, doctors, nurses or gardaí to be money well spent – even if better-paid public servants do not necessarily mean better public services.

Ministers and senior officials acknowledge privately that budget discipline has jumped on to the agenda in recent weeks.

Minister for Finance Paschal Donohoe pointed out this week that expenditure growth over the past five years was about half the rate of 2003-2009 figures. But he is under pressure and he knows it.

Ministers have several roles in our system. One of the important ones is to represent the interests and points of view of their stakeholders at the highest political decision-making forum – it’s the job of the arts minister to make the case for the arts, for the education minister to make the case for education and so on.

That is a view which is always impressed on new ministers by the civil servants in their departments – they are expected to bat for resources for the department at the cabinet table, or more decisively, in the crucial budget meetings with the finance minister and his mandarins.

But ministers have another job, too. Once government has made a decision on policy or resources, it is up to them to defend and sell that decision to the same stakeholders. Constitutionally, the government acts collectively and the decision of the cabinet is the decision of all its members, who have a responsibility to stand by that decision, whatever their private views. That is the price of being at the cabinet table, and it applies especially to budgetary decisions.

And budgetary decisions cannot be made without the consent of the minister for finance – the only minister, apart from the taoiseach, who has a constitutional status.

System

Our system of government and politics, of course, is not a rigid framework of rules and principles. There is push and pull, the ebb and flow of power and politics and priorities.

And as an election approaches, the demands of politics are heard more loudly. Politicians have a public to please and must contend with highly organised special interest groups which in many cases have ready access to the media and to public debate. If the minister wants to stay a minister, his party has to be re-elected.

The Department of Finance understands this – it has, after all, seen a bit of politics. But it also understands the dangers of fiscal looseness at a time of political opportunity and healthy exchequer finances. The scars of the financial crisis have not healed completely. So for those at the centre of Government whose horizon extends beyond the next election, this is a time of maximum danger – when politicians can make far reaching decisions for short-term benefit.

Recent weeks have seen a spate of spending announcements, many of them in health and education, but elsewhere too. Donohoe has responded with a pre-Easter warning at Cabinet about the need for spending discipline. He will meet the bigger spending Ministers shortly for bilateral meetings.

One thing they won’t discuss openly: the suspicion around Government there may be tacit support for the emerging looseness across the quadrangle in the Taoiseach’s department. But it hangs in the air, all the same. The ground has shifted a bit, and everyone can see it.