Fiscal Advisory Council’s timely warning

Budget 2018 must stick within EU rules and allow for Brexit having a greater impact than anticipated

 

The Government would do well to heed the advice from the Fiscal Advisory Council on the overall direction of Budget 2018. It has called on the Government to adopt a reasonably conservative stance, sticking within EU rules and keeping some room for flexibility if Brexit hits the economy more severely than anticipated. Given the uncertainties in the Brexit talks, such a course would appear sensible.

There is no sign of the Government throwing caution to the wind, of course. But as the council points out in its pre-Budget report, small adjustments made in successive years can cumulatively affect the Budget position. Both last year and in 2015, spending was added late in the year to meet particular pressures. Had this not happened, the Budget would already be in balance – and the Government would have more scope for 2018.

The council has pointed out that spending and tax commitments already made leave little enough room for manoeuvre in Budget 2018. The Government could decide to raise new taxes, or stop some spending programmes, to free cash for new measures. However the current political arrangement in the Dáil does not lend itself to supporting reform. A more pressing job will be to resist demands for new spending in a range of areas. There will be some additional cash to deploy, but not a significant amount. Prioritisation will be essential. And there will be a real onus on the various parts of Government to use the resources they have to best effect. This also applies when looking at the planned increase in investment spending in the years ahead. More investment is needed, but it is essential that project selection, planning and execution are expertly undertaken.

There is nothing revolutionary about the council’s recommendations. Most fall under the heading of good sense. A central point is that we should abide closely to the EU budget rules. They are not, in general, unfair restrictions on our progress. Rather they are attempts to stop us repeating the mistakes of the past, which involved spending too much in the good times, only to have to cut painfully when a slowdown hit.

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