Budget 2016: John McHale stands by spending criticism

The chairman of the Irish Fiscal Advisory Council Prof John McHale said on Thursday he stands over a warning he issued over the level of overall spending in Budget 2016 .

Prof McHale's comments come after the fiscal council was required to issue a statement yesterday after he said on RTÉ's Morning Ireland programme that Budget 2016 could break stringent European rules. Hours later, he had to withdraw the charge.

The fiscal council conceded Prof McHale had made an error when suggesting the Government was obliged to cut the underlying structural deficit in the public finances by more than set out in the budget. While the budget assumes a 0.8 per cent of GDP cut in the deficit, Prof McHale had said a 1 per cent cut was required.

On Thursday Prof McHale said the council had not changed its position on concerns in relation to the level of spending. “We haven’t changed our position on that at all and I hope that hasn’t got lost in the controversy that followed”.

In advance of the budget, the Fiscal Council had formally endorsed the macroeconomic forecasts on which the plan rests.

However, Prof McHale yesterday said he was concerned about the adoption of supplementary estimates for a number of departments this year which would roll over into allocations for 2016.

Having warned previously against increasing the €1.5 billion package, he suggested the Government was obliged to cut the underlying structural deficit in the public finances by more than set out in the budget.

A number of Ministers rejected Prof McHale’s view and the fiscal council later conceded he had made an error.

However, speaking this morning, Prof McHale said while any clarification might be seen as a reversal, he still stood over the figures.

“I’m most concerned that the main points I spoke about yesterday get lost. The main points I was making on behalf of the council is that the increase in spending for this year beyond what was budgeted, which was €1.7 billion, leads to an overly-expansionary fiscal stance and also undermines the Government’s multi-year expenditure ceiling and creates questions about the entire budgetary process,” he said.

Speaking on Newstalk, Prof McHale reiterated that the required improvement fixed earlier in the year had not been published and was not made available to the council, meaning that his comments yesterday were based on earlier information the council had received.

“There needed to be a factual clarification that was made to us and I passed that on so that this wouldn’t linger,” he said.

Prof McHale said the clarification might be seen as a reversal or humiliation in some quarters, but that he still stood over concerns about overall spending in Budget 2016.

As it welcomed the climbdown yesterday the Department of Finance noted that the EU authorities had published country-specific recommendations for Ireland months ago in which they called for “a fiscal adjustment of 0.6 per cent of GDP” in 2016.