LEGISLATION THAT will strengthen rules on the management of the public finances and put the Irish Fiscal Advisory Council (IFAC) on a statutory basis was published by the Government yesterday.

The Fiscal Responsibility Bill 2012 will begin its passage through the Oireachtas when law-makers return from summer holidays in September.

The new budget rules must be enacted under the terms of the European fiscal treaty which voters backed at a referendum at the end of May.

The first rule to be enshrined in national legislation relates to revenues and spending. In future, the deficit between revenue and spending cannot exceed 1 per cent of gross domestic product once one-off and business-cycle factors are accounted for.

This is designed to ensure that governments do not lock in spending commitments based on unsustainable revenues, such as those generated by property bubbles.

The second rule obliges governments to reduce their total indebtedness by a minimum amount each year if it is above 60 per cent of GDP.

Minister for Finance Michael Noonan said “these rules are sensible and prudent and represent a responsible approach to budgeting”.

Yesterday’s Bill does not change the structure of the IFAC, but “enlarges” its role in deciding “whether a significant deviation has occurred and if a correction is proceeding in accordance with the correction plan”. These powers will be granted to all IFAC’s European counterpart agencies.

The Bill strengthens the independence of the agency by limiting the Minister for Finance’s power to fire its members. Any dismissal will need a Dáil resolution.

The IFAC was established last year to provide an independent assessment of the soundness of fiscal policy. Internationally, such independent entities have been found to lessen the chance and scale of budgetary crises.

In its reports to date, the IFAC has recommended a marginally faster pace of budgetary adjustment than that being implemented by the Government.