The public finances without a Government
By Sean Whelan, Economics Correspondent
By the end of this week, the government is supposed to have sent the European Commission a document called the ‘Stability Programme Update’.
Although this requirement has been around for some two decades, it is only with the onset of the financial crisis that the wider public started to pay it much attention.
In fact the SPU, as it is know, is probably the most important budget document apart from the Budget itself.
It effectively sets the parameters for the construction of the October budget, including the most recent set of economic forecasts – and it will make another estimate of the available fiscal space for 2017 (it hasn’t gone away you know) – so it marks out the amount of cash the government will have to play with in the October budget.
Between the publication of the SPU and October 15, it’s all about filling in the details.
Last year the government decided to make an event of the SPU publication (normally an “event” nowhere other than the Department of Finance website) by making a ‘Spring Economic Statement’ – which was essentially a restatement of the key points from the SPU, with a little added political steer to help it on its way to two key constituencies – the general public and the interest groups.
For the latter the document was designed to lead them into a new form of economic dialogue, which happened at a structured event in July. This largely replaced the previous process of “pre-budget submissions”, a tedious and largely pointless exercise at a time of fiscal tightness.
For both the interest groups and the general public, the aim was to manage expectations about what could be realistically delivered in October’s Budget, so the ensuing “submissions” might end up in the ballpark of budget realism (which means they might actually be entertained). Most participants seemed to be pleased with the way this process ran last year.
But what of this year?
With no new government with a mandate to change policy, there is little to update Brussels on in this year’s document. It has been largely prepared by the civil servants as usual, but on a “policy lite” basis – complying with the bare legal requirements of the Commission (“more like a spreadsheet than a manifesto”, as one described it).
This means it can be sent to Brussels on time (assuming the Cabinet approve) this week.
As the Spring Economic Statement is a local affair, there is nothing to stop the new government (if one is formed in time) from having its own Spring Economic Statement, to set out its policy priorities for the next budget (and possibly beyond). This could form the basis of another Economic Dialogue with the interest groups in July – assuming again that the government is formed in time to do both these things.
And assuming the next government actually wants to proceed in this way.
Another issue pressing on the 32nd Dáil is the small matter of the legality of spending money. Under Irish budget law, the Dáil is supposed to consider in select committee – along with relevant ministers and officials – each of the 40 Revised estimates for government spending this year.
This is supposed to happen in “early Spring” – much of which has been spent waiting for a government to be formed. The Dáil is then supposed to vote approval of each of the 40 estimates “in late spring” (according to a note on budget process from the Oireachtas Library and Research Service).
OK, there is no new government, but is there anything that actually prevents the members of the 32nd Dáil from carrying on with this essential public business? After all ,the original estimates from last October, and the revised estimates in December, were both prepared under this current set of ministers. Waiting for a new government to come into being makes no sense for two reasons.
Firstly it pushes even later into the year the point at which the Dáil approves spending for this year – half the money will have been spent before it is approved.
Even more important, the law that governs the State’s ability to raise and spend money says that if the revised estimate has not been voted by the Dáil, the State can only spend 80% of the previous year’s budget. This means that if the Dáil does not vote through the estimates, the government will run out of money in October. That means no pay for doctors, nurses, teachers, guards. No social welfare payments, no schools, no grants, no civil service wages.
For some parts of the State the cash crisis is more acute – such as the Central statistics Office, which is currently gathering up census forms.
The census is a very expensive business, and because it was not in last years estimate for the CSO, it is not covered by the 80% rule. So the CSO will run out of money well ahead of other parts of the State.
But the interest on the national debt – being a non-voted expenditure – will be paid.
At a time when we are hearing a lot about Dáil reform, we should not forget there are some basic parliamentary tasks that do not need reforming, they just need doing. Ensuring taxpayers money is lawfully spent on public services is one of them.