How Ireland is strengthening its fiscal management as part of its ongoing recovery program

Posted By Brian Olden

A recent article by Tom Ferris in Public Affairs Ireland Journal of December/January 2012 examines changes being introduced to improve fiscal responsibility in light of the IMF/EU support program and in particular the role of the newly established Irish Fiscal Advisory Council.

The article describes what the Irish government has achieved since the start of the program, when Ireland gave explicit commitments to reform its budget formulation process, introduce a Fiscal Responsibility Law and establish an Independent Budget Advisory Council.

Reforms to the budgetary process, announced by the Minister of Public Expenditure and Reform on 5 December 2011 comprised 5 strands.

1. Spending and revenue plans to be anchored in a sustainable multi-annual vision determining how the public finances will be managed
2. Replacement of the existing annual expenditure estimates with the introduction of a multi-annual expenditure framework
3. Introduction of a comprehensive spending review where no expenditure lines are deemed sacrosanct
4. Inclusion of performance information into the annual estimates
5. Strengthening the role of parliament (“the Oireachtas”) in holding the government accountable for the budget.

The Fiscal Responsibility Bill, which is expected to be enacted in 2012, will include fiscal rules designed to ensure sustainable fiscal policy and prudent budget management over the economic cycle. The Bill will also put the new Fiscal Advisory Council on a statutory footing.

These are some of the most far reaching changes to budgetary management ever undertaken in the Irish context and the article provides a concise summary of what is envisaged and what has been achieved so far.

Comments

[Andy Wynne]

It is interesting to note that these reforms do not include a move from the modified cash basis to the accrual basis for the annual financial statements of the Government of Ireland.

Despite being a neighbouring country and speaking the same language, the Republic of Ireland did not follow the UK in moving to accrual accounting. The reasons why accrual accounting was a ‘road not taken’ are explored in the following paper by an academic from Northern Ireland (part of the UK):
www.cipfa.org.uk/regions/roi/download/Accrual_Accounting.doc