The electoral cycle decides the budget, while the fiscal advisory council is ignored

In June 1954, TK Whitaker, then assistant secretary at the Department of Finance, wrote a note to outgoing Minister for Finance Seán MacEntee: “I could not let this opportunity pass without expressing my greatest admiration for the courage behind the 1952 budget and your unsparing devotion to public duty when everyone would have held you excused.”
That budget had been so stark it was labelled the “Famine budget.” Raising income tax by a shilling in the pound with price increases on essentials including bread, butter, tea and sugar, MacEntee was on a deflationary mission to tackle the deficit in the balance of payments. Before the budget, he described the national finances as “difficult almost to the verge of desperation” but some queried if he was pushing too far, too fast, had a true grasp of the balance of payments issue or was aware how his decisions would further depress Irish industry.
As with all budget decisions, there was a political logic at work; if unpalatable medicine had to be administered, better to do it quickly. But it was also a big political risk. MacEntee could not shake off his association with austerity which contributed to Fianna Fáil’s electoral defeat in 1954 and ensured MacEntee was not going to become leader of his party, hence the Whitaker tribute.
It is the boom and bust rather than the neutral budgets that are remembered. The inextricable link with the electoral cycle has been a constant, as has a problem identified as far back as 1941 by writer Seán O’Faoláin when decrying the absence of long-term vision. Irish politics, he concluded, was hobbled by “conflict between the definite principles of past achievement and the undefined principles of present ambition”.
The fiscal crises of the 1980s also involved difficult and controversial budgetary decisions, exacerbating political instability, while the Celtic Tiger budgets often involved a sweeping disregard for sustainable growth. When Charlie McCreevy, minister for finance from 1997-2004, gave evidence to the Oireachtas banking inquiry in 2015 he seemed to suggest it was electoral cycles that ultimately guided fiscal decisions: “If we had spent less, it would have meant larger budget surpluses and some have gone on to say we should have built up further rainy-day funds, apart from the pension reserve. Now, are these people for real? In a political democracy, it is especially difficult to run any kind of a budget surplus.”
Not any longer. Now, we have surpluses and growth and can be thankful we are not dealing with the economic pain characteristic of the 1950s or 1980s. But it is also apparent that it is “especially difficult” for our politicians to avoid overheating an economy operating at full capacity, despite the abundant evidence of the danger of that. Bestowing largesse on those who do not need it has thus become a regular budgetary feature.
The scale of the economic crash from 2008 led to talk of a reform of this kind of culture. Before the 2011 general election that witnessed the collapse of Fianna Fáil’s vote, Fine Gael’s Richard Bruton, then Opposition enterprise spokesman, noted with satisfaction the proposal for a new independent Irish Fiscal Advisory Council (Ifac) as it “would protect citizens from previous inappropriate and excessive behaviour by politicians where governments decided to pour oil on to an already flaming fire in the economy”.
Then minister for finance Michael Noonan duly announced the appointment of the first Ifac in July 2011 to help “reform Ireland’s budgetary architecture … to provide an assessment of, and comment publicly on, whether the government is meeting its own stated budgetary targets and objectives. It will also be charged with assessing the appropriateness and soundness of the government’s fiscal stance … as well as … compliance with the government’s fiscal rules.”
It has been doing that ever since, banging its reports and advice against a wall of resistance amid a continual breaking of those fiscal rules. As a new taoiseach in 2011, Fine Gael’s Enda Kenny heralded the proposed Ifac as a move “to ensure that the budgetary mistakes of the past are never repeated”. By 2014 he declared Ifac’s warnings were a “valuable set of observations … I value its independence”. What he was really saying was that its recommendations could be binned, because what Ifac offers is “just an opinion … budgetary decisions are in the gift of the government”.
Indeed they are. They now have gifts galore and Ifac is once again left pissing in the wind as we remain stuck with the established pattern of budgets dictated by election timing, while the Department of Finance reminds us that half of all corporation tax is paid by just 10 companies. Ifac’s first chairman, John McHale, said its role was to “institutionalise the memory” of Ireland’s economic crises. That memory is clearly not strong enough to withstand the primacy of electoral cycles.