Access to public and non-public information for IFIs: goodwill versus

procedures?20 November, 2014

John McHale

Irish Fiscal Advisory CouncilNational University of Ireland, Galway

Presentation to the Second Meeting of the EU Network of Independent Fiscal Institutions

Some background on IFAC

• Established on an interim basis, July 2011– Physically based at the Economic and Social Research

Institute (ESRI), an independent research organisation

• Put on a statutory basis under the Fiscal Responsibility Act, December 31, 2012

Mandate

• Endorsement of macroeconomic forecasts underlying budget and SPU

• Assess macroeconomic forecasts and budgetary projections

• Assess compliance with national Budgetary Rule and Correction Mechanism

• Assessment of fiscal stance (with reference to requirements of SGP)

Fiscal Responsibility Act • Statutory independence • Budget from Central Fund not subject to annual appropriation(ceiling of

€800,000, indexed for inflation)

• Appointments made by Minister for Finance, with requirement of appropriate macroeconomic/budgetary expertise

• Dismissals: Requires resolution of parliament

• Requirement to publicly report at least twice per year

• Requirement to appear before parliamentary committee

Structure and personnel• Council membership (Part-time)

– Sebastian Barnes (Senior advisor to Chief Economist and former head of Ireland desk, OECD)

– Alan Barrett (Professor, ESRI)– Donal Donovan (Former Deputy Director, IMF)– John McHale, Chair (Professor, NUIG)– Roisin O’Sullivan (Professor, Smith College)

• Secretariat (Full-time)– Thomas Conefrey (Head of Secretariat and Chief Economist)– John Howlin (Economist)– Eddie Casey (Economist)– Sarah Doyle (Administrator)– Andrew Hannon (Research Assistant)

Key published outputs

• Six Fiscal Assessment Reports – Seventh report to be published on November 25th

• Other reports:– Report on Reforming Fiscal Institutions, February 2012– Report on The Government’s Balance Sheet After the

Crisis: A Comprehensive Perspective, October 2013– Pre-Budget Statement, September, 2014

Production function for a fiscal council

• Analytical capacity• Independence• Accountability• Visibility

Analysis: -- Forecast endorsement & assessment -- Rule compliance -- Fiscal stance

Capacity to raise reputational costs of inappropriate fiscal policies

OutputsInputs

Expertise: -- Council -- Secretariat

Information flow

Key information flows

IFAC

Department of Finance

Department of Public Expenditure and Reform

Other Government departments/agencies

Central Statistics Office

NTMA Central Bank of Ireland

Economic and Social Research Institute

European Commission / IMF / Networks of IFIs

Private-sector forecasters

Critical cooperation on staff secondments

• Both chief economists on secondment from Central Bank

• Other secondments– NTMA (now permanent staff member)– Department of Public Expenditure and Reform– Department of Arts, Heritage and Gaeltacht Affairs– ESRI

Mixture of goodwill and procedures• Procedures

– Some teething problems in accessing information from DoF• Now much improved with a central point of contact

– Formal MoU with DoF on endorsement function• Important safeguard

• Goodwill– Have avoided an overly procedural approach with DoF

• MoU in background• Flexible ongoing cooperation

– Goodwill relationships with other departments/agencies– Some challenges with access to budgetary information from other

departments• Potential need for more formal relationships

MoU has structured interaction on endorsement

• Sets out:– Variables on which information is to be provided– Timing of formal interactions• Presentation to secretariat• Presentation to Council• Timing of endorsement

– Ongoing MoU review procedures

Example: Tax Forecasting Errors

• IFAC wanted to examine the source of tax forecasting errors to see if there was any indication of systematic bias in the forecasts

• Department of Finance provided data for several tax heads going back to 2001:

– Budget time forecasts and outturns– Forecasts for macroeconomic drivers and the accompanying

elasticities– Estimates of the effect of policy changes– Information on one-offs

• Department made themselves available to answer any questions IFAC had regarding the data

Examples of information access from other departments

• Health Expenditure– IFAC wished to gather information on the nature and causes on the

persistent expenditure overruns in the Department of Health– Department of Public Expenditure and Reform (DPER) met with IFAC

to discuss the management of costs in the Department of Health and within hospitals

• Unemployment Benefits– IFAC sought understanding of how expenditure on unemployment

benefits was forecast and how accurate they could be– IFAC met with DPER and Department of Social Protection to discuss

the relationship between the unemployment rate, the live register and the costs of Jobseekers Benefit and Jobseekers Allowance

Non-government Bodies

• IFAC secretariat regularly meets with other public bodies– Central Bank and National Treasury Management Agency can each

offer unique perspectives and data

• Central Statistics Office (CSO)– IFAC has met with the CSO a number of times to understand unusual

trends underlying headline data and the affects of ESA 2010 revisions• New proposed consultation group of users: DoF, IFAC and ESRI

• Private sector forecasters– Prior to endorsement exercise, IFAC meets with a number of private

sector economists from stockbrokers, banks etc.

External information access very important

• Regular meetings with “Troika” missions

• Networks of IFIs– OECD– Informal network of EU IFIs– EUNIFI

• Good informal access to information from the Commission, but need for a more structured role given the integration of European and national fiscal rules following the Fiscal Treaty– Much of the EU fiscal framework was established prior to IFIs – IFIs cannot be expected to rely on Ministries for information on the harmonised

methodology or issues related to the rules– Example: “Calendar of convergence” and the adjustment path for the structural balance

for high debt countries– IFIs should be on the Output Gap Working Group circulation list for papers with some

representation at meetings

Summing up• Reasonably positive experience with information access

• Goodwill and procedures play complementary roles in relationship with Department of Finance

• Potential need for more formal arrangements with other departments, especially in relation to assessing budgetary forecasts

• Good working relationships with other public and private bodies

• Good informal access to information from the Commission, but need for a more structured role given the integration of European and national fiscal rules following the Fiscal Treaty