It seems I've been unfairly maligning our civil service in relation to them failing to do their job advising the government on the economic implications of government fiscal policy.[broken link removed]
Report: Dept of Finance warned government of dangerous policies
30 January 2011 By Cliff Taylor
Bertie Ahern’s Fianna Fáil-led governments ignored clear warnings from the Department of Finance about the risks of cutting taxes and increasing spending as the economy boomed, according to a confidential report prepared for the government.
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The Wright report finds that, in general, the department provided clear warnings for nearly a decade in the annual June memorandum on budget strategy, signed off by the ministers for finance and sent to the cabinet, led for most of the 2000-2010 period by former taoiseach Bertie Ahern, and from May 2008 by Brian Cowen.
So the civil servants were dead set against the McWilliams Blanket Guarantee of the bondholders as well as the depositors. But Brian Lenihan acted on the advice of McWilliams.The officials in the Department were (by then) also advocating a guarantee of people's deposits but only to a certain level. However, I argued because the Irish banks' funding had become so unstable, if we didn't guarantee the funding as well as the deposits, the banks would come crashing down and you would have had to come up with the money immediately for people's deposits. The whole point of a guarantee is that you want to avoid paying out right away.
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but he[Brian Lenihan] still wasn't convinced and, from what I could gather, his officials in the department were dead set against a full guarantee
David McWilliams has some cheek.
Check out
In McWilliams own words:
So the civil servants were dead set against the McWilliams Blanket Guarantee of the bondholders as well as the depositors. But Brian Lenihan acted on the advice of McWilliams.
We slag off the public service very easily. They are not really in a position to defend themselves publicly. They can't come out and say "We advised the Minister not to do x but he rejected our advice".
Brian Lenihan and the government were faced with a horrible choice. He took the advice of McWilliams against the advice of his own civil servants and we are all paying for that now.
But McWilliams has the solution again now. Let's have a referendum and refuse to pay out debts.
An independent review of the Department of Finance over the past ten years has found that it did warn about Government budgetary polices and the property boom, but that any warnings were 'overwhelmed' by political and other pressures.
The review, commissioned by Finance Minister Brian Lenihan, was headed by Rob Wright. He was most recently Canada's deputy minister of finance
It found that the amount of spending and tax relief outlined in Budgets of the period was usually well above that advocated by the Department of Finance when setting out its Budget strategy earlier in the year.
It also said that the department's advice was 'more direct and comprehensive' than concerns expressed by others in Ireland or international agencies.
So pretty much confirms that social partnership was simply bought.
What it shows to me is that Civil Servants in the department were doing their job and doing it correctly, but were blocked at all times by Government who had their own mandate and listened to interest groups instead and the social partners were possibly involved but I would imagine the construction industry were the closest to the Cabinet table.
What it shows to me is that Civil Servants in the department were doing their job and doing it correctly, but were blocked at all times by Government who had their own mandate and listened to interest groups instead and the social partners were possibly involved but I would imagine the construction industry were the closest to the Cabinet table.
I never said the civil servants weren't doing their jobs. The report specifically said that the budgety process was overwhelmed by social partnership and government programmes to increase spending and cut taxes. Blaming big bad developers is nice and populist but the construction industry werent the ones calling for huge increases in things like social welfare. The construction industry was part of social partnership as was IBEC and these bodies are just as guilty as politicians and trade unions for short sighted leadership.
3.2.3 The Panel reviewed in detail the annual June Memoranda to Cabinet on Budget21
Strategy. Generally speaking, we found that advice prepared by the Department for Cabinet
did provide clear warnings on the risks of pro-cyclical fiscal action. These views were
signed-off by the Finance Ministers of the day who would submit the Memoranda to
Cabinet. Department officials do not, of course, participate in Cabinet discussion. This
advice was more direct and comprehensive than concerns expressed by others in Ireland, or
by international agencies.
This extract from the report should be a bombshell - turns out that the Department was giving the best advice.
Interestingly the report goes on to say that there are not enough economists in the Department - a lot of the economic work is being done by generalist civil servants. Given that the Department outperformed the best Irish and International economists, it makes you wonder whether there is any value to hiring economists and/or seeking their advice. If the Departments predictions are the best available, dont upset it by introducing economists.
Given that the Department outperformed the best Irish and International economists, it makes you wonder whether there is any value to hiring economists and/or seeking their advice. If the Departments predictions are the best available, dont upset it by introducing economists.
That had occurred to me as well. I am always astonished by the confidence which economists have in their forecasts and their solutions when their general record has been so poor.
... it does not surprise me that people with no economic background now look like better economists than the Keynesian ilk that are still being entertained to this day.
I think it is important to distinguish economists by their economic school of thoughts. Economists of the Austrian School have been incredibly accurate in their predictions, especially in the incredibly large busts of the last 15 years.
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