Budget debate begins: I'm happy to do the state some service by working with NED

I live a charmed life in many ways. I belong to a generation that was well educated, essentially for free. I made it all the way to a PhD with no debt. The taxpayer paid for that.

The state delivered a very good education and I reap the rewards of it every day. The state gave me the means to make my living and even gave me a job afterwards.

So when the Department of Finance asked me to be a rapporteur for the new National Economic Dialogue (NED) process, I said yes without hesitation.

If the state needs anything from me, I give it. I appreciate how lucky I am and I do want to help any way I can. As it turned out, I was lucky again. The process was fascinating to me as an outsider to the policy process. I learned a huge amount.

The instant cynicism that greeted the NED is probably best summed up by the pun on the butter substitute: I can’t believe it’s not Social Partnership!

Superficially it resembles social partnership. In one big room in Dublin Castle, you have government, trade unions, employers’ groups such as IBEC, four or five bodies representing farmers, groups representing environmental concerns and what used to be called the ‘social’ pillar, representing many issues.

I was impressed at the depth of knowledge individual advocates had on their specialised topic –representing construction, the aged, the disabled, environmental issues, farmers and more – but also how ‘across’ other disciplines they were as well. In the end, everyone was pushing for more spending, and no one wanted to see cuts in other areas.

Of course, some participants felt their ‘thing’ was the solution to everything. For example, one participant felt that trees, yes dear readers, trees, were the solution to the problems the country faces in health, pensions and education.

I was fascinated by the language used by some participants – they referred to themselves as being part of the ‘pillars’, the exact term given them in social partnership.

So we had the same room, the exact same people, the same concerns, and a growing economy with a bit of a surplus to divvy up. Not exactly confidence-inspiring to begin with.

But things are different now.

Conversations behind closed doors are now happening live – and live streamed. Lobby groups are listening to each others’ ideas, while getting to make their own points. Discussions were framed by the Irish Fiscal Advisory Council within the clear fiscal constraints set out by the Spring Statement and with short-term forecasts from the ESRI.

Everyone here has a just cause and wants to advocate on behalf of their constituents with their different and important needs and priorities. The arts are important. The rights of the elderly are important. The rights of the disabled are important. Every one of them has a good case to make for more funds for their causes.

The problem is, the country just doesn’t have the money.

In her opening remarks, Tánaiste Joan Burton quoted George Washington: we must consult our means, not our wishes. In a way, this says it all.

Our fiscal rules – not Europe’s, they are ours now, and part of our law – insist that our expenditure growth is limited by the underlying potential of the economy.

The budgetary rules we now work under are designed, in a way, to bake a sort of anti-McCreevy into all of our budgetary processes, so even when you’ve got it, you can’t spend it.

The idea is that when things go wrong and a recession looms, the government can borrow or spend reserves to weather these reserves. It’s an old idea, and one the chair of the NED, Professor Alan Barrett, made a point of in his closing remarks.

The National Economic Dialogue’s format allows members of the Oireachtas, including the opposition, to comment on possible tax and spend measures before the budget is actually made, all in the presence of lobby groups and other interested parties, all of whom are hunting for expenditure increases.

The dialogue process forces groups to be focused, transparent, and realistic. They need to have their figures properly costed, and understand the limits of the ‘fiscal envelope’. They are also in the presence of their fellow lobbyists.

No one is going to look credible asking for €1 billion for their group or issue, when we know the upper limit of spending will be €750 million and the changes in taxes will again be €750 million.

That said, the Tánaiste also remarked how she had met individually with all of those around this table, so the old, closed, budgetary processes are still in play, at least to some extent.

The idea of the National Economic Dialogue is that everyone should be listening to one another.

Bad ideas – such as let’s spend more on things we want using ‘off balance sheet’ vehicles – got shot down early on. Everyone accepted the size of the fiscal envelope the government had and the discussion was disciplined by this.

This really isn’t a closed shop

The social partnership model was an insider’s dream, with huge, destabilising consequences for society. Unless those two days are a chocolate teapot, the feedback the government receives should help shape the budget it creates over the summer.

The Wright Report on the Department of Finance’s failure to monitor, diagnose and deal with the asset bubble built up during the boom identified social partnership as a key driver of the spending boom.

The NED is not only much more open in terms of its membership, it is also much more intensive in terms of ‘face time’ with ministers.

One lobbyist made the very valid point that he has never had unrestricted access to a Cabinet minister for three-and-a-half hours, to talk about their major priorities and discuss options for seeing those priorities getting sorted.

Huge themes emerged across the different groups and from the plenary. A smattering of them: how do we choose longer-term projects, decide on things like infrastructure spending, introduce new taxes, get rid of old ones, deliver balanced regional development, equality-proof our budgetary process, use the budget to deal with climate change and move towards a consolidated national balance sheet?

Minister for Finance Michael Noonan made a point that will ring in my ears for years: “Don’t confuse a structural deficit with a nominal surplus.”

You might think you’re rich, but actually you’re at the start of a downturn. Economies do go up and down, more or less independently of government.

The government’s job, in a way, is to avoid booms and busts, rather than upturns and downturns. Listening to people interested in that process is vital, and the NED is a first step in doing that.