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Government should not include fiscal rules in constitution – advisory council

The Fiscal Advisory Council has said that the proposed fiscal compact should not be enshrined in the constitution.

Taoiseach Enda Kenny will attend an EU summit in Brussels next week.
Taoiseach Enda Kenny will attend an EU summit in Brussels next week.
Image: Geert Vanden Wijngaert/AP/Press Association Images

THE GOVERNMENT HAS been advised to not seek to include the proposed new fiscal rules in the Constitution by the Fiscal Advisory Council.

The Council was established last year to offer independent analysis on whether or not the government is meeting its budgetary targets. It has recommended that the Fiscal Compact Treaty – to be finalised by EU leaders next week – should not be enshrined in the constitution.

The issue of whether or not it is required that the treaty be included in the Constitution is currently being examined by the Attorney General. A change in the Constitution requires a referendum.

In a report published today entitled Strengthening Ireland’s Fiscal Integration, the Council examines the Fiscal Compact Treaty which is currently in draft stage but which will be finalised in Brussels by EU leaders next week.

The treaty is intended to enshrine budget discipline by imposing rules on the amount of debt a country can hold and penalising those who break the rules. In present form it allows member states to choose whether or not to incorporate a debt reduction mechanism either constitutionally or through national legislation.

The Council says that the proposed fiscal rules would lack “the necessary flexibility and operability” if included in the constitution. It recommends that the enforcement mechanisms be strengthened while still allowing “ultimate democratic control”.

It said the rules would be more effectively achieved if enshrined in national legislation as has been the case in countries such as Australia and New Zealand.

The chair of the Fiscal Advisory Council, John McHale of NUI Galway, told RTÉ’s Morning Ireland that any laws enshrining sound fiscal management should include “little bit more than ordinary legislation” which would sufficiently satisfy EU partners that the laws would not easily be reversed.

The Council also recommends: “Each new Government  should  set out explicit  targets for the  debt-to-GDP ratio over a five-year period  as well as an indicative ten-year target. This would form part of a Fiscal Statement for Government.”

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