Official Report: Minutes of Evidence

The Chairperson (Dr Aiken): I welcome Ms Annette Connolly and Mr Barry Comerford from the Parliamentary Budget Office (PBO). The session will be recorded by Hansard.

Ms Annette Connolly (Parliamentary Budget Office): Thank you very much for the invitation to speak to the Committee this afternoon, which I am very happy to do. You have heard a lot of detail from Sebastian and Eddie about the Fiscal Advisory Council, so I will begin by setting out what the Parliamentary Budget Office does and the differences between it and the Irish Fiscal Advisory Council (IFAC).

The PBO is an in-house parliamentary body set up by the Houses of the Oireachtas to provide the Oireachtas with tailored support for its role in the budgetary process. That means that we give support to Members in relation to the approval of spending, revenue-raising legislation, and oversight of public finances and fiscal governance arrangements. Our work is very much aimed at meeting Oireachtas Members' needs in those areas. We do that through publishing research and analysis and presenting our analysis to Committees of the Houses.

The office is staffed by civil servants — we are all civil servants — and currently has eight staff. However, we have a number of vacancies, and we will be recruiting additional staff in the coming weeks. Our mandate is set out in legislation and is line with the OECD principles for independent fiscal institutions (IFI) and PBOs, which I know you are familiar with.

The PBO originates in the need for Irish parliamentarians to have access to expertise to better understand and engage with their role in the Budget process. In the early 2010s, on the government side, a number of reforms were introduced to the Budget process, but Parliament's role had not changed at all. So, in 2015, the Oireachtas Service commissioned a report from the OECD about how parliamentary scrutiny of the Budget could be improved. That report recommended setting up a Budget Committee so that the Oireachtas could have a specific forum to discuss Budget issues in advance of the Budget. It also recommended setting up a parliamentary Budget office to support that Committee, other Committees, and Members in general in their engagement in budgetary matters.

Based on this, the PBO does have a special relationship with the Committee on Budgetary Oversight. I regularly appear before the Committee to present our analysis of major government Budget-related documents or just to brief the Committee generally on the economic and fiscal situation. The sessions are held in private, and the advantage of that, I guess, is that it allows for an open exchange with the members. We also try to align our own work programme, to an extent, with the work of the Committee on Budgetary Oversight so that we can help it in its work.

Obviously, as you will be aware, and as you have heard from Sebastian, the Fiscal Advisory Council originated in the economic and fiscal crisis of 2008-2012 and the need for an independent check on the Government's fiscal plans. EU fiscal rules required that an independent national institution should either complete or verify the Government's economic forecasts and check compliance with the EU's fiscal rules. You have heard a lot of detail about how the council does that work.

As you have also heard, the council does not work directly with the Oireachtas, but it does have regular engagement, in particular meeting the Committee on Budgetary Oversight on its fiscal assessment reports. That is important in a couple of ways. First, it allows council members a public forum to explain their assessment and the thinking behind it. Secondly, it allows Dáil Members to get a greater understanding of the issues by asking questions and engaging in open dialogue with informed, independent experts on overall government Budget policy. The PBO and the Fiscal Advisory Council recently agreed a memorandum of understanding between us to share information in areas of mutual benefit and to have more regular contact. We hope that that will help us to avoid any overlap or duplication in our work.

I thought that it might be useful to give you a sense of the practicalities and challenges that arise when setting up a new independent fiscal institution. It is important that a body such as the PBO be independent. That is an important and fundamental principle for us. The OECD advises that PBOs should be non-partisan and independent in their analysis and that they should be underpinned by statutory legislation to that effect. This is important because it allows independent institutions to operate in an area that will always be politically contentious.

Access to skilled, expert staff is a prerequisite for such a body. I will be honest and say that that has caused us issues with retaining staff over the past few years. We have had a high turnover of junior staff because many have left us on promotion. That was good for them, but it means that we have had difficulties replacing them and trying to recruit specialist staff. It is a slow process. Individuals who have the economic and statistical skill set that we need, as well as knowledge of the Budget process, are not in plentiful supply, and that skill set is in high demand across Civil Service bodies generally.

I will also mention that having a statutory right to access and request government information is really important. Our legislation gives me, as director, the right to request information from Ministers and bodies and says that the office will have:

Overall, cooperation with Departments on requests for information has been quite good. There have been instances where requests have been ignored or refused, or informal consultation before a request was made indicated that no information would be provided to us.

Overall, that has not really impeded our work, and we can and do use our publications to highlight poor information or lack of information and lack of cooperation. However, the "soft" authority that we have to request information would be of greater concern if our remit on costings proposals is to be expanded.

In last year's Programme for Government, the new Irish Government made a commitment to explore extending the PBO's mandate to cost political party election manifestos. Currently, the Civil Service provides costings of political party budget and election proposals, but there are gaps in that because not everything is costed, and there is no independent check on costings.

However, implementing that Programme for Government commitment would require substantial extra resources for the PBO and a closer working relationship between us, Departments and potentially other institutions. It would also require a change in the PBO's legislative mandate. However, it is probably fair to say that that kind of work is more suited to a Parliamentary Budget Office than a Fiscal Advisory Council because we have closer interactions and engagement with the political system. It could also dilute the focus of the Fiscal Advisory Council's mandate.

I did not want to take up too much time on my opening remarks, but I just want to say thanks again for the invitation. I am happy to address any questions that you might have. Barry is here as well to supplement or respond to any questions.

The Chairperson (Dr Aiken): Annette, what is your relationship with the Committees and their Chairs?

Ms Connolly: That is a good question. Our closest working relationship is with the Committee on Budget Oversight and its Chair. More broadly, we have, over the past while, been building on and developing relationships with other Committees — the sectoral Committees especially — in relation to their role in approving the Estimates and monitoring spending allocations in year. Over the past couple of years, we have been working with the Committee secretariat to improve the in-year monitoring of spending by Departments. That has allowed us to develop closer relationships with other Committees, but it is a slow process.

To give you an idea of how our system works, I might send correspondence to Committee Chairs, but it is very much up to the Committees to invite us to address them. Some Committees have, but not all. However, it is something that we are working on.

The Chairperson (Dr Aiken): One of the things that we want to see is a common framework across all Committees so that we are all reporting against the same issues. We also want to encourage Departments to report on similar lines, bearing in mind that the Estimates process seems to drag out and that we are always well behind the power curve when we do it.

Have you been able to get an understanding among Committees about working to a common framework? That would mean that, when you are doing your analysis, everyone can understand it, because they are sharing the same information sets, although not necessarily the same pieces of information. All information is then presented in a way that is readily understandable. As you build up experience with the Oireachtas and its Members, they will get to understand the process as well.

Ms Connolly: That is a very timely question, because, last year, the newly formed Committee on Budgetary Oversight did a review of how the Committee had operated in the previous Dáil, which was essentially the first Committee. The first Committee was set up in 2016, and it made a series of recommendations. Its report was published very recently, and I am happy to share it with you.

The Chairperson (Dr Aiken): Yes, please.

Ms Connolly: Since that report was published, we have been working with the Committee secretariat on how best to implement the recommendations. It made recommendations about the approval of the Estimates, which, in line with your experience, can be a very long, drawn-out process. In some instances, some Estimates are not approved until halfway through the year, so half the spending has already occurred. There are already recommendations about shortening that time frame and having more meetings throughout the year to look at spending in year and so on.

The PBO will look at that and will prepare the kind of templates that you are talking about. We will suggest to Committees what kinds of issues we think that they should be looking at as a Committee through the year, what kind of questions we think they should be asking, and how they should focus on them.

Obviously, government spending is a big element of the Budget. Over the past couple of years, the PBO has produced monthly analyses of government spending and of the performance on the revenue side as well. We have been sending our assessment and analysis to Committees to help them in their work. In that analysis, we point out trends and areas of overspend occurring for a Committee to focus on in its engagement with Departments. That is something that we have been happy to work on over the past couple of years. However, we will try to come up with a more robust framework in future, working with the Committee on Budgetary Oversight.

The Chairperson (Dr Aiken): A final one from me. To be able to produce monthly out-turns, you need a degree of understanding of the data that is being presented. How difficult is it to get that? One of our biggest problems is that we are months behind. We are lucky to get information on the current quarter at the time of the next quarter, so we are a quarter behind. How do you manage to do the monthly bit?

Ms Connolly: The Department of Finance publishes its own monthly fiscal monitor. That monitor has up-to-date, real-time monthly figures on the tax take and the level of spending by each Department at vote level. On the spending side, there is no information published other than the figures, so we have been contacting Departments directly to get more granular information from them about the spending. We have been asking them for explanations of exactly which programmes are overspending or underspending and for programme-by-programme breakdowns, because those are not being published by the Departments.

It goes back to the issues with access to information. At this stage, we get very good cooperation from six to seven Departments and very little information from the others, and that is a challenge for us. We know that the Departments have the information, so we have been trying to get them to share it with us so that we can provide it to Oireachtas Members. Something that we have been trying to reinforce with Members and the Government side is that Members' role of approving the Estimates is a really important one, so they really should have as much information as possible to allow them to scrutinise where the money is being spent and how well it is being spent. That is a work in progress, however.

The Chairperson (Dr Aiken): Thanks, Annette.

Mr McHugh: Tá fáilte romhaibh uilig, Annette agus Barry, go dtí an cruinniú an tráthnóna seo. You are very welcome to the meeting. I listened to your presentation, Annette. Is your role for elected Members very much an educational one?

Ms Connolly: There are a couple of things to say about that. The PBO has been up and running for nearly four years, so it has been a learning experience for us as well as for Members. We know that the Members are time-poor, with a lot of demands on their time and resources, and the Budget process is complicated and technical. There is a lot going on. This year, the Government plan to spend up to €87 billion, which is a very large Budget. The tax system is very complicated. We are therefore very conscious when we are doing our analysis that we need to try to explain it as simply as we can and try to explain the very technical elements in as straightforward a way as we can in order to help Members understand. You are right: it is about understanding what is going on. The reality is that a lot of the material that is presented by the Government side is very complicated. It is far too complicated and detailed.

Mr McHugh: I can appreciate that. Do you find that there is a lot of duplication with the Fiscal Advisory Council, or is there cooperation to the extent that there is no duplication? Can Members themselves see the difference between the roles of the PBO and the Fiscal Advisory Council?

Ms Connolly: From the outset, we have been really clear and careful to avoid any kind of overlap or duplication with what the council does. We have an informal relationship with it. From time to time, and certainly at the beginning, when we were set up, we were being asked to look at issues that were absolutely for the council. We would tell Members, "No, this is not for us. It is for the Fiscal Advisory Council", and suggest that they contact the council about such issues. We see our role very much as just working in Parliament itself and on the Budget process, whereas IFAC has a much broader economic mandate. I do not think that there is confusion about our two roles. We are keen, however, to ensure that there is no overlap with or confusion about what we do.

Mr McHugh: How does your role add value to the whole budgeting process?

Ms Connolly: Our role is really to help Members to understand the nuts and bolts of it. The hope is that there will be better scrutiny of what the Government are doing on fiscal policy so that Members can ask more pertinent questions and really have better engagement and more evidence-based conversations and discussions with the Government side on what is happening on the economy and Budget. That is very much our intention and where we see that we are trying to add value for Members.

Mr McHugh: Do you often find that, when you bring forward your information, you are in conflict with either the Government or Departments?

Ms Connolly: Yes. We just have to acknowledge up front that this is a contentious space. It is also very important, though. We have to be impartial and objective. If we feel that things need to be highlighted for Members, we do that, absolutely. We call out things that Departments are doing. That regularly happens.

Mr McHugh: It is your job. Go raibh míle maith agat arís, Annette. Thank you ever so much, once again.

Mr O'Toole: Thanks, Annette and Barry, for coming to give us evidence. Recently, you published a memorandum of understanding with the Fiscal Advisory Council. Is your relationship with it based on a shared view of the role of independent fiscal institutions? I ask that in the context of the OECD's having a checklist of things for successful independent fiscal institutions. Are you both subscribed to the same broad view, although you have different roles and different reporting lines?

Ms Connolly: Absolutely. That is very much where we are coming from in our relationship with the Fiscal Advisory Council. We are both members of the OECD Network of Parliamentary Budget Officials and Independent Fiscal Institutions. In fact, next year, we will jointly host a meeting of the network in Dublin.

From the outset, as I said, we have been careful to develop an informal working relationship with the council. What we do is based on informal relationships. The economics community is a very small one, so there are some personal relationships between some of the staff in our office and council staff, and that has been helpful. In its report on the Fiscal Advisory Council, the OECD suggested that it would be useful if that informal relationship were set out in a letter of understanding between us, so that is what we have done. That is why we recently agreed that letter between us. As I said earlier, it is not because there is confusion between our roles. Rather, it is to make things more formal and to give public clarity by saying that this is how we operate and that we have a close understanding and working relationship.

Mr O'Toole: The PBO was set up in 2015 but was not established in statute until amending legislation, the Houses of the Oireachtas Commission (Amendment) Act 2018, was enacted. When it was set up in 2015, was it intended that it would eventually be established in statute, or was it established in statute as a result of practice revealing to people that the PBO needed a statutory basis?

Ms Connolly: It was a bit of a chicken-and-egg situation. When the OECD made its recommendations in 2015, it clearly stated that each IFI needs to take account of its own national situation but strongly suggested that it should conform to the OECD principles. One of those principles is that PBOs should have a statutory mandate. That is based on experience, where some PBOs had been stripped of resources when they issued analysis that was contrary to and critical of the Government stance. It is therefore partly, I guess, to insulate the office from potential threat from government side.

We were set up on an administrative basis in 2017, when I was appointed as director. It was always the intention that we would prepare legislation. The way in which the Houses of the Oireachtas service was set up means that we get a three-year, multi-annual budget from the Government. That budget requires legislation to be enacted every three years, and that is by amendment to the Houses of the Oireachtas Commission Act 2003. The way in which the cycle works, that Act was due to be amended in 2018 anyway, so we took the opportunity to include establishing the PBO at the time that that legislation was being enacted. Another quirk is that that had to be agreed with the Minister for Public Expenditure and Reform, so that Minister had to bring the legislation to the House. We had worked on and developed the legislation ourselves and had worked closely with government side on its provisions.

Mr O'Toole: Unless I am misreading it, section 5 of the 2018 Act does not really specify an obligation on the part of Departments to provide you with information.

Ms Connolly: Yes.

Mr O'Toole: Would you like to see that improved by further legislation?

Ms Connolly: Absolutely. Before we prepared that legislation and the business case to have it enacted, we did a lot of research into other PBOs internationally. All the evidence, and even our conversations and consultations with PBOs, suggested that a really big issue for pretty much every independent fiscal institution internationally is having access to data and information and having as robust legislation as is possible.

From our perspective, we see this as an opening gambit. We have gone for a soft approach, where I have the right to ask for the information, but you are absolutely right that there is no obligation on anybody to provide that information. Ideally, I would love to see the section strengthened. Again from speaking to colleagues in other PBOs, I found that in some instances, even where that obligation exists, it often does not necessarily mean that they get the information that they need. This is why we have been developing and building relationships with various Departments: so that we can get access to the information that we need.

One area on which we have been working is to develop some of our own models so that we can have an independent assessment done of information and material that we get from Departments. It takes time and a lot of expertise to develop those various economic models, but it is something that we are working on.

Mr O'Toole: I was going to come on to the question of your models in a second. On the point about legislation requiring Departments to share information, can you give us a worst-case example of a Department refusing to give you information? You can anonymise the culprit or culprits.

Ms Connolly: There have been instances. It is not that we asked for direct information. Actually, no, we have asked for direct information.

The response was, "You're an independent office, and we don't think that it would be appropriate for us to engage in this with you".

Mr O'Toole: OK. That is useful.

The Chairperson (Dr Aiken): An independent office of the Oireachtas.

Mr O'Toole: I have two brief questions. Section 5 states:

Does that mean that an individual TD or senator cannot approach you and ask for a piece for work to be done? It has to be a Committee requesting it or the House voting in a plenary sitting to request information. The average Back-Bench TD cannot therefore simply commission a piece of work from you.

Ms Connolly: Theoretically, no, but we have the parliamentary Library and Research Service that expects and responds to information requests. It does research on demand. In practice, if Members come to us with a query, we do our best to respond and help them as best we can, based on the resources that we have and other priority areas. In general, most of the work is based on direct requests from the Committee on Budgetary Oversight in particular, but we get requests from other Committees as well. We make it clear to all the Committees that we are more than happy to engage and work with them and to deal with any requests that they have.

Mr O'Toole: It sounds as if you are saying that, for an individual Member's requests, the parliamentary research service is separate from you, although you do work together.

Ms Connolly: Yes.

Mr O'Toole: Members can come and ask for a bit of information on desk research that can be got by your people, but I presume that if a Back-Bencher came in and said, "I've got this great policy to spend on x, y and z. Can you cost it for me?", it would be a no.

Ms Connolly: We have been doing a confidential costings service, but it is for political parties and groups rather than for Members. Generally speaking, however, all the Members are members of a group, so it is open to them to request information from us through their group or party.

Mr O'Toole: This is my final question. You talk about the fact that you are constructing your own models. How important is it to have proper internal model-building and forecasting capacity in your organisation rather than just having the capacity to scrutinise what you are given?

Ms Connolly: We feel that we can really add value if we have our own models to double-check the information, the costings and so on that are being provided from government side. We have been developing and working on that, primarily for social welfare payments, labour market models and so on. We have been developing some of those ourselves, and the economists in the office have a lot of expertise in that area and have recently developed a debt sustainability model. We are therefore working on that and building up that expertise. Some of it we can do ourselves, but this is where it is about our relationship with Departments and what access we have to information and data. Primarily, a lot of the models are based on publicly available data sets. That is a slight constraint when it comes to building and developing our own models, but we have a relationship with the Economic and Social Research Institute and have access to its SWITCH model, which is the model that involves the tax and social income support and benefits system. Having access to that model gives us the capacity to run things through that model. That is an important way in which to double-check. We also have access to EUROMOD, which is a European-wide version of the SWITCH model. It takes time to develop those models and, as I said, technical expertise, so it will take us some time before we are fully satisfied with the models and with our own modelling capacity in-house.

The Chairperson (Dr Aiken): Annette and Barry, thank you very much indeed for your time. As we progress along our path, we would like to keep the dialogue open, so we would be delighted if you can keep in contact with us —

Ms Connolly: Absolutely.

The Chairperson (Dr Aiken): — and we will inform you of our progress. When things go back to normal, we would be delighted to get an opportunity, when we are next down in your neck of the woods, to say thank you in person. To be honest, I would prefer doing it in the Dáil rather than in one of my least favourite buildings in Dublin, which is where you are stuck at the moment. We look forward to that. Thank you both very much indeed for your time.

Ms Connolly: Thank you very much. We are happy to stay in touch. Best of luck.