The Fiscal Responsibility Act came into effect in December 2012. The introduction of the Act was part of a wider agenda of budgetary reform, benchmarked under the Programme for Government 2011 and the EU/IMF Programme of Financial Support for Ireland.
The Act established the Irish Fiscal Advisory Council as a statutory body and legislated for the implementation of national and EU fiscal rules. Further EU regulations (July 2013) resulted in the Council being assigned the role of the independent body that would endorse the macroeconomic forecasts produced by the Department of Finance on which Budgets and Stability Programmes are based (implemented by Ministers and Secretaries Amendment Act 2013). The process of this additional function is outlined in the Memorandum of Understanding) between the Council and the Department of Finance.
Under the Fiscal Responsibility Act the mandate of the Irish Fiscal Advisory Council is:
- To endorse, as it considers appropriate, the macroeconomic forecast prepared by the Department of Finance on which the Budget and Stability Programme Update are based.
- To assess the official forecasts produced by the Department of Finance. These are the macroeconomic and budgetary forecasts published by the Department twice a year .
- To assess whether the fiscal stance of the Government is conducive to prudent economic and budgetary management, with reference to the EU Stability and Growth Pact.
- To monitor and assess compliance with the budgetary rule as set out in the Fiscal Responsibility Act. The budgetary rule requires that the Government’s budget is in surplus or in balance, or is moving at a satisfactory pace towards that position.
- In relation to the budgetary rule, to assess whether any non-compliance is a result of ‘exceptional circumstances’. This could mean a severe economic downturn and/or an unusual event outside the control of Government which may have a major impact on the budgetary position.
The Acts ensure the independence of the Council in the operation of its functions.