In all but a handful of fortunate states with large net sovereign wealth, including many oil sheikhdoms, finance ministries share a common nightmare – the day you must tell the Minister for Finance that the Government has run out of money.

There are no longer any willing lenders, even at unaffordable rates of interest. This happened to Ireland in the early months of 2010, when two plump chickens flew home to roost side by side.

The banking system collapse had been fully revealed and the apparent health of the budget in the pre-crash years had depended on transitory tax revenues from stamp duties and the property bubble. The apparent budget balance evaporated in 2008 and 2009, as did the liquidity of the banking system despite Government guarantees, rendered valueless as the Government itself lost access to finance.

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Finance ministries have a quasi-constitutional function to restrain ministers tempted into careless budget policies: their priority is national solvency.

The parallel function of ensuring caution in bank lending had been devolved to an inattentive Central Bank and Ireland ended up in an IMF programme, reliant on official lenders once the market declined to ignore reality.

The outgoing Government was blamed and the party political system re-drawn at the first post-crash general election in 2011.

Not surprisingly, there were institutional reactions, including the establishment of the Department of Public Expenditure (DPER), the introduction of a formal Public Spending Code and a strengthening of the Central Bank designed to supervise more actively.

The number of banks shrank dramatically and the survivors became more cautious, reducing the risk of another banking disaster.

But budget policy has shrugged off whatever restraint has been urged by independent bodies, including the Fiscal Council. Tax give-aways and budget overshoots have surged in recent years; and the apparent surpluses are due to an unexpected boom in a vulnerable source, corporation tax from mainly US multinationals.

Public capital programme

While the bust from 2008 onwards resulted in higher taxes and tight controls on current spending until around 10 years ago, the principal form taken by austerity during the Troika period has been forgotten. This was a vicious reduction in the public capital programme, quickly halved as uncommenced projects were shelved abruptly.

Many saw planning consents expire and have had to go back to square one, and today’s infrastructure deficits have their origins politcians choosing the soft option of slashing the capital programme in 2009.

Coinciding with the establishment of DPER was the reinforcement, but on a non-statutory basis, of the Public Spending Code.

The intention was that big investment projects would not go ahead prior to an independent economic evaluation from DPER.

A positive verdict from the project promoters or their consultants would no longer be sufficient – the project would need to persuade DPER that the sums added up, and the promoters, usually a State agency, could not mark their own homework or hire consultants to mark it for them.

The capital programme needs project promoters of course, without whom big projects would languish, but there would also be oversight at central level prior to final decision by Government.

The Government could ignore the DPER verdict and did so in the case of the National Broadband Plan, when DPER publicly criticised the inadequacies of the appraisal commissioned by the promoters from an accountancy firm.

Public Spending Code

This definitive project appraisal has now been dispensed with – the Public Spending Code is now voluntary, the appraisals commissioned by project promoters, invariably positive, are all that is required and DPER has no role in alerting Government to any exaggerated claims for big capital schemes.

The Dublin MetroLink underground railway, expected to cost €15bn or €16bn, has been allocated €2bn in Government funds entirely on the basis of an evaluation prepared by two firms of engineers and paid for by the State agency promoting the plan.

It is the prerogative of the elected Government to ignore the advice of DPER, as they did in the broadband case, but it is a further step to suppress entirely the intended independent evaluation under the Public Spending Code.

We do not know what DPER, or the Department of Finance think about the in-house evaluation of this giant scheme released by the project promoters.

The failure to place the Public Spending Code on a statutory basis appears to have been a response to the embarrassing broadband row. There is no need to distance the Government from independent evaluations of big capital projects since there are no longer any independent evaluations, not even for MetroLink. Time perhaps to scrap DPER altogether and reintegrate it with the Department of Finance.