The Irish Fiscal Advisory Council (IFAC) has said that the Budget puts the public finances on a “worse trajectory by repeatedly breaking established spending limits and increasingly relying on high-risk corporation tax”.
In its flash release on Budget 2027, the fiscal watchdog accused the Government of “ignoring the speed limit” and “spending risky taxes”.
“Spending increases net of tax measures have run at a blistering pace in recent years. A sustainable speed limit of 5% for both was set in 2021. But governments have since budgeted for around 6% growth, before actually delivering about 10% a year on average, double the speed limit,” the IFAC release said, adding that today’s figures suggest an increase of almost nine percent this year if overruns continue at their current pace.
It criticised the Government for continuing to use “high-risk” tax receipts, such as corporation tax revenues, to fund permanent tax and spending measures.
“It plans to spend about six-in-seven euros of all corporation tax revenues it takes in. Most of it is for current spending.
“Stripping out the excess corporation tax, the parts that look riskiest, the Government plans to run larger deficits, rising from €12 billion in 2026 to €20 billion in 2030,” it said.
From next year, the release said that the Government would effectively have to borrow to put money into its long-term savings funds for ageing costs.
It advised that the Government ought to save more of its “risky” receipts to make its tax base more secure.
“It would ensure it covers future ageing pressures and weathers the next recession without the need for painful cutbacks or sharp tax increases,” the flash response said.
The full IFAC response to Budget 2027 can be read here.