Government spending is rising much faster than planned, according to the Irish Fiscal Advisory Council, who warned that current spending has already increased by almost 4.6 percent above the level implied in the last budget.
The IFAC put the blame on “poor budgeting,” stating that “earlier overruns weren’t properly built into the latest forecasts”.
So far this year, current spending has increased by almost 6 percent, which the watchdog notes is well above the 1.4 percent indicated by Budget 2025.
Public finances are in surplus, due to “remarkably high corporation tax and a very strong
economy”, but the IFAC observes that without those factors, there is a structural deficit of 2.4 percent of GNI* (Modified Gross National Income), which is equivalent to €2,500 per worker.
While in the short term corporation tax intake is expected to grow, “these receipts remain high-risk,” according to the IFAC, owing to the fact that “a handful of large US firms” pay the majority of the corporation tax.
The Council also raised concerns about Ireland’s fiscal rules, critiquing the current framework as ineffective.
“So far, the new Government hasn’t set out any clear plans for a domestic fiscal rule. And with forecasts covering only the next 20 months, Ireland still lacks a proper medium-term fiscal strategy,” it said, additionally noting that the government has not set departmental ceilings for 2026 and 2027.
The council recommended that Government commit to a fiscal rule, and use budgetary policy to reduce the “ups and downs of the economic cycle”.
“This means showing restraint when the economy is strong. It also means providing support when the
economy is struggling,” it said.
It also highlighted infrastructure shortages, and advised that no matter how the economy evolves, it is a matter than requires renewed focus in order to remain competitive.
Commenting on the report, IFAC Chairperson Seamus Coffey said that nevertheless the “Irish economy is in a strong position going into a period of uncertainty”.