3 days ago
'Poor budgeting' has Government spending money faster than planned, says watchdog
The Government is spending money much faster this year than was planned, with Ireland's fiscal watchdog blaming poor budgeting.
In an assessment of the State's financial health, the Irish Fiscal Advisory Council (IFAC) said spending has increased by 6% so far this year, well above the 1.4% implied by Budget 2025. IFAC said the rapid spending is because earlier overruns were not properly built into the forecasts, and Government estimates were 'simply not credible'.
The exchequer returns for May, published last week, show spending of €37.3bn to the end of May — €2.1bn (5.9%) above the same period last year.
'This pace far exceeds the growth rate that would be consistent with Budget 2025 forecasts, given the final level of spending in 2024,' IFAC said, adding that the overruns are in most areas of spending, not just health.
Presenting the returns last week, Jack Chambers, the public expenditure minister, said the increases were in line with the amount profiled by departments to be spent at this stage in the year.
IFAC said the Irish economy is in a strong position, but it warned of growing risks, saying that tariffs and trade tensions are a threat to investment and exports, and only 'phenomenal levels' of excess corporation tax are keeping Ireland in surplus.
'Without these revenues, there would be a substantial deficit, despite a strong economy,' IFAC said.
'Without these factors, there is a structural deficit of 2.4% of GNI — equivalent to €2,500 per worker.
"In the short term, corporation tax is likely to grow further. However, these receipts remain high risk.
A handful of large US firms pay most of the corporation tax
IFAC also raised concerns about Ireland's fiscal rules, saying the framework is not effective and that EU budgeting rules will not help as they rely on GDP and ignore the risks from volatile corporation-tax receipts.
'The reality is that both the new EU fiscal rules and their mirror in domestic legislation no longer provide any credible constraint for Ireland,' IFAC said, adding that the Government appears to have abandoned the national spending rule introduced by the last government, which set a 5% limit for net spending growth.
Extra stimulus
Regarding Budget 2026, IFAC said the Government should adapt its approach to the state of the economy.
'If the economy stays strong, there's no need for extra stimulus,' the council stated. 'In that case, budgetary policy should show some restraint. But if the economy takes a downturn, budgetary policy should provide support.'
IFAC said the Government should commit to a fiscal rule, use budgetary policy to reduce the ups and downs of the economic cycle, focus on infrastructure and competitiveness, and set realistic spending forecasts. Recent forecasts have ignored previous overruns and been unrealistic.
IFAC's chairman Séamus Coffey said: 'The Irish economy is in a strong position going into a period of uncertainty. The Government needs to ensure that budgetary policy reduces the ups and downs of the economy. Introducing a rule would help guide fiscal policy in the coming years.'
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