Ireland’s fiscal watchdog has warned that the Government is planning to spend too much money in next month’s Budget.
The Irish Fiscal Advisory Council (Ifac) said that a “more restrained approach would help avoid overheating the economy and leave room to respond to future downturns”.
The organisation said a total spending increase of €9.4 billion is currently planned for Budget 2026.
“Given the economy is still performing well, this is not appropriate,” it said.
The independent organisation, set up in the wake of the financial crisis to provide oversight of the public finances, also warned spending so far this year is well ahead of what was planned.
The Coalition proposed increasing expenditure by €3bn this year, but it is likely to rise by €7.6bn.
The fiscal council said this “repeats the pattern of spending overruns in recent years”.
It said the Departments of Education, Children and Justice increased spending by 7.5% so far this year, while Budget said the rise would only be 2.5%.
The council warned the Government is relying on windfall tax payments by multinationals to finance additional spending.
It said if these volatile tax receipts are excluded, spending is running at €8bn more than Government is collecting.
The body said it is “disappointing” the Government has not published a medium-term fiscal plan which was promised to be released this summer.
The organisation also said Ireland lacks a spending rule which would set a limit on the annual increase in expenditure.
Overall, the council said the Irish economy continues to perform well with record employment and robust consumer spending.
It said while there is uncertainty created by the imposition of tariffs by the Trump administration, they have not yet had a major impact on the economy.
“The Irish economy is in a strong position, despite high uncertainty. As a result, this is not a time for a large budgetary package. That should be reserved for periods where the economy is weak and needs support,” Ifac Chairman Seamus Coffey said.
Speaking on RTÉ’s Morning Ireland, Mr Coffey said the Government should stick to the plans it sets out itself.
“You can have bodies like the Fiscal Council offering advice on where public policy should go and budgetary policy should go, but a key factor of restoring the credibility of our budgetary process will be the Government sticking to what it says itself,” he said.
Mr Coffey added: “Yes, there are particular measures and priorities that the Government should have, and that’s absolutely fine. But in overall terms, we have to take into consideration what we’re doing.
“The Government is adding to demand and that’s already performing well.
“It is perhaps allowing vulnerabilities to build up, that maybe if there was to be a slowdown in the economy, if there was to be impacts on those corporation tax receipts, that some of those vulnerabilities could be exposed through that, so we refer to that underlying deficit.”
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