Ireland’s independent fiscal watchdog has issued a warning that Government expenditure is growing at a much faster rate than initially planned, reports RTE.
According to the Irish Fiscal Advisory Council (IFAC), the main issue behind the overspending is “poor budgeting.”
The council reported that current public spending has increased by 6% so far this year—well above the 1.4% rise projected in the Budget, reports RTE.
It stated: “This is because earlier overruns weren’t properly built into the latest forecasts,” reports RTE.
The council noted that although the Government currently has a surplus, if one excluded windfall corporation tax and recent economic strength, the country would be running a structural deficit equal to €2,500 per worker.
It also urged the Government to enforce spending caps for each Department, as required under existing legislation, reports RTE.
The watchdog criticised the lack of a clear domestic spending rule, which would set firm limits on how much spending could increase.
It said: “With forecasts covering only the next 20 months, Ireland still lacks a proper medium-term fiscal strategy,” reports RTE.
IFAC also stressed that budgetary decisions should help smooth the economic cycle over time.
It stated: “This means showing restraint when the economy is strong. It also means providing support when the economy is struggling,” reports RTE.
Chairman Seamus Coffey commented: “The Irish economy is in a strong position going into a period of uncertainty.”
The council also projected that corporation tax revenue will likely climb in the near term, r r
It explained that this is because the corporate tax rate for large firms is set to rise from 12.5% to 15%.
The increase is also supported by the fact that pharmaceutical exports have jumped recently, as drug companies remain exempt from US trade tariffs, reports RTE.
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