Read our new “Pre-Budget 2024 Statement” ahead of Budget 2024
From Irish Fiscal Advisory Council
Published on
Last updated on
From Irish Fiscal Advisory Council
Published on
Last updated on
The government now plans to repeatedly breach the National Spending Rule every year out to 2026. The government’s intention is to go beyond plans set out in April, repeatedly breach the National Spending Rule every year out to 2026. The Rule sets a 5% limit for core spending increases net of new tax measures — a speed broadly matching trend growth that would help stabilise the economy and avoid fuelling price and wage pressures. Core net spending is now expected to be €4 billion higher by 2026 compared to previous plans.
These breaches are a serious cause for concern.
1) They risk repeating Ireland’s past mistakes, with employment already high and windfalls boosting the Exchequer. This would represent a continuation of procyclical fiscal policy.
2) The stance adopted undermines the National Spending Rule at a time when EU fiscal rules are not binding and likely to be distorted by GDP if and when new proposals are enacted.
3) The manner in which plans were revised weakens the credibility of government projections, lacking transparency and not factoring in overruns and costs related to population ageing and the climate transition.
The Council recognises pressures for additional spending, but these pressures should be funded sustainably. Pressures in health, housing, infrastructure and climate-related areas are likely to need ongoing multi-year funding. If the government wishes to ramp up spending across all these areas, it should ensure that the outlays can be maintained on an ongoing basis and not just based on receipts expected to prove temporary.
Looking to Budget 2024, the Council assesses that: