IRELAND’S FISCAL WATCHDOG has slammed what it described as an “everything now” approach in Budget 2024, accusing the government of poorly budgeting its expenditure.
The Irish Fiscal Advisory Council has released its latest report, in which it analyses the government’s spending plans for next year.
The Council is not impressed with the Budget that was announced in October — particularly in the area of health.
Budget 2024 introduced a range of one-off payments and changes to tax rates, as well as setting out spending allocations for government departments.
The Council is accusing the government of taking an “everything now” approach of “tax cuts, a ramp-up in capital spending and current spending increases” — which, it says “repeats Ireland’s past mistakes”.
“It entails using strong tax receipts in good times to expand the budget quickly at the risk of adding to price pressures, getting bad value for money, and potentially having to reverse measures in a downturn.”
The Council says the budget has breached the National Spending Rule — a principle that was agreed in 2021 with an aim of keeping increases in “core spending” from the Exchequer at 5% or lower.
In this Budget, the figure stands at 5.8% for 2024. Overall, since the rule was announced in 2021, the figure is 7.5% what it would have been if the rule had been adhered to consistently.
And the Council is concerned by indications from the government that it will continue to breach the rule in years to come, saying that future governments should commit to adhering to the rule to avoid exacerbating inflation pressures and running the risk of needing to make “painful” cuts to spending or tax increases.
It is, however, happy to see the government introduce a ‘Future Ireland’ fund, which is designed to deal with future financial challenges, like the ageing population and climate change.
Sticking to the rule and utilising the Future Ireland Fund would help to alleviate concerns about “volatility” in corporation tax income.
The report says that costs linked to climate – such as expenses associated with decarbonisation measures, penalties for missed targets, and damage caused by extreme weather events — are substantial, but can be “managed and planned for”.
“Addressing these costs will require a lot of big decisions. Planning for the transition carefully will be essential to ensure a smooth transition,” it says, warning that there are “also large costs to inaction”.
In a statement, the Council’s Acting Chairperson Michael McMahon said that “Ireland’s economy remains in a position of strength and the public finances are on a good path”.
“The Future Ireland Fund, in particular, will lessen the burden of tax increases and spending increases on future generations as pensions and healthcare costs grow,” he said.
Yet Budget 2024 was marked by exceptionally bad budgeting, most notably in health.
“As well as that, the National Spending Rule was substantially undermined, through a mix of gimmickry and plans to repeatedly breach it,” McMahon said.
“The Rule needs to be adhered to if Ireland hopes to sustainably meet challenges of rising costs related to pensions, healthcare and long-term care as well as its climate transition.”
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