THE IRISH FISCAL Advisory Council has warned that the Government’s “everything now approach” could result in the State having to “reverse on its promises later”.

The Council today published its pre-budget submission and cautioned that the Government is “adding needless pressure to the economy” by breaching its “tax-and-spend rule”.

Tax-and-spend refers to the Government increasing taxes in order to spend more on public services.

The State’s budgetary watchdog was established to offer an “honest and independent view of how the Government manages its budget”. 

Last month, Public Expenditure Minister Paschal Donohoe said the upcoming Budget will see a total of €105.4 billion in expenditure being made available.

Taoiseach Simon Harris also confirmed last month that the Budget in October will include a cost-of-living package.

Finance Minister Jack Chambers has said a key objective in the Budget will be avoiding a situation where workers and other taxpayers end up paying a higher percentage of tax as their income grows. 

While the Fiscal Advisory Council noted the “unprecedented strength of Ireland’s workforce”, with record employment and wages beginning to outpace price increases, it added that there are still pressures.

“Prices remain high even if falling energy prices have brought some relief,” said the Council.

It also highlighted that “domestic prices”, such as rent, food services, and medical costs, continue to “rise rapidly”.

The Council also claimed the Government is taking an “everything now” approach that is “needlessly adding to these pressures”.

“The approach has seen the Government expand in all areas of its budget,” said the Council.

“This means tax cuts, higher day-to-day spending, and a continued ramp-up in capital plans.”

The budgetary watchdog accused the Government of “adding unnecessary fuel to the fire by not prioritising” and added that “overruns and untargeted cost-of-living supports could see the Budget rise to double pre-Covid packages”.

In addition to “adding to pressures”, the Council said the Government is at risk of having to “reverse its promises later on” because its “boasts of a surplus are misleading”.

“The surplus is entirely driven by taxes from a handful of foreign multinationals,” said the Council.

“Without these, Ireland would be facing a large and growing deficit.”

In April, a general Government surplus of €8.6 billion was projected for this year.

However, then Finance Minister Michael McGrath noted that when corporate tax receipts are excluded, there is an underlying deficit in public finances.

McGrath also cautioned that corporate tax receipts “cannot be relied upon”.

The Fiscal Advisory Council has warned that the Government “might be forced to renege on its promises if things change suddenly”, such as corporation tax revenues suddenly shrinking or if “exceptional job numbers reversed”.

“A reversal like this could come at a time when the economy most needs support,” said the Council, which added that this “would repeat Ireland’s past mistakes”.

Meanwhile, regarding infrastructure deficits, the Fiscal Advisory Council advised the Government “to look beyond just providing more money”.

It said one option is to “focus on areas that require less workers”.

The Council added that the Government can also “look at planning, regulations, and ways to encourage the private sector”.

“This includes giving private investors more certainty and more incentive to play their part.”

Seamus Coffey, the Irish Fiscal Advisory Council’s Chair, said that the “big promises” being made by the Government is “driving up prices and making it harder for people to afford the basics”.

Coffey added: “Price increases may have slowed, but there are many areas where pressures remain high.

“If we are to learn from past mistakes, now is the time for the Government to stick to its own rule rather than to have to hit reverse later on, and potentially in the next recession”.