Latest news with #SéamusCoffey
Irish Examiner
01-07-2025
- Business
- Irish Examiner
Government urged to show restraint amid €2bn overspend
Ireland's fiscal watchdog has warned the Government to exercise restraint on spending, calling on the coalition to set limits to offset what it has called a "weak fiscal framework." Speaking at an Oireachtas committee about Budget 2026, chair of the Irish Fiscal Advisory Council (Ifac) Séamus Coffey told committee members that current spending overruns this year are likely to exceed €2bn. 'Recent budgets have pumped money into an economy that is already performing well,' Mr Coffey told the committee. 'After accounting for exceptional corporation tax and a strong economy, the government is running a substantial deficit. This is equivalent to more than €2,500 per worker.' The Government is currently preparing its summer economic statement, a key budgetary document that will indicate the parameters for spending increases in the October budget. Speaking on Budget 2026 which will take place in October, the council chair and University College Cork lecturer said spending growth should be no faster than the sustainable growth rate of the economy, given that it continues to perform well in the face of rising uncertainty and looming tariff measures. 'That is not to say the government can't try to improve public services, support households that are struggling or upgrade Ireland's infrastructure,' Mr Coffey told the committee. 'But it means that choices would need to be made. If the Government wants to spend more in a certain area, or tax less in another, it needs to offset that by doing less in other areas.' "We don't want to see this boom and bust cycle that has plagued Irish fiscal policy for the last 40 or 50 years," Mr Coffey told the Oireachtas Budgetary Oversight Committee. The council also identified three key challenges for the Government, with these being an ageing population, the need to manage Ireland's climate transition, and infrastructure, which Ifac said is 'about 25% behind [Ireland's] peers'. The budgetary watchdog issued four key recommendations to the Government, the first of which was the coalition's need to reduce the ups and downs of the economic cycle. 'This means showing restraint when the economy is strong and being more generous when the economy is struggling,' Mr Coffey told committee members. Second, the Government was urged to set spending limits, net of tax changes, that it believes are sustainable to reduce the vagaries of annual pressure as Budget Day approaches. Third, Ifac urged the Government to focus on competitiveness and infrastructure, adding: 'While there is uncertainty over many issues, the shortage of infrastructure will need to be addressed regardless of what the international environment looks like.' Lastly, the watchdog has urged the Government to improve how it forecasts spending, calling out what it called a failure to account for overspending in 2024 when planning for this year. 'This created unrealistic budget figures from the beginning - a problem that keeps recurring,' said Mr Coffey. 'To avoid repeating this mistake, Budget 2026 and future medium-term plans must start with accurate baseline figures that include all likely overspends in 2025. Otherwise, spending projections will be wrong from the outset.'
Irish Times
01-07-2025
- Business
- Irish Times
Coalition spending overrun likely to be more than €2bn this year
Overruns in day-to-day public spending are likely to top €2 billion this year, according to projections by the Government's budgetary watchdog. The Irish Fiscal Advisory Council (Ifac) is expected to issue several warnings to the Government on Tuesday when it appears before an Oireachtas committee for discussions about the October budget . The finding about overspending is among several criticisms and warnings that Ifac is likely to make today. The Coalition is preparing its summer economic statement, a key budgetary document that will indicate the parameters for spending increases in the October budget. The council will urge the Government not to continue with the pro-cyclical budgetary policies of recent years, in which billions of euros were allocated on budget day, as well as longer-term spending increases. READ MORE The Government has said that there will be no one-off cost-of-living packages this year, though Ministers are likely to come under fierce political pressure – including from their backbenchers – on this issue as budget day approaches. 'Given the economy is in a strong position, it does not require support from budgetary policy. Standard economics suggests the government should support the economy when it is weak, but show restraint when the economy is strong,' council chairman and UCC professor Séamus Coffey is expected to tell the budgetary oversight committee. 'Recent budgets have pumped money into an economy that is already performing well. After accounting for exceptional corporation tax and a strong economy, the Government is running a substantial deficit. This is equivalent to more than €2,500 per worker. 'Looking to Budget 2026, if the economy continues to perform well, spending growth [net of tax changes] should be no faster than the sustainable growth rate of the economy,' Mr Coffey is expected to say, according to an opening statement submitted to the committee. 'If the Government wants to spend more in a certain area, or tax less in another, it needs to offset that by doing less in other areas.' The council will urge the Government to take account of spending overruns when drawing up next year's expenditure plans. The overruns are in current budgets and do not include overspending on capital projects. The council will be critical of the lack of a medium-term budgetary strategy. 'There is no effective framework for fiscal policy at present,' Mr Coffey will tell the committee. 'The Government is yet to propose a clear plan for a domestic fiscal rule. This means there is no formal guide for budgetary policy.' Opposition smells blood in the water over RPZ changes Listen | 35:51 It will also warn about the need to accelerate the carbon transition. 'If Ireland fails to reduce its emissions, as it currently looks set to [do] by a wide margin, we may have to transfer an enormous amount of money to neighbouring countries,' notes the opening statement. The council identifies three key challenges for the Government: an ageing population; managing the climate transition; and infrastructure, which it says is 'about 25 per cent behind [Ireland's] peers'. Moreover, the fiscal council will make four recommendations to the Government: reduce the 'ups and downs' of the economic cycle by 'showing restraint when the economy is strong and being more generous when the economy is struggling'; set limits for spending growth; focus on competitiveness and infrastructure; and improve spending forecasts to eliminate large overruns. Government departments are compiling requests for spending increases to be tabled during the budgetary process.
Irish Examiner
10-06-2025
- Business
- Irish Examiner
'Poor budgeting' has Government spending money faster than planned, says watchdog
The Government is spending money much faster this year than was planned, with Ireland's fiscal watchdog blaming poor budgeting. In an assessment of the State's financial health, the Irish Fiscal Advisory Council (IFAC) said spending has increased by 6% so far this year, well above the 1.4% implied by Budget 2025. IFAC said the rapid spending is because earlier overruns were not properly built into the forecasts, and Government estimates were 'simply not credible'. The exchequer returns for May, published last week, show spending of €37.3bn to the end of May — €2.1bn (5.9%) above the same period last year. 'This pace far exceeds the growth rate that would be consistent with Budget 2025 forecasts, given the final level of spending in 2024,' IFAC said, adding that the overruns are in most areas of spending, not just health. Presenting the returns last week, Jack Chambers, the public expenditure minister, said the increases were in line with the amount profiled by departments to be spent at this stage in the year. IFAC said the Irish economy is in a strong position, but it warned of growing risks, saying that tariffs and trade tensions are a threat to investment and exports, and only 'phenomenal levels' of excess corporation tax are keeping Ireland in surplus. 'Without these revenues, there would be a substantial deficit, despite a strong economy,' IFAC said. 'Without these factors, there is a structural deficit of 2.4% of GNI — equivalent to €2,500 per worker. "In the short term, corporation tax is likely to grow further. However, these receipts remain high risk. A handful of large US firms pay most of the corporation tax IFAC also raised concerns about Ireland's fiscal rules, saying the framework is not effective and that EU budgeting rules will not help as they rely on GDP and ignore the risks from volatile corporation-tax receipts. 'The reality is that both the new EU fiscal rules and their mirror in domestic legislation no longer provide any credible constraint for Ireland,' IFAC said, adding that the Government appears to have abandoned the national spending rule introduced by the last government, which set a 5% limit for net spending growth. Extra stimulus Regarding Budget 2026, IFAC said the Government should adapt its approach to the state of the economy. 'If the economy stays strong, there's no need for extra stimulus,' the council stated. 'In that case, budgetary policy should show some restraint. But if the economy takes a downturn, budgetary policy should provide support.' IFAC said the Government should commit to a fiscal rule, use budgetary policy to reduce the ups and downs of the economic cycle, focus on infrastructure and competitiveness, and set realistic spending forecasts. Recent forecasts have ignored previous overruns and been unrealistic. IFAC's chairman Séamus Coffey said: 'The Irish economy is in a strong position going into a period of uncertainty. The Government needs to ensure that budgetary policy reduces the ups and downs of the economy. Introducing a rule would help guide fiscal policy in the coming years.' Read More David McNamara: ECB ready to take a pause on rate cuts
