Updated at 11.37pm
JUNIOR FINANCE MINISTER Simon Harris has said the government is “absolutely not” repeating mistakes made by previous governments in managing the economy.
It comes after the State’s fiscal watchdog warned that the economy could be heading on this course, despite Budget 2016 being compliant with other economic targets and guidelines.
Minister of State Simon Harris has said the Budget focused on modest increases.
Speaking to RTÉ’s Today with Sean O’Rourke, Harris was questioned on whether the government is taking the “when I have it, I spend it” attitude of former finance minister Charlie McCreevy.
“Absolutely not,” Harris said,
We’re certainly not going back to the mistakes Fianna Fáil repeatedly made in government.
He noted that there are repeated calls for more investment in areas such as health, but the government is criticised when it starts spending more.
The Irish Fiscal Advisory Council has acknowledged a “strong economic recovery” is underway, but that “numerous uncertainties about the pace of future growth” still remain.
In the report the government is warned that its spending in the October Budget has “worrying echoes of past fiscal policy errors and goes against the spirit of the new budgetary framework” – an unusually strong message from the politically-neutral organisation.
You may recall the government dismissing the council’s calls for a more austere spending plan before Budget 2015.
Harris said that the government takes this advice “very seriously”, and that the council is right to be putting pressure on those in the political sphere to make sure finances are anchored in a stable way.
However, while the council warned that corporation tax is a volatile revenue source to be relying on, the Minister said Revenue previously stressed that the recent windfall from the tax wasn’t a once-off.
What the government is doing wrong
The council hits out at the €1.5 billion increase in government expenditure in Budget 2016.
It says the money – which contributed towards cuts to the USC, an increase to pensions and a bump in the minimum wage – would have been better spent in reducing the country’s high level of debt.
By spending what had been better than expected tax returns, the government has pushed back the point at which the budget will be balanced.
The fiscal advisory council also identified other areas that could negatively impact on the country’s financial future: overspending on health and the fact that there is no clear plan for maximum expenditure.
How are things looking going forward?
The new report predicts that some problems could crop up over the coming years.
Commitments to spending and tax reduction could see the government running into difficulty over the next five years.
The report predicts that after next year’s Budget, public service spending could take up much of the slack that will be created with bigger tax returns.
Earlier this month, the EU described Budget 2016 as “broadly compliant” with its rules, but expressed concerns about spending increases and tax cuts being introduced as part of the same package.
Additional reporting by Nicky Ryan. Originally published 6.01am.
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