IRELAND’S FISCAL WATCHDOG has slammed yesterday’s Budget and called for the Government to be “more serious” instead of “repeating past mistakes”.

“Ireland needs a more serious vision that delivers on the economy’s needs without repeating the boom-to-bust pattern of its past,” the Irish Fiscal Advisory Council said.

The Irish Fiscal Advisory Council (IFAC) was established to offer an independent view of how the Government manages its budget”. It published  its first read on Budget 2025 yesterday evening.

It criticised the government for failing to target cost-of-living supports such as energy credits and extra child benefit at those most in need, as opposed to the universal measures announced yesterday.

It also warned that the budget is inflationary meaning money that’s been put into people’s pocket in the budget will be taken back out by prices being pushed up.

It said the “very large” Budget will also “widen the underlying deficit”.

Yesterday’s Budget amounted to €9.1 billion, a substantial increase on Budgets seen in the pre-Covid era – in 2019 and 2020, the Budget package was €3.8b and €3.6b respectively.

Corporation tax

While the Government is running a surplus, IFAC said this is driven by an “extraordinary amount of corporation tax” and a well-performing economy.

IFAC warned that “if these were to reverse, a deficit of almost €9 billion could emerge”.

The Council also noted that while a surplus of €80 billion is projected between now and 2030, there is a deficit of €50 billion when corporation tax is excluded.

IFAC described the amounts of corporation tax being collected as “exceptional”.

And while the amounts collected have more than doubled in three years, IFAC cautioned that it is “incredibly concentrated”.

“Just three companies account for 43% of all corporation tax — €10 billion of the total €23 billion collected in 2022,” said IFAC in its flash release.

The Government is planning to save less than half of the excess corporation tax and IFAC said more should be set aside, “given how concentrated and risky these receipts are”.

Budget should have have targeted most at need

IFAC also noted that only around half of the €2.1 billion of cost-of-living measures were targeted at those who are most at need.

Universal measures such as energy credits, child benefit payments, and extensions to VAT cuts on electricity and gas make up €1 billion of this.

IFAC said the same supports could have been provided to those most in need and at a much lower cost.

The Council also noted a net spending increase of 9.2% for this year and 5.8% for 2025.

The Government has set itself a rule to tie expenditure growth to the estimated sustainable nominal growth rate of the economy, at 5% per year.

IFAC said the breaches of this net spending rule since 2022 have been “substantial” and that the Government is likely to be at least €12.5 billion above what the rule would have allowed by 2025 in cumulative terms.

The Council also warned that while large Budget packages can put money back in people’s pockets, they can also take it away by pushing up prices.

“By breaching its rule,” said IFAC, “the Government is estimated to add €1,000 to the cost of a typical household’s yearly outgoings. This is probably an underestimate.”

It also said the tax package is “effectively neutral”.

The “€1.4 billion of tax cuts cancel out what would be raised by people drifting into higher tax bands plus the carryover impact of measures introduced previously”.

Tánaiste Micheál Martin today said he “takes some issue” with IFAC’s analysis.

Speaking on RTÉ’s Morning Ireland, he said: “Are they seriously suggesting that the Future Ireland fund is not a serious effort for the future?”

The Future Ireland Fund aism to deal with future recognised expenditure pressures including an ageing population and climate change.

A separate Infrastructure, Climate and Nature Fund seeks to assist with climate change objectives and nature, water quality and biodiversity issues.

Martin added that the investment in infrastructure “is quite significant”.

“There is an issue here in terms of the cost of living and the once off measures will help people, but I do take issue with the suggestion that there’s no funding at all put aside for the future or for trying to enhance the competitiveness of the economy to an infrastructural investment.”

Elsewhere, Finance Minister Jack Chambers defended the Budget and said it has “the common good at its core”.

He added that it provides a “unique” opportunity to provide better public services, more housing and significant infrastructure projects.

Meanwhile, Public Expenditure Minister Paschal Donohoe said the Government “has tried to get the balance right” and that running large surpluses is the right thing to do given the dependence on “few taxpayers”.