IRELAND’S FISCAL WATCHDOG has said that some of the measures taken in the Budget can be “explained by the fact we are so close to a General Election”.

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

It slammed the Budget and called for the Government to be “more serious” instead of “repeating past mistakes”.

The 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.

‘Political environment’

Speaking on RTÉ’s Morning Ireland, IFAC chair Seamus Coffey said “you have to take into consideration that these decisions are made in a political environment”.

“Maybe some of that lack of a medium and long-term view can be explained by the fact that we are so close to a General Election,” he added.

“There’s no doubt that in Ireland, we have issues with the political and economic cycle not going hand in hand,” said Coffey.

The IFAC chair also said there were “two Budgets” announced on Tuesday, as there were “reasonable” measures for 2025 but also “as many announcements for 2024”.

He said Government spending this year has “increases pretty dramatically for two key reasons”.

Coffey said the first reason was that “maybe the number set out last year didn’t have that credibility, and there was likely to be overruns”.

He noted that there have been “significant overruns in health, already up over €1.5 billion and possibly likely to be larger before the end of the year”.

The second key reason he pointed to was the almost €2 billion of new spending measures introduced in the Budget for 2024.

And while Coffey said there’s “no doubt the Government should respond to the inflationary environment”, he questioned cost-of-living supports being described as “once-off” when some have happened for three years in a row.

He also said that when such measures are introduced, particularly for low income families, they “should be repeated again next year, so we should be considering these to be permanent, not these one off measures”.

Coffey also criticised many of the cost-of-living supports for being universal and untargeted.

“The €250 energy credit for just over 2 million households, that’s spending of €500 million over a very short period of time when it comes to the budget,” said Coffey.

“The Government should be responding to the increased inflation we’ve seen recently, but it should be doing so on a more permanent basis, particularly for low-income households.

“These figures should be built in again for next year, but they’re not in the figures.

“So from a credibility perspective, it’s likely we will see announcements next year to fill the hole that these once-off measures, if they’re withdrawn, would make, so they will be paid again.”

Corporation Tax

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

“Are they seriously suggesting that the Future Ireland fund is not a serious effort for the future?”

The Future Ireland Fund aims 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.

However, Coffey said the contribution to those funds this year will be around €4 billion, against the “estimated exceptional corporation tax receipts the government will collect this year is €15 billion”.

Coffey said this figure would be just over €6 billion next year but that the “excess corporation tax receipts are far larger than that”.

“There’s no doubt that the Council welcomes the fact that the government has introduced these funds,” said Coffey, “but the scale is lacking in terms of the amount of money that’s being collected.”

Coffey also noted that corporation tax is “not coming from the domestic economy and the bulk of it is paid by multinationals who are here to service international markets”.

“If the government takes this corporation tax money, in the main from US multinationals, and pumps it into the economy and stimulating demand, there’s absolutely no case for fiscal stimulus in the Irish economy,” said Coffey.

“Our economy is in a very good position, but if the government pumps even more money into an economy in that position, you’re just going to drive up domestic inflationary pressures.

“We’ve seen problems in the past where we have had stimulatory budgets, with the Government adding to demand in an economy that’s performing pretty well, so I think we should take that seriously.”

Coffey added that IFAC recognises that the economy is in a very strong position but said that “you should be running a surplus in those instances”.

“But given the government’s own figures, if we take out this excess level of corporation tax, there’s a pretty significant deficit there of €6 billion.

“At a headline level, things look pretty strong and a lot of this is sort of a good problem to have but when it comes to the impact on the economy in underlying terms, we’re actually running a pretty large deficit.”