THE GOVERNMENT’S REPEATED failure to stop unbudgeted spending increases has left Ireland exposed if another economic downturn occurs, the Irish Fiscal Advisory Council has warned.

The budgetary watchdog’s latest report sharply criticised the Government for failing to manage Ireland’s finances properly in recent years and also hit out at Budget 2019 as “not conducive to prudent economic and budgetary management”.

It said that the Government’s medium-term budgetary plans are “not credible”, that the system of three-year budget ceilings was not working, and that the Department of Finance’s own estimates suggested that fiscal rules for 2018 and 2019 will be broken.

“Repeated failures to prevent unbudgeted spending increases have left the public finances more exposed to adverse shocks, with the budget balance in deficit rather than in surplus,” the report says. 

“Failures to prevent unplanned spending increases has meant long-lasting increases in spending that are difficult to reverse and that represent a repeat of the policy mistakes of the past.”

The report noted that next year’s budget will see spending increases of €4.5 billion compared to 2018, despite the IFAC’s assessment that a limit of €3.5 billion in spending increases and tax cuts was appropriate for 2019.

The council warned that while Ireland’s short-term economic outlook remains strong, a slowdown in coming years was inevitable and Brexit may be “more costly than assumed”.

“Other risks are posed by the concentration of Ireland’s exporting sector in a handful of specialised areas, the global rise in protectionism, and possible future changes in the international tax environment,” it said.

The council added that a prudent fiscal policy would see Ireland’s spending policy rise in line with sustainable revenues, and said that budgets should be balanced to ensure that debt ratios maintained a steady downward path in future.