IFAC: Govt to boost core spending by more than stated in Summer Economic Statement
The Irish Fiscal Advisory Council has calculated that the Government plans to increase core spending next year by €5.5 billion, some €250 million more than set out in the Summer Economic Statement published yesterday.
In a series of tweets, the Council said this would see spending rise by 6.4% and not the 6.1% in the Statement. It goes on to describe how these figures are presented as ‘bad for transparency.’
The Council says that €250 million euro classified as ‘windfall capital investment’ in the Statement must be counted in core expenditure as this item is contained in each year out to 2026. The total windfall capital investment comes to €2.25 billion for the years 2024-2026.
It says the windfall capital expenditure means the spending rule will be broken every year to 2026.
The Council says the decision to breach the spending rule, which limits increases in core spending to 5%, ‘repeats a pattern and undermines the credibility of the Government’s plans and the Spending Rule itself. This is a clear case of procyclical fiscal policy.’
It calculates that the government’s spending plans will add 0.1-0.2% to the annual rate of inflation and ‘also risks making high prices more persistent…’
It also warns of the risks of spending overruns in health, children and social protection. It repeated warnings of spending pressure over the medium term due to the ageing population, the effects of climate change and health reforms.
It says even if tax receipts come in better than forecast over the next few months, that doesn’t provide the basis for additional measures in the Budget.