The State’s fiscal watchdog has sounded the alarm on Government spending, which is set to rise by 153% above what was planned in last year’s budget, writes Craig Hughes.

In its pre-Budget statement, the Irish Fiscal Advisory Council (IFAC) warned that persistent overruns are undermining the credibility of the budgetary process, leaving people “without a clear roadmap for fiscal policy”.

It has also called for the Government to rein in spending in this year’s Budget.

Last year’s budget committed €3bn in additional spending.

But this was topped up by another €3.3bn in July’s Summer Economic Statement (SES) and is now on track to reach €7.6bn by the end of this year.

Professor Séamus Coffey, IFAC chair, said: “It undermines the assessment of budgets, if they are so removed from what actually happens.”

The 153% overspend is being fuelled by overruns in certain Government departments.

The departments of Health, Education, Children and Justice have all overshot their allocations, with Health spending up 5.8% against a planned 4.1% rise, and Education, Children and Justice up 7.5% – three times the initial forecast of 2.5%.

The IFAC recommends that the Government fully incorporates the spending overruns from this year when setting spending forecasts for next year.

The report highlights that the economy is performing strongly and “does not require fiscal stimulus”.

The council has recommended cutting back the planned €9.4bn package amid “high uncertainty”, such as the threat of US tariffs, noting that such an expansion “is not appropriate” when the economy is already running at capacity.

Mr Coffey said Ireland’s strong economic position means restraint is required, stating: “This is not a time for a large budgetary package.

“That should be reserved for periods where the economy is weak and needs support.”

But the Government is showing little intention of cutting back its spending.

Finance Minister Paschal Donohoe said yesterday that “once–off” measures of recent budgets to address the cost-of-living crisis will be “replaced” with more “permanent” longer-term solutions in October.

And Tánaiste Simon Harris said yesterday that he wants to increase the threshold at which inheritance tax is paid over the lifetime of the Government, further reducing the tax base.

The Government is proposing to spend €1.5bn on tax cuts with the remaining €7.9bn on capital projects in next month’s Budget.

But the IFAC said budgetary planning is being done “without a clear roadmap for fiscal policy” and urged the Government to follow the EU’s recommendation of medium-term budgetary planning.

Despite a commitment in the Programme for Government to publish such a strategy alongside the Summer Economic Statement, none has appeared.

Nor has the Government introduced a domestic fiscal rule to cap the pace of net spending growth.

“There is no map for the road ahead... no domestic budgetary rule or guide,” Prof. Coffey said.

The country’s reliance on corporation tax receipts is also highlighted as a major vulnerability.

While headline figures show a budget surplus of €5.4bn in 2025, this depends heavily on around €13bn in excess corporate tax revenues, mostly from multinational firms.

When these are stripped out, the State is on course to spend €8bn more than it raises in taxes this year — a deficit that is set to worsen next year.

Corporation tax revenues have grown six-fold in the past decade, but their future is uncertain.

“If these receipts were to decline, the public finances would be in a significant deficit,” it said.

The IFAC called for a legislated spending rule that reflects Ireland’s sustainable growth rate, which includes protections for public investment and allows for flexibility during downturns.

Without such a framework, the council warned, fiscal policy risks being made “in a year-to-year fashion” and driven by short term political pressures.

The watchdog is also monitoring the progress of 129 large projects (costing more than €20m) that were originally proposed under the 2021 National Development Plan, (NDP) and found that “only half of these projects are likely to be completed on time.”