The Irish Fiscal Advisory Council (IFAC) has issued a stark warning that Government spending is increasing at a pace well beyond what was planned in the national Budget, citing “poor budgeting” as the main cause.
In its latest assessment, the State’s independent fiscal watchdog reported that current Government spending has risen by 6% so far this year—far above the 1.4% growth set out in Budget 2024. The council said the overspend was largely due to earlier expenditure overruns not being properly factored into the latest forecasts.
“This is because earlier overruns weren’t properly built into the latest forecasts,” the Council noted, adding that while Ireland is currently running a budget surplus, it is underpinned by windfall corporation tax receipts and temporary economic strength.
When adjusted for these temporary factors, the Council estimates that Ireland is running a structural deficit equivalent to €2,500 per worker—raising concerns about the long-term sustainability of public finances.
IFAC Chairman Seamus Coffey acknowledged that the Irish economy remains in a strong position but warned that this strength must be used to build resilience ahead of a more uncertain period. “The Irish economy is in a strong position going into a period of uncertainty,” he said.
The Council criticised the Government for failing to outline a domestic spending rule, which would act as a guide for how much public spending can increase each year. It also noted that no spending ceilings have been set for individual Departments, despite legal obligations to do so.
“With forecasts covering only the next 20 months, Ireland still lacks a proper medium-term fiscal strategy,” IFAC said.
The watchdog urged the Government to use budgetary policy more effectively to smooth out the economic cycle. “This means showing restraint when the economy is strong. It also means providing support when the economy is struggling,” the report stated.
The Council also forecast that corporation tax revenues are likely to rise in the short term due to two key factors: the increase in the corporate tax rate for large multinational firms from 12.5% to 15%, and continued growth in pharmaceutical exports, which have remained unaffected by U.S. tariffs.
The warning comes ahead of preparations for Budget 2025, as the Government faces growing pressure to manage spending responsibly while balancing the need to invest in key services and infrastructure.
