Ifac ramps up criticism of Government’s spending plans

Cantillon: Watchdog believes Government is failing to manage public purse in prudent manner

Minister for Finance Paschal Donohoe: he may be willing to heed some of the advice from the Irish Fiscal Advisory Council this time. Photograph: Conor Healy Photography

Minister for Finance Paschal Donohoe: he may be willing to heed some of the advice from the Irish Fiscal Advisory Council this time. Photograph: Conor Healy Photography

 

Last November, the Irish Fiscal Advisory Council (Ifac) unleashed a torrent of criticism against the Government for “repeatedly” breaching its own budgetary targets; for allowing public spending to advance at an unsustainable rate; and, worst of all, for acting in the same reckless manner as the pre-crash Fianna Fáil-led administration.

Six months on and the watchdog thinks nothing much has changed. Not only is the Government still failing to rein in spending – it further ramped up between the budget and Christmas – it is still using a potentially temporary income source – corporation tax revenue – to paper over the cracks.

The problem is that much of the additional health spend is in recruitment which is likely to be permanent while much of the current corporate tax bonanza is tied into the buoyant economic conditions internationally, which may soon recede.

This is a direct throwback to the pre-crash era, when public spending was expanded, and by a similar amount, courtesy of tax revenue from property transactions, which vanished a few years later.

Brexit

In its latest assessment, the council also focuses on the threat to the public purse from Brexit, suggesting that a no-deal outcome may have a bigger impact on the budget deficit than the Government has allowed for. With the prospect of a crash-out Brexit now looking more likely, this has to be taken seriously.

The Government is under no obligation to heed the watchdog’s advice and typically ignores it. Last time Minister for Finance Paschal Donohoe hit back at the criticism, saying he was not going to apologise for using additional corporation tax revenue to fund vital infrastructural investment. This time around he sounded a softer note, suggesting he was willing to heed some of the advice and was listening to the council’s commentary.

The change of tack may suggest the criticism is hitting home or merely the Government wants to dampen down the attack by not reacting too strongly.

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