The Irish Fiscal Advisory Council’s warning before Budget 2027 is about dependence, not abundance.
Ireland goes into Budget 2027 with a surplus, record corporation tax receipts and a package of €8.5 billion. The Irish Fiscal Advisory Council, the independent body set up after the financial crisis to assess the public finances, says that is precisely why it is worried.
The three concerns
The first is scale. Net spending is set to grow by around 6% in 2027, faster than the roughly 5% the Council considers sustainable. Its chairman, Seamus Coffey, has described the package as slightly larger than appropriate for an economy that does not need stimulus.
The second is credibility. Departmental overruns have averaged more than €2 billion a year in today’s terms over the past decade. By the Council’s count, the last year in which spending came in at or below what was budgeted was 2013. Health was overrunning by around €400 million by the end of July this year. So the real size of Budget 2027 will be larger than the figure announced on Tuesday.
The third is dependence. The Council calculates that following the current medium-term plan would see roughly €7 of every €8 collected in corporation tax going on ongoing commitments, with only €1 saved. Corporation tax receipts are concentrated among a small number of multinational companies and are vulnerable to decisions made in Washington and at company boards, not in Dublin.
The debt paradox
The Journal reported this week that despite the corporate tax windfall, Ireland’s annual interest bill on its national debt is set to double to around €6 billion a year. Higher ECB rates mean that as older, cheaper government bonds mature and are refinanced, the cost rises. A surplus does not eliminate the debt, which still stands above €200 billion.
The Government’s answer
Harris has accepted the watchdog is right to highlight overspending while arguing that not all spending is equal and that Ireland lags the EU average on infrastructure. The Future Ireland Fund and Infrastructure, Climate and Nature Fund are the mechanisms for saving part of the windfall, and contributions to both continue.
Why it matters
If corporation tax receipts fell by a third, the surplus would become a deficit and the spending commitments made in good years would still have to be paid. That is the scenario the Council is warning against. Tuesday’s Budget will be judged on the day by what it gives people. The Council’s point is that it should also be judged on what it leaves in reserve.
