Remember the fiscal rules? No, not the ones ripping the UK asunder, the Irish ones that stipulate spending should increase by no more than 5 per cent per annum, a rate deemed sustainable for the Irish economy.
They were adopted in 2021, broken every year since and are now not really talked about any more.
In contrast, the UK government is tearing itself apart to try to stay within its own version (which roughly speaking try to balance spending with revenue over a five-year horizon).
After big U-turns on proposed welfare cuts, UK prime minister Keir Starmer and his chancellor Rachel Reeves have boxed themselves into a corner.
Either they break the rules (many economists think they should) and face the ire of the bond markets or work out another way to stay inside them, perhaps by raising income tax, a politically charged option.
The corrosive surge in UK borrowing costs after former prime minister Liz Truss’s ill-fated mini budget is a ghostly presence in all this.
The situation couldn’t be more different in Ireland. Instead of a £30 billion (€35 billion) hole in the exchequer (the UK’s estimated shortfall), we’ll have €16 billion in savings by the end of 2025.
The Government’s fiscal rules have floated off into the ether without much ado largely because Government revenue helped by record corporate tax receipts is giving the Coalition a free hand.
But spending here is rising and at a rate that many see as unsustainable in the long run.
Chairman of the Irish Fiscal Advisory Council (Ifac) Seamus Coffey warned last week that overruns in day-to-day public spending are likely to top €2 billion this year.
“The Government needs to improve how it forecasts spending. When formulating Budget 2025, the department didn’t account for the money they were going to overspend in 2024 when planning for 2025,” he said.
“This created unrealistic budget figures from the beginning – a problem that keeps recurring,” he said.
Ifac also warns that the incoming European Union fiscal rules won’t really place any restrictions on Ireland because they are measured in GDP, which exaggerates Ireland’s true financial position.
With no rules and a heavy dependency on tax receipts from a handful of multinationals, the Government is playing a risky game.
