The Irish Fiscal Advisory Council (Ifac) has warned Government spending continues to increase too rapidly and there will be “sizeable overruns” again this year.
The watchdog was responding to the latest exchequer data that indicated Government spending rose by 7.4 per cent to €64.9 billion in the first seven months of this year.
The council said the headline figure blurred the rapid increase in current spending which was already up 7.8 per cent, against a forecast of 6.3 per cent at the time of the budget.
“Sizeable overruns are likely,” Ifac said. “These are most evident in health. At the end of July, current health spending was overrunning by €400 million.”
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The rapid increase in spending has become a flashpoint for the Coalition amid a near doubling of public expenditure since 2019.
The Government is already forecasting overruns in departmental budgets of €700 million this year. But Ifac said these could stretch to €850 million and beyond.
Much of the overrun stems from an overspend in health and comes amid suggestions the budgetary allocation for hospitals this year remains at the 2025 level despite the increased demand.
“Government is investing significant additional resources across our public services,” Minister for Public Expenditure Jack Chambers said.
“The figures published in today’s fiscal monitor underline the increased investment in services and infrastructure to support a growing population and economy.
“A focus on reform, efficiency and value for money is essential to ensure this expenditure is carefully managed, delivers tangible outcomes and represents value for money for the people of Ireland.”
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Chambers is promising a major clampdown on spending, warning Government departments will face greater sanctions for breaching their spending allocations. He has also warned that ministers seeking extra money in the upcoming budget would have to find it within their existing allocations.
His department’s spending review, which sets out the fiscal baseline for the upcoming budget, indicates overall spending will be increased by €7 billion next year, comprising €5.9 billion in additional day-to-day spending and €1.1 billion in capital expenditure on infrastructure such as energy, water and transport.
This will bring total expenditure to €125 billion in 2027.
Overall, this represents a 5.9 per cent increase in spending in line with the Government’s Medium-Term Expenditure Framework, published last year, which seeks to put a 6 per cent cap on annual spending increases out to 2030.
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While the Government is forecast to run a budgetary surplus of €9.2 billion this year, with bumper corporation tax revenues excluded there will be an underlying deficit of €10.8 billion.
The latest exchequer numbers point to an exchequer deficit of €600 million for July. This compares to a surplus of €4.1 billion last year.
However, the department noted the year-on-year comparison was impacted by increased revenue last year arising from the Apple tax case.
