Government warned not to 'splash out' in Budget 2018

A member of the Fiscal Council says we have 'made mistakes' here before

Government warned not to 'splash out' in Budget 2018

Finance Minister Paschal Donohoe speaking to the media at Government Buildings in Dublin | Image: Sam Boal/Rollingnews.ie

The Irish Fiscal Advisory Council has said the Government should stick to existing tax and spending plans for Budget 2018.

The council has published its fourth pre-budget statement.

It says Ireland is in a good position to move public finances to a safer position, and that the short-term outlook means that there is no need for additional stimulus at this time.

"Debt levels remain very high, which leaves Ireland vulnerable to adverse shocks such as those from a harder-than-expected Brexit impact", it warns.

But the council says it would be "prudent" for the budget to stick to existing tax and spending plans of around €1.7bn.

It says this is within the available gross fiscal space for 2018.

"The cost of previously announced measures, as well as the yet-to-be approved public sector pay agreement, reduces the scope for new initiatives in Budget 2018 to approximately €0.5bn.

"If the Government wishes to address additional priorities, these should be funded by additional tax increases or through re-allocations of existing spending.

"The Government should not use unexpected increases in tax revenues or lower interest costs to fund permanent budgetary measures."

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The chair of the Irish Fiscal Advisory Council, Seamus Coffey, said: "The spending rule and the other elements of the fiscal framework were put in place to prevent repeats of past crises.

"The Government’s plans to adhere to these should help guide debt to safer levels, limit the damage done by boom-bust cycles and protect the State’s borrowing capacity.

"It should also allow for moderate changes to spending and taxes, and a ramping up of public investment spending, while limiting risks that cyclical or other transitory revenue gains are used to fund any permanent spending increases.

"It is important that the Government follows through on its plans to adhere to the spending rule and all elements of the fiscal framework."

Michael Tutty is a member of the Fiscal Advisory Council.

He told Newstalk Breakfast: "This is the time in the past when we started making mistakes, that we go overboard when things are better - and that leads to the next crisis.

"So we are saying stick to the rules that the Government adopted."

"While the half billion sounds a small amount of money, perhaps, to the Irish people for the next budget, the actual amount of money is going to be €1.7bn.

"It just happens that a lot of that has already been committed through - for example - the social welfare payments in last year's budget."