Jack Quann
Jack Quann

07.36 1 Dec 2020


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The Irish Fiscal Advisory Council (IFAC) has said the Government still has to identify how it's going to fund permanent spending measures "in a sustainable way".

The IFAC said it welcomes large-scale stimulus in Budget 2021, but warned the Government needs 'a credible medium-term strategy'.

It said COVID-19 is having a major impact, but the outlook has improved.

A deficit of over €20bn, around 10% of GNI, is expected this year and next.

The IFAC said large temporary supports and stimulus of up to €12bn "are welcome" and the €2.1bn contingency and €3.4bn recovery fund for 2021 are "helpful".

"These policies will help to support the economy and limit lasting damage from the crisis", it said.

However, it added that Budget 2021 includes permanent increases in spending of €5.4bn, possibly up to €8.5bn.

It said introducing these permanent commitments, without identifying how they will be funded sustainably, "is not prudent."

Chairperson of the Fiscal Council, Sebastian Barnes, told Newstalk Breakfast clarity is needed as to where the money is coming from.

"The Council does very much improve [sic] of what the Government has done in the short-run".

"The area where we have concerns is more about looking towards the medium-term.

"The budget did include this package of regular, permanent spending measures - more money for the health system, for education, for the Guards - right across the public service.

"They're planning to take on about another 1,700 employees next year - and we're concerned that they haven't identified how that's going to be funded in a sustainable way".

Mr Barnes said this points to a need for "much better medium-term planning".

"This is a very large amount of money - if we haven't had all the temporary measures, this would have looked like a pretty big budget package.

"That's one of the reasons why we're so concerned".

He said the Government has not published a five-year forecast since last year, "so we really don't know what they think about the economy in the medium run.

"We also don't know what they're planning in terms of the public finances.

"So I think there's a need just to improve the planning process - and the difference between that €5bn and €8bn is accounted for for parts of public spending where there's very little transparency".

"It's partly a planning issue, but it's also a strategy issue", he said

He added that a planned medium-term strategy, due to be published in April, will be "critical".

Fiscal watchdog: Government needs to identify where 'sustainable' permanent spending is coming from

00:00:00 / 00:00:00

Main image: Finance Minister Paschal Donohoe at Government Buildings in Dublin with Budget 2020. Picture by: Sam Boal/RollingNews.ie

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Budget 2021 Fiscal Planning Ifac Irish Fiscal Advisory Council Newstalk Breakfast Permanent Spending Measures Sebastian Barnes Transparency

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