IRELAND'S independent fiscal watchdog has issued a warning to the government over their current budget plan.
The government’s proposed €9.4 billion package for Budget 2026, which includes €7.9 billion in spending increases and €1.5 billion in tax cuts, has been criticised by the Irish Fiscal Advisory Council (IFAC) as excessive.
In their report, the council urged Finance Minister Paschal Donohoe to adopt a more cautious and realistic approach, noting that public expenditure continues to far exceed initial projections.
While the government had budgeted for a €3 billion increase in spending this year, actual figures suggest an overrun of €7.6 billion, which is more than double the target.
“This pattern of overspending repeats what we’ve seen in recent years,” said IFAC Chairman Seamus Coffey.
“If this trend continues, it will erode the credibility of the budget process and leave the country vulnerable in the event of an economic downturn.”
The council noted that departments such as Education, Children, and Justice have seen spending grow by 7.5% so far in 2025, far above the 2.5% projected.
Health spending is also up 5.8%, compared to the 4.1% originally planned for the year.
IFAC warned that a large portion of the additional spending is being funded by volatile corporation tax receipts from multinationals, which may not be sustainable in the long term.
Excluding these windfall revenues, public spending is currently running €8 billion ahead of what the government is actually collecting.
The watchdog also criticised the Department of Finance for failing to publish a revised medium-term fiscal plan, despite a government promise to do so alongside the Summer Economic Statement in July.
Furthermore, Ireland still lacks a formal spending rule to cap annual increases in expenditure.
“The government is adding demand into an already well-performing economy,” Coffey said in an interview on RTÉ’s Morning Ireland.
“This is not the time for expansionary fiscal measures. We should be saving firepower for when the economy truly needs support.”
IFAC also expressed concern over the potential long-term effects of international developments such as US tariffs, though it said any short-term employment impacts are likely to be limited.
Calling for a more disciplined approach, the council urged the government to align its budgetary forecasts with actual spending trends and to moderate the size of the Budget 2026 package.
“Budgetary policy should help smooth the economic cycle,” IFAC stated, “not amplify it.”
See More: IFAC, Irish Budget, Paschal Donohoe
