The Republic is “flying blind” without the updated medium-term fiscal plan that was promised in last year’s programme for government and the Coalition is “budgeting like there’s no tomorrow” with no forecasts available beyond 2026, the State’s independent budget watchdog has warned.
In its latest fiscal assessment report, the Irish Fiscal Advisory Council (Ifac) said the forecasts produced alongside October’s budget provide the shortest horizon possible.
“There is no excuse” for this, Ifac said on Wednesday, particularly given the Government’s commitment to updating its previous medium-term forecast following last year’s general election.
Speaking to reporters on Tuesday, Ifac chairman Seamus Coffey said the Government was required under European Union fiscal rules to submit a medium-term plan, which it did before the election last year.
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However, it is also required to submit a revised plan following an election and a change of government.
“The programme for government from last spring indicated that this medium-term expenditure plan would be updated in the summer,” said Mr Coffey. “This didn’t happen. We were hoping, perhaps, it would be published along with the budget. That, again, didn’t happen.”
In the report, Ifac reiterates its long-standing concern about the State’s ever-growing reliance on corporation tax receipts to fund spending increases.
Mr Coffey said he met Tánaiste Simon Harris upon his appointment as Minister for Finance last week, following Paschal Donohoe’s sudden resignation to take up a senior role with the World Bank.
He said he went through the “key messages” of the report, including the “vulnerability” in the Republic’s public finances arising from reliance on corporation tax receipts from a handful of multinationals in the technology and pharmaceutical sectors.
Ifac said that while a €5 billion exchequer surplus is forecast for next year, it becomes a €14 billion deficit when excess corporation tax receipts are excluded from the projections.
Mr Coffey said Mr Harris listened to the concerns and asked questions. But he was only “a day or two into the job” at the time of their meeting and “didn’t give any feedback from his perspective”.
“It was good to be able to get our messages across,” said Mr Coffey. “We will be sending this final report to the Minister. We’ll be looking for a response over the coming weeks, but certainly we got a few messages across last week.”
Overall, Mr Coffey said the Republic is “flying blind” in the absence of a medium-term spending plan or specific rules limiting budgetary expenditure increases.
The report warns that policy spending continues to grow at a “very fast rate”, adding demand to a strong economy that does not require stimulation.
Unlike last year’s budget, however, Budget 2026 will raise tax revenues rather than reduce them, largely due to the impact of Organisation for Economic Co-operation and Development corporation tax reforms that the Department of Finance estimates will add €3.2 billion of revenue in 2026.
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This is despite the Coalition unveiling large tax cuts, including a reduction in the VAT rate for the hospitality sector at an estimated cost of €800 million from its introduction in July 2026 to the end of 2027.
Mr Coffey said Ifac does not take any view on the appropriateness of specific policy measures like the controversial VAT cut.
However, he said Ifac’s research on the measure indicates the cut is unlikely to be passed on to consumers through lower prices in pubs, restaurants and hotels.
