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Ireland’s independent fiscal watchdog has raised concerns about the Government’s current approach to public spending, cautioning that a growing reliance on volatile tax receipts is creating long-term risks for the State.

According to the Irish Fiscal Advisory Council, strong corporation tax inflows from large multinational firms continue to boost the Exchequer. However, the proportion of these windfall revenues being placed in reserve is decreasing. The Council indicates that the State is on track to save significantly less of its corporation tax intake by 2026 compared with this year.

The watchdog says the absence of meaningful budgetary projections beyond 2026, along with the delay in submitting an updated medium-term fiscal plan to the European Commission, highlights the need for major reform. It argues that Ireland should move away from annual budgeting and instead adopt a more structured, multi-year approach, which would give public bodies greater certainty around funding and improve long-term planning of public services.

The Council notes that government spending is projected to rise by more than 11 percent in 2025, a pace it regards as well beyond sustainable levels. When temporary and highly variable corporation tax receipts are excluded, the underlying deficit is expected to widen from around €7 billion this year to €14 billion next year. It also criticises the Government’s repeated tendency to exceed spending limits set out on Budget Day, stating that expenditure forecasts are regularly revised upwards.

Council chair Seamus Coffey has indicated that the Government plans to run a smaller surplus in the coming year.

Responding to the report, Minister for Finance Simon Harris said his priority is to deliver a comprehensive medium-term economic plan before the end of the year. He acknowledged the need to resist short-term decision-making and anchor future budgets within a clearer strategic framework. He added that he recently met with the Council and welcomes its analysis.

Taoiseach Micheál Martin said substantial funds are being set aside, although he accepted that spending levels have increased sharply in recent years. He attributed this to the State’s response to the pandemic, the energy crisis, population growth and issues relating to tariffs. The Taoiseach noted that a significant share of future outlays is committed to capital investment. The Council remains concerned, however, that unpredictable corporation tax receipts are being used to support ongoing spending pressures.

The watchdog further points out that expenditure planned for 2025 now stands €12.5 billion higher than the amount set out in last year’s Budget. Previous commitments to limit annual growth in spending to 5.1 percent in 2024 and 6.5 percent in 2025 have since been overtaken by new projections of 8.6 percent and 7.7 percent respectively.

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