Government failed to take 'prudent financial path' in Budget 2016, says FAC

The Fiscal Advisory Council has criticised the Government's Budget for 2016.

Its latest assessment report stated that the decision to loosen the fiscal stance was a deviation from prudent economic and budgetary management.

The Council says the Irish economy is experiencing strong recovery - but the pace of future growth remains uncertain and our high levels of debt mean we have limited room for manoeuvre.

Budget 2016 saw the Government increase spending by €1.5bn

The FAC said that the increase absorbs this year's better than expected tax revenues and delays the point at which the Budget is balanced.

It said that using unexpected revenue to fund permanent increases in expenditure has worrying echoes of past mistakes.

It also warned that we are significantly at risk of breaking budgetary rules as there is no margin for overruns - despite the sustained pattern of overruns in health.

Chairman John McHale said that the Fiscal Advisory Council was supportive of the Budget before the Government announced a raft of additional spending in the days beforehand.

“That increase in spending was as large as the Budget package itself, and was largely funded by unexpected incoming revenues, particularly corporation tax” he said.

“So we see that as not being appropriate given the stage in the economic cycle and our high level of debt, and we see that as a being really a deviation from the prudent path.”

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