In the foreword to his department’s key pre-budget economic forecasts in June, Finance Minister Paschal Donohoe said he was determined to follow a “prudent” path because pumping up spending “in an economy at full employment entails risks”. The Summer Economic Statement, which was published four months before the budget, uses the word “prudent” a further nine times.
In its official assessment of October’s budget, the Irish Fiscal Advisory Advisory Council watchdog has deemed that the budget was anything but prudent.
Days before the budget, Mr Donohoe announced plans to plug out-of-control healthcare spending with an additional €700m this year. Covering the overruns was an €1bn in additional tax revenues collected in a windfall.
The Irish Examiner at the time branded this bounty as “back of the sofa” money because it tapped the early payments of corporate tax bills by multinationals from future years.
Relying on such a bounty is the definition of an unsustainable and imprudent budget plan. In its assessment, IFAC reveals that because of “weak planning and “weak spending controls”, the healthcare budget has on average overrun about €500m between 2014 and 2017. His predecessor Michael Noonan had used similar methods to boost spending ahead of the 2016 election. IFAC wouldn’t be drawn on its views on Mr Donohoe’s timing for his “imprudent” spending.