Internal emails reveal fiscal watchdog had concerns about Government's 'windfall' plans

Records released under FOI show that the Irish Fiscal Advisory Council believed the Government planned to break its own spending rules for 2024, 2025, and 2026

In an email released under Freedom of Information, Ifac's chief economist said it seemed the Government intended to break its own spending rules by around €600m. File picture: Maxpix

Members of Ireland's fiscal watchdog expressed various concerns around the Government creation of a new windfall capital investment category of spending, it has been revealed.

In internal emails, the Irish Fiscal Advisory Council (Ifac) said the so-called windfall budget was set to rise to €1.25bn by 2026, but that it “categorically” could not be considered ‘one-off’ spending as the Department of Finance seemed to suggest.

In one email about the Government’s summer statement, Ifac economist Niall Conroy told colleagues: “It seems like an attempt to grow spending without it showing up as core expenditure.”

Mr Conroy also explained how, if the windfall spending was included in the core budget, it would mean the Government was already planning to break its own spending rules for 2024, 2025, and in 2026.

Ifac prepared a list of tweets for publication, one of which said that the way the figures had been presented by the Department of Finance was “bad for transparency”.

Ifac chief economist's emails

Another internal email from its chief economist Eddie Casey stated: “I think we should focus more on what’s actually in the SES [summer economic statement] early on. Then discuss the detail of the capital gimmickry afterwards as it’s a little complicated. We’re right to include it.”

In one of the emails, Ifac chief economist Eddie Casey said that while it was understandable to some degree, the Government's bending of its own spending rules reduced its credibility. File picture: FiscalCouncil.ie

Discussions on the summer economic statement had begun early in July 4 with its main contents having already been “leaked” to the media.

In a discussion email, Mr Casey said it seemed as if the Government intended to break its own spending rules by around €600m this year.

He wrote: “This obviously makes life difficult for us.” Mr Casey said it would be the third year in a row where the spending rule had been “bent a little” and that while it was understandable to some degree, it reduced the Government’s credibility.

“The additional expansion comes at a time when growth is already strong, the labour market has never been tighter, and inflation is already a concern,” he said in the email. “Injecting more stimulus in this environment is the wrong approach at the wrong time.”

Mr Casey said they would need to criticise the Government, but it was important they would not “pretend that the sky is falling in either”.

He wrote: “It’s a breach, but for now not a massive one. There are lots of worrying signs and reasons for concern. But how much we bang the drum about the actual quantum of measures is something I would suggest we consider carefully.”

Mr Casey said they were looking to reach some kind of consensus by the following day; by which time, they hoped to release a 13-part thread on Twitter.

In preparing the material for release, concerns were also raised about the inclusion of a point about how €2.5bn of additional Government expenditure was for humanitarian assistance for Ukrainian refugees.

One note said: “We did ask for them to budget this properly, didn’t we? We should make sure that we don’t sound angry about including it — it is the right thing to do (both the spending and the inclusion [in data]).”

The possibility of even more bumper corporation tax receipts was also flagged as they worked internally on their public response.

One note stated: “Maybe we should think about how we are going to deal with the issue of likely higher CT [corporation tax] in the coming months and get ahead of the story by acknowledging that it might happen but it isn’t a reason to justify extra spending now?”

Asked about the records, which were released under Freedom of Information, Mr Casey said: “The records document our initial considerations and deliberations about our response to the summer economic statement.

“The issued tweets represent our initial response to the summer economic statement. Our pre-budget statement will provide a fuller
assessment of the Government’s plans in advance of Budget 2024.”