The new chief at the country’s budget watchdog said the next finance minister will have relatively little to spend in October’s budget because so much of the country’s corporate tax windfall has already been spent in previous budgets.
Seamus Coffey, chairman at the Irish Fiscal Advisory Council (IFAC) also said the potential €3bn in proceeds from the sale of shares in AIB should go to pay down debt and not be used to pump up levels of spending further.
Some opposition parties have called on the Government to forego paying down the national debt more quickly and use the potential proceeds of more than €3bn from the part-privatisation of AIB to alleviate the housing crisis. Many business and industry groups have separately called for large increases in capital spending on roads, rail and schools.
However, in its latest report, the IFAC warned the Government’s “minimalist approach” had led to it breaching EU’s budget rules in 2016, though not by a significant amount to trigger sanctions from Brussels. Government plans this year will likely result in a further breach, it said.
The watchdog suggests that the successor to outgoing Finance Minister Michael Noonan will have little to play with in October’s budget. Under EU rules, most of the €1.8bn the IFAC estimates is available in so-called fiscal space to the next finance minister is already accounted for.
After extracting €600m to pay for demographic demands of a growing population and €700m to take account of the “carryover” costs of commitments in previous years, the autumn’s 2018 budget only allows for a net €500m in spending increases and tax cuts, according to the watchdog.
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