Coalition’s overspend of €1.5bn in budget compared to the boom years by budget watchdog

The country’s budget watchdog said the Coalition’s late decision to spend €1.5bn in additional spending in 2015 was similar to ill-advised decisions taken by previous administrations during the boom years.

The Irish Fiscal Advisory Council — IFAC — in its assessment of the Coalition’s pre-election spending, said it was not kept fully informed by the Government of its plans for a large supplementary budget.

The €1.5bn in additional spending plugged a large spending overrun in health, and included new measures on transport and social spending — all to be spent in the last few weeks of the current year.

The supplementary 2015 budget was announced just days before Finance Minister Michael Noonan detailed a further €1.5bn package of spending measures and tax cuts — for the 2016 budget.

Michael Noonan

The watchdog said its role was to inform the public about Government spending decisions so as to prevent fiscal mistakes of the past from being repeated.

It said that the Coalition had exploited “a loophole” in Europe’s oversight mechanisms by announcing the additional 2015 spending measures.

“There is no doubt that there was strong similarity with what happened this year and with what happened during the boom,” IFAC chair Professor John McHale told reporters. But though the Government “had strayed” from the path in 2015, he assessed that the Coalition was committed to following prudent budget practices. And IFAC found that the Coalition’s 2016 budget met with the new EU rules which apply to Irish budgets from the start of next year — if only by the narrowest of margins. The European Commission last week said Ireland’s 2016 draft budget was “broadly compliant” with its rules and recommendations.

With about half of all corporate tax revenues accounted for by around 50 of the top companies, IFAC also warned against the State relying on bounties from company taxation. The Revenue assessed that the unexpected corporate tax bounty this year was accounted for by a number of very large multinationals.

The Cabinet

IFAC repeated its warning about continuing health budget overruns. It said that the largest single overrun in the past two years was in health. In 2014, health spent more than €647m than it was allocated, and is due to exceed its spending by €600m this year. “This seems to indicate specific problems with the Department of Health’s pay budget that have not been resolved through the change in 2015 from a system of limits on staffing levels — the Employment Control Framework — to Departmental pay ceilings,” it said.

Finance Minister Michael Noonan said he welcomed IFAC’s assessment Ireland would meet the budget deficit rules for 2015.