Budget does not repeat mistakes of the past, says Varadkar

Taoiseach responds to criticism from the Irish Fiscal Advisory Council

Taoiseach Leo Varadkar: 'Even though there'll be a lot more money in people's pockets, we'll still see inflation.'

The budget will not overheat the economy, the Taoiseach has said.

The country's fiscal watchdog, the Irish Fiscal Advisory Council (IFAC) was deeply critical of the budget in comments posted to social media site X, formerly Twitter, on Tuesday. The council said that the Government's budget "repeats the mistakes of the past" and runs the risk of fuelling inflation.

They added that there "was little justification for further temporary measures, given falling prices, the strong economy, and the risks of fueling more inflation".

However, speaking in Dublin City on Wednesday morning, Leo Varadkar said that he did not believe that the package will harm the economy.

"I very much respect the Irish Fiscal Advisory Council. I was a member of the government that established it. It is important that we have a watchdog and, as a government, we will always hear different views. 

"You'll hear a lot of NGOs and advocacy groups saying that we should have done more, and we hear groups like the Fiscal Advisory Council and Central Bank saying we've done too much. We have to make a political judgement as to what the right thing to do is. I am confident in the understanding that a lot of resources are being deployed in this budget. Even though there'll be a lot more money in people's pockets, we'll still see inflation."

'Limitations'

Mr Varadkar said that he "understands" that people would have liked more from the budget, but said that the government "has to operate within constraints".

"I think we would always like to do more in any budget. You know, I can guarantee any minister would have gotten into the talks hoping to do more and get more than they did, but then we do have to have regard to the fact that there are limitations and we don't want to create a situation where a budget is so big it drives up inflation."

Mr Varadkar said that the Government went beyond its own spending rules of a 5% increase in over-expenditure because of high inflation. He said that the rule was drawn up on the basis of 2% inflation.

“Inflation isn’t 2%, it’s 5%. With inflation at that level, we decided it was appropriate to change that rule. Our own domestic rules can change depending on circumstances. The population also grew faster than we thought it would. We need to make changes to account for that,” he said.

The Taoiseach also denied that there is any attempt by Fine Gael to stymie the health budget because the ministry is occupied by a Fianna Fáil minister. He said that he had experienced pressures to get the budget in line when he himself held the portfolio and Labour held the Department of Public Expenditure.

"There has been a massive expansion in the health budget and the number of people working in the health service. People will see real changes with the expansion of free GP care and the reduction in the cost of medicine. There has been a lot of investment in health but it will always be a challenge."