Michael McGrath defends budget amid 'fiscal gimmickry' criticism

Mr McGrath said that people will be able to keep “more of their hard earned money” and that will help boost the domestic economy when they kick in in January. Picture: Stephen Collins/Collins Photos

Finance Minister Michael McGrath has defended the budget following criticism from the fiscal watchdog, arguing that the Government struck the “right balance”.

In its post-budget assessment, the Irish Fiscal Advisory Council (IFAC) criticised what it described as an “everything now” approach which risked repeating the financial mistakes of the past.

“Cost-of-living supports included in the package were mostly untargeted. The “everything now” approach of tax cuts, a ramp-up in capital spending, and current spending increases (the chances of repeating) Ireland’s past mistakes,” the report says.

Particularly, IFAC criticised the Government for what it described as “fiscal gimmickry” and for breaching its own spending rules. Within the budget, the Government decided to increase core spending beyond the 5% limit, citing high inflation.

The council said that it was "worrying" that the Government had indicated it would breach the rule again and said that it had also employed "fiscal gimmickry to flatter its numbers".

Responding to the criticism, Mr McGrath said that he would “strongly argue” that the decision to implement cost-of-living supports was the correct one, saying that households remain under pressure from high energy costs and high grocery costs.

He also defended the increase in capital expenditure, saying it would allow more schools, homes and healthcare facilities to be built across the State.

On tax reductions, Mr McGrath said that people will be able to keep “more of their hard-earned money” and that will help boost the domestic economy when they kick in in January.

The Finance Minister also noted that there is likely to be a large budget surplus in 2023 and 2024, while also citing the €8bn surplus for 2022, despite “successive shocks” including the pandemic and the war in Ukraine.

Mr McGrath also pointed to a European Commission report on the budget, which he said gave Ireland a “strongly positive” assessment.

He added that Ireland has a very clear and transparent budgetary process, of which IFAC play an “important part”, adding that he and the Department of Finance would “carefully consider” the report.

The council, in particular, said that there was evidence of poor budgeting on the spending side. It singled out the overruns in the health budget which were “obvious before Budget Day" and were not catered for sufficiently.

In his response, however, Mr McGrath did not directly address concerns flagged by IFAC over the health budget.