Watchdog criticises Irish government spending plans

Image source, PA Media

At a glance
  • The Irish government's spending plan is criticised by the country's budget watchdog
  • Increased public spending was announced this week ahead of the budget in October
  • The 6.1% rise in core spending breaks the government's own limit on increases
  • The Fiscal Advisory Council says that risks undermining the credibility of the overall plan
  • Author, John Campbell
  • Role, 大象传媒 News NI economics & business editor

The Republic of Ireland's budget watchdog has criticised government spending plans, warning that they risk making inflation more persistent.

This week the government laid out plans to increase core public spending by 6.1% in October's budget.

That breaks its own rule that spending should rise by no more than 5% annually.

The Fiscal Advisory Council (IFAC) said the additional economic stimulus would probably contribute 0.1 to 0.2 percentage points to inflation in the near term.

Consumer price inflation in Ireland fell to 6.6% in May though core inflation rose to 6.3%.

Core inflation is a measure which strips out volatile energy and food costs.

IFAC said the spending proposals "undermine the credibility of the government's plans and the spending rule itself".

It also criticised how the government is accounting for increased infrastructure spending.

It said that, in its view, when such spending is properly accounted for it means the government is planning to break the spending rule every year until 2026.

When he delivered the budget plans on Tuesday, Irish Finance Minister Michael McGrath said economic conditions justified breaching the spending rule.

"Households continue to face significant cost of living challenges and we have to ensure we protect people as much as possible from the full impacts of inflation," he said.

"I believe this strategy takes into account the economic realities of today while still ensuring that we do not stoke inflation further."