It has called on Finance Minister Paschal Donohoe to set “realistic” spending forecasts in next month’s Budget, because in the past ministers have not factored in the spending overruns that have already taken place.
“Previous experience suggests the actual increase in spending will likely be much bigger than what is announced on Budget Day,” it said.
The independent body pointed out that last October, the Government budgeted for a €3bn increase in spending.
“In practice, spending is likely to rise by €7.6bn,” it said. “This repeats a pattern of spending overruns in recent years.”
Also in last year’s budget, it was implied that the growth in current spending in 2025 would be 1.4pc. “In the year to August, current spending has grown by 6,1pc,” the IFAC calculated.
Current spending is rising particularly quickly in the departments of Education, Children and Justice, up 7.5pc combined. Last October’s budget only projected an increase of 2.5pc.
Health spending has also been rising faster than planned. It is 5.8pc up so far in 2025, even though 4.1pc for the whole year was projected in the last budget.
Seamus Coffey, the chairman of IFAC, said these constant overruns undermine the credibility of the budgetary process. “The fear is that it will be repeated in 2026,” he added.
The council is insisting the large spending overruns this year “need to be incorporated” into the forecasts published on Budget Day next month. If not, then further spending overruns in 2026 are inevitable.
IFAC has also criticised the Department of Finance for not providing a map for the road ahead. “There is no domestic budgetary rule or guide, and no revised medium-term fiscal plan has been submitted to the EU,” it points out.
This is not a time for a large budget package
“The Programme for Government committed to publishing a revised medium-term plan with the Summer Economic Statement [in July]. This did not happen.”
The council has called on Mr Donohoe to reduce the size of the Budget Day package, currently set at €9.4bn, including €7.9bn in spending increases and €1.5bn in tax cuts.
“Given that the economy is performing well, this is not a time for a large budget package,” IFAC said, as the Government is already providing “unnecessary support”, in the form of extra spending.
The Government should be trying to smooth out the upward and downward swings in the economy, not make them worse. “Budgetary policy should be less generous when the economy is performing well, so we can be more generous in a downturn, when the economy needs support,” it said.
Working off the figures the Department of Finance produced in July, spending is set to grow by 6.5pc next year, which is “faster than the sustainable growth rate of the economy”.
In relation to US tariffs, the council believes the short-term impact on Irish employment will probably be quite small. In the longer term, the cost will be in jobs not created rather than existing ones lost, it said.
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