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Monday 18 December 2017

Over-spending 'to add €8bn to national debt'

Seamus Coffey
Seamus Coffey

The Government's strategy of pushing strict EU spending rules as far as they can go is not the way to Brexit-proof public finances, the State's budgetary watchdog has warned.

Extra public spending in 2015 and 2016 outside of what was announced in the Budgets shows that the days of "if I have it, I'll spend it" have not ended, according to the Fiscal Advisory Council (IFAC).

That spending will have added an extra €8bn to public debt by 2021, the body said.

In its latest assessment, the council warned further similar increases in public spending could risk Ireland significantly deviating from EU fiscal rules.

"Fiscal policy can play an important role in leaning against the wind, particularly if the economy is performing strongly now, and we do view that there are risks down the line," said Seamus Coffey, the chairman of the council.

"You don't Brexit-proof the public finances by using all the fiscal space and pushing the fiscal rules as hard as you can now. What capacity do you have then when there's a downturn in the economy?

"The time to make space to deal with some of these problems is now, when the economy is performing well without the need for additional fiscal stimulus."

Cautious

In its latest assessment, the council said fiscal policy needs to be cautious.

It said that, since a deficit of less than 3pc of gross domestic product was achieved two years ago, the Government has shown a "minimalist" approach to complying with the fiscal rules.

Meanwhile, the Economic and Social Research Institute has said tax and welfare measures brought in here during the recession ensured the rise in income inequality seen in other countries has not occurred here.

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