Irish Fiscal Advisory Council Urges Caution in Budget 2026 Planning

The Irish Fiscal Advisory Council has raised concerns regarding the preparation of Budget 2026, stating it is being developed “without a clear roadmap for fiscal policy.” The Council has called for a reduction in the proposed budget package of €9.4 billion, citing “high uncertainty” in the current economic climate.

In its latest assessment, the Council emphasized that the planned budget is not suitable given the robust performance of the economy. It advocates for a more cautious fiscal strategy that would help “avoid overheating the economy” and allow for flexibility to respond to potential future downturns.

Economic Performance and Spending Concerns

Seamus Coffey, chairperson of the Council, articulated that “the Irish economy is in a strong position, despite high uncertainty.” He pointed out that this is not an appropriate time for a substantial budgetary package, which should be reserved for periods of economic weakness requiring support.

The Council’s report highlights that the Irish economy is currently exhibiting strong indicators, including record employment and healthy consumer spending. Despite this positive outlook, the Council warns that uncertainties, including tariffs, pose potential risks, even if they have yet to significantly affect the economy.

Government spending has been increasing at a rate that far exceeds earlier projections. The Budget 2025 originally forecasted a €3 billion increase in expenditures; however, the actual spending is expected to surge by €7.6 billion. The Council notes that this trend reflects a concerning pattern of spending overruns that have persisted in recent years.

Given the strong economic performance, the Council asserts that the economy does not require additional support from fiscal policy. The Government is currently providing substantial assistance, with projected expenditures exceeding revenues by €8 billion this year, leading to an underlying deficit that is expected to widen in the following year.

Recommendations for Budgetary Policy

The Council expressed disappointment that a new medium-term plan was not published alongside the Summer Economic Statement, as was pledged in the Programme for Government. It also criticized the lack of a defined limit on the sustainable growth rate of spending, which it argues could lead to year-to-year budgetary decisions without a consistent framework.

To address these concerns, the Council has recommended that the Government account for spending overruns from the current year when formulating forecasts for the next. It warns that if this is not implemented, overruns will likely be unavoidable next year.

The Council concluded by urging the Government to continue contributing to the recently established savings funds, reinforcing the need for a sustainable fiscal strategy that prepares for both current and future economic conditions.