Donohoe tells watchdog Ifac his long-term budget spending sums are ‘credible’ after all
Finance Minister Paschal has defended his Government’s long-term spending plans against a charge made last month by watchdog, the Irish Fiscal Advisory Council that they lacked “credibility”.
In a formal reply to Ifac chair Seamus Coffey, the finance minister said plans to inject €2bn in a Rainy Day fund by the end of the year is evidence of the Government’s prudence.
Mr Donohoe acknowledges the flat-out economy faces the unusual risks of either overheating, or deflating “due to the rising possibility of a disorderly Brexit later this year”.
“Furthermore, in terms of the council’s specific assertion that the expenditure forecasts lack credibility, I would point out that the sensible approach currently adopted in relation to departmental expenditure ceilings is informed by the experience in the lead-up to the crisis,” he wrote, saying that the public finances are in good shape.
“I would also like to reaffirm this Government’s commitment to ensuring sustainable fiscal policy and a budgetary strategy that protects domestic living standards for all citizens,” he told Ifac, adding he was aware of the issues of the Government relying on corporation tax revenues. He again acknowledged “overspending issues” at the Department of Health, which led him last year to set a huge supplementary budget of €645m, to plug the health spend overrun.
In its hard-hitting June report, Ifac had found fault with the Government’s fiscal plans out to 2023 which it said were “not credible” because the arithmetic, it said, was based on “implausible” spending plans.
Ifac had also said framing a credible plan would involve setting up a new “prudence account”.
