The Irish Fiscal Advisory Council has warned that overspending in health this year and increased spending by local authorities next year is not in line with "prudent economic and budgetary management".

In its Fiscal Assessment Report published today, the council also finds that without the windfall from high corporation tax receipts, Ireland would have broken European Union budgetary rules.

The fiscal council warns that Government spending plans are "right at the limit of what is considered sustainable" given the country's high debt burden and the risks to the economy.

It says spending by local governments and approved housing bodies is providing an additional €900 million stimulus on top of spending outlined in the Budget.

It is also critical of continued overruns in health budgets, which it finds have averaged more than €500m a year since 2014.

It points out that most of the benefit from lower interest rates on Government debt and higher than forecast taxes has gone on current expenditure, which is expected to be long lasting.

Without those "excess" corporate taxes, the fiscal council concludes that Ireland would have broken EU budget rules.

On Brexit, it warns the outlook is still uncertain, saying the impacts on the Irish economy "could be more severe than projected".


Read more:
Fiscal report: How do our finances fare?


Speaking on RTÉ's Morning Ireland, council chairperson Seamus Coffey reiterated warnings that the Government should not be overly reliant on corporation tax.

Mr Coffey said corporation tax "was likely to go up as it is to go down" and corporation tax receipts are volatile and uncertain.

For most years, he said, the top ten payers have accounted for between 45-50% of the tax.

Mr Coffey added that the Government has been using corporation tax "almost as soon as it has been coming in".

He added that the council was concerned that the Government has failed to stick to spending plans in recent years and that there have been significant over runs.

However he said these over runs have been "masked by corporation taxes" which makes the public purse seem healthier than it actually is.

He said: "There has been significant overruns in spending for almost every year, in recent years, and this has been masked by these corporation tax receipts which make the public finances appear better than they might actually be.

"And one issue with these overruns - a lot of them happen on current spending, a lot is additional unplanned hiring that leads to increased wage costs.

"These are ongoing and repetitive. So we're building up permanent increases in spending and commitments that need to be met on a year-to-year basis and it may be that they're being based on a revenue source that may not be there into the medium term."

A spokesperson for the Minister for Finance has responded to today's report from the Irish Fiscal Advisory Council by pointing out that "the European Commission gave our Budget a clean bill of health last week". 

"Ireland was one of just nine Euro area countries to get this stamp of approval," the spokesperson added. 

She also noted the welcome given by the Council to the Minister's decision to take account of spending overruns within departmental budgets. 

She said the Government was "acutely aware" of exposure to corporation tax receipts and pointed to a paper on this published by the Department at Budget time. 

Responding to the Fiscal Council's call for a contribution to the Rainy Day Fund to be made in the event a disorderly Brexit is avoided next year, the spokesperson said "...in the event that a disorderly Brexit is avoided, the budgetary position will remain in surplus as opposed to the deficit expected".

"This will make the public finances more resilient, as would be the case with additional funds being deposited into the RDF," she added.