The economy is recovering faster than expected but considerable uncertainty remains over the cost of climate action and Sláintecare reforms.

In its response to this year's Budget, the Irish Fiscal Advisory Council has also recommended that government commitments on spending limits should be backed up with legislation.

IFAC says October’s Budget struck "an appropriate balance" between supporting the economy and keeping the public finances on a sustainable path.

The Council welcomes the Government’s 5% spending rule but wants it backed up with legislation.

It warns that with expenditure levels already high, the room for new spending or tax cuts in future budgets could be limited to around half a billion a year, far less than government forecasts.

It is also worried about what was not laid out in the Budget. It says the cost of the Climate Action Plan is unclear and the estimated costs of Sláintecare health reforms have not been updated since 2017.

It also recommends any unplanned windfalls in corporation tax be deposited in the now depleted Rainy Day Fund.

IFAC estimates that after accounting for the growth in the population and indexing payments and tax bands to inflation, the "stand alone" costs of providing public services will soak up around €1 billion a year in budgets out to 2025.

This will reduce the available resources for new spending or tax reductions to around half a billion a year.

The Budget, by contrast, lays out additional room for spending of around €1.6 billion a year.

The Fiscal Council says additional spending, beyond half a billion a year, would require tax increases or spending reductions and that "failure to plan for future spending pressures may make it more difficult for the Government to stick to its spending rule".

The Fiscal Council has also called for departmental expenditure ceilings for three years out to be published.

Its recommendation to save any additional corporation tax in the Rainy Day Fund applies to windfalls of tax which had not been anticipated and any additional revenue which accrues to the State from the agreed increase in the global minimum 15% rate.

It says there is a risk the reliance of the Exchequer on corporation tax will continue to build.

It recommends that windfall amounts of corporation tax be treated in the same way Norway treats revenues from oil and gas - as a finite and volatile resource.

IFAC estimates the current level of "excess" corporation tax is between €3.2-6.4 billion.

The forecast for corporation tax this year was increased in the Budget from €12 billion to just under €14 billion.

The Chairperson of Irish Fiscal Advisory Council said the cost of the climate action plan and Sláintecare do not appear to have been factored into the Government's medium term fiscal planning.

Speaking on Morning Ireland, Mr Barnes said this means the Government will have to make some serious choices in the years ahead.

Sebastian Barnes said there is no real analysis of what the Government plans to do with the climate action plan or what the overall package is going to cost.

He said more clarity is needed because the Government is engineering a massive change in the economy and society.

There is a lot of uncertainty and the issues are very complex, he said.

Mr Barnes also said he thinks the money is there to fund the Government's mica scheme.

This is essentially a one off cost that does not change the trajectory for the medium term, he explained.

Mr Barnes also said Ireland remains very dependent on a small number of international companies for high levels of corporation tax.

He said the Government should wean itself off this over reliance because those companies could easily change their arrangements and move that revenue elsewhere.