The Fiscal Advisory Council has said that a 2017 budget package of €900m would be consistent with prudent economic and budgetary management. 

However it said that some €6 billion - around half of the additional money the Government believes it will have to spend on budget increases over the next five years - will be needed for cost of living increases to existing spending programmes.

In a formal assessment of the Government's Spring Economic Statement, the Fiscal Council said the economy has recovered at a faster pace than expected.

But the Council warned that hard won gains can be quickly lost by a high debt country making bad budget choices.

It said the Programme for Government has a list of new spending and tax cutting plans, but does not match them with the resources expected to be available during the lifetime of the new Government - the so-called Fiscal Space.

The Council said that some €6 billion of that fiscal space - around half of the total - will be needed just to keep pace with cost of living increases and to stop inflation eating away at the real value of spending in areas like social welfare.

That would leave less money for other programme commitments.

It said the Government should publish detailed plans which demonstrate how the various policy commitments in the Programme for Government will be paid for within the estimated remaining fiscal space, allowing for the cost of maintaining existing public services. 

The assessment said "until this detail is provided, it is unclear how the Government's plans in the Programme for Government are consistent with meeting the fiscal rules and reducing the deficit and debt".

It would be appropriate for the Government to use available fiscal space after 2017 - but only if the economy is growing at a sustainable rate, it added.

According to the Council, the Government needs to look out for signs of overheating in the economy, saying the strong growth requires no further fiscal stimulus.

It added that the Government might actually have to start thinking about taking money out of the economy through a rainy day fund (another Programme for Government commitment) to head off another boom-bust cycle. 

While there are no signs of overheating now - no clear wage and price pressure, low investment levels, little credit market easing - it said the economy is getting closer to operating at its potential level.

With high growth and falling unemployment, medium term planning needs to be able to react quickly to any emergence of overheating, the Council cautioned.

It also warned of possible risks to economic growth, including Brexit, a change in US corporation tax policy or simply slower growth than forecast. 

It said an economic shock that lowered GDP growth by 1.5% below the forecasts in the Spring Economic Statement would cause the debt-to-GDP ratio to stagnate at its current high level, before starting to rise again by the end of the decade - unless there was additional budgetary adjustment.

Another risk it noted is the volatility of Corporation Tax, and the heavy reliance on just a handful of firms to provide the lion's share of the tax. 

It said that uncertainty surrounding Corporation Tax has increased in the last year. Having unexpectedly increased by 50% last year, the Department of Finance is now forecasting a 3.7% decrease in Corporation tax receipts. 

The Fiscal Council pointed out that just ten big companies here paid over 40% of Corporation Tax last year, compared with a 21% share for the top ten firms in 2009. 

These ten firms account for 6% of total Exchequer revenue - approximately the same proportion of overall Exchequer tax revenue as stamp duty had in 2007.

Today's assessment said it is important that future budget plans do not become overly reliant on Corporation Tax receipts, because of this concentration vulnerability.

The Fiscal Council also said a preliminary estimate by the Department of Finance shows a fiscal space of €900m will be available for budget 2017. 

Along with a similar sized increase already allocated, the total increase in the package for 2017 of some €1.8 billion would be consistent with prudent economic and budgetary management. 

It said that given the forecast growth in the economy, a package of this size would be "modestly contractionary".

But high recent growth and falling unemployment limits the case for a more expansionary fiscal stance, while the still high debt level leaves the economy vulnerable to shocks, the Council added.