Wednesday 11 December 2019

Budget watchdog wants transparency on hidden spending of €1bn

Seamus Coffey, head of Fiscal Advisory Council
Seamus Coffey, head of Fiscal Advisory Council
Donal O'Donovan

Donal O'Donovan

The details behind as much as €1bn of a faster-than-expected hike in Government spending next year are not in the Budget and are having to be pieced together by the State's own budget watchdog.

Irish Fiscal Advisory Council (IFAC) chairman Seamus Coffey says it struggles to access information in relation to a swathe of around a fifth of Government spending that falls outside the formal Exchequer process - including spending by local authorities and what appears next year to be a planned hike in capital spending by housing bodies.

Of what is now projected to be a €4.6bn net spending increase in 2020, close to €1bn falls outside of the Exchequer data for which detailed information is available in published budget papers.

Based on an investigation by the IFAC and queries to the Department of Finance, it is thought €600m of the unplanned increase relates to investment in new housing by approved housing authorities.

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Mr Coffey said the IFAC was not taking issue with how the money is to be spent and said officials provide information when asked.

"It should be far more transparent, it shouldn't be a question of us having to ask the right questions," he said.

Traditional Exchequer data misses 15pc to 20pc of annual spending, he said, even though the widest measure of general government spending is a better guide to what's happening with the State finances.

He was speaking at the launch of the latest 'Fiscal Assessment Report', the first since Budget 2020 was unveiled in October. The IFAC said that what was initially planned as modest spending increases next year have already been hiked by €2.1bn - even if there's no hard Brexit and more if there is.

That pushes net spending to the limit of what could be regarded as a sustainable limit, at a time when the economy is growing robustly, he said.

The council view is that the Government should set aside funds during periods of growth to have available in slowdowns.

In fact, it found that since 2015 increased spending - including significant unplanned spending - more than outpaced additional tax and other gains of as much as €14bn.

The council has repeatedly warned that a surge in corporation tax paid mainly by foreign-owned multinationals is unpredictable and should not be the basis for higher spending commitments that will still have to be met if the income evaporates.

The Government's spending overruns in 2019 are now forecast to be €700m.

"For 2019, the Government did not stick to its plans and is again likely to rely on unexpected corporation tax receipts to fund spending overruns," the IFAC said.

A budget package allocated for Brexit mitigation next year, if required, may need to be beefed up, it added.

Irish Independent

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