'Budget 2026 was wrong to begin with' - IFAC

We spent most of yesterday's show talking about the budget of over €125 billion for next year, 6% more than last year, including over €1.5 billion in tax cuts. Not everyone was happy. People we talked to in Kinegad paying for petrol and diesel said it wouldn't be enough, and economists say it was too much. The Irish Fiscal Advisory Council, set up at the insistence of the Troika after the last crash to advise against another one, described the government's budgetary approach as fast and loose, saying it repeatedly breaks established spending limits, excuse me, and is increasingly relying on high-risk corporation taxes. Here's what the Taoiseach said in response.

Well, first of all, I would disagree in the sense that, first of all, this year we said we'd come, we'd budget for 6% as part of the medium-term plan we sent to Europe. We're within 6% increase in expenditure for 2027, and within that there's £1.6 billion unallocated contingency fund. So I'm in a very strong position going into 2027 to hold to that. But if you take the 5% rule that they reference, I don't think that was actually realistic, even though government did set it, given the growth of the economy and also the growth of inflation. And your expenditure rule has to mirror and reflect the growth in the economy, growth in population and indeed growth internationally. So they're wrong tonight. And I would question, I mean, look, we take very seriously what they say, but in the overall, if you look at overall public expenditure over the last number of years, it's more or less remained consistent at about 33% of gross national income. Our population has grown, our economy has grown, the public expenditure growth is reflecting that. But Minister Chambers, to be fair to him, and you saw all the tough negotiations that went on, he has created, I think, a public expenditure framework for 2027 that is robust and that will hold over the duration of next year.

Taoiseach Micheál Martin. Seamus Coffey is in our Cork studio. He's chair of the Irish Fiscal Advisory Council. Morning, Seamus. Morning, Gavin. The Taoiseach says that the increase in spending is consistent, that it's in line with the growth of the economy and the population. Is he right?

Well, the planned increase seems in line with what we might call the potential growth of the economy and inflation. Yes, for 2027, the planned growth rate in spending is 6%. We've seen this for each of the last four or five years, where the government sets what it feels is a sustainable target for spending increases. The previous government announced an intention to be around 5%. This government has done it more formally. They've submitted an expenditure plan to the European Commission, where they say they intend to stick to a growth rate of around 6%. And yes, the plan for 2027 does suggest that we will see a growth in spending of around 6% next year. But as I said, we've seen that for each of the last four or five years, planned spending increases of around 5% and 6%. But actual spending increases have been around 10%.

Well, what hasn't been included here?

So if we look at what's happened over the last number of years, there's been various departments