Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Prices for a range of goods and services in the domestic economy are now rising at a level not seen since the Celtic Tiger era, the Irish Fiscal Advisory Council (Ifac) is warning.
Council chairman Seamus Coffey will tell the Oireachtas committee on Budgetary Oversight later this evening that while headline inflation has fallen below 2 per cent this is largely down to falling energy prices and that other areas are “seeing fast price increases”.
“We can see continued pressure on areas such as rents, medical services costs, and prices in hospitality, cafes and restaurants,” he will tell the committee in an opening address seen by The Irish Times.
When it comes to the things that Ireland doesn’t import, “the pressures are now similar to what we would have seen in the 2000s,” he warns.
Mr Coffey will also warn the committee that the Government is adding to these price pressures by continually breaching its own tax-and-spending rule.
He cites Central Bank research, which suggests that repeated breaches of the rule, which seeks to keep annual spending increases inside a 5 per cent ceiling, has probably added €1,000 to the average annual household bill.
“The Government might put money back in people’s pockets, but by raising prices these indirect costs take out of their pockets in a lasting way,” he will tell the committee.
Ifac predicts the Government will breach the national spending rule this year by a much bigger margin than previously flagged with spending overruns in health and other areas potentially surpassing €3.5 billion by the year’s end.
The council said net spending is on course to increase by 9 per cent (from €94 billion in 2023 to just over €100 billion in 2024) as opposed to staying within the 5 per cent limit set down in the spending rule.
It said it had expected a budget increase of about 6 per cent in 2024 this time last year but now expects the increase to be closer to 9 per cent.
“This is due to the fact that many spending programmes the Government had classed as temporary or ‘noncore’ now look set to be permanent,” the council said.
And, on top of that, it said it expected large overruns in spending this year, mainly in health. “This would take gross voted spending to just over €100 billion,” it said.
The spending rule was adopted in 2021 but has been broken every year since.
Mr Coffey will tell the committee the current pricing pressure are coming at a time when Ireland is posting record jobs numbers, which is adding to wage growth.
“By expanding in all areas of its budget – everything now – the Government is not making choices. It is not lessening these pressures,” he says.
“Tax cuts, higher day-to-day spending, and a continued ramp-up in capital plans are all in prospect for Budget 2025. The Government’s Budget package is already large. Overruns and untargeted cost-of-living measures will add to the pressure further,” he says.
English