Govt plan aims to keep spending growth to 6% per annum

The Government will publish a major expenditure strategy today which will aim to limit spending growth to 6% per annum on average until the end of 2030.

The Medium Term Fiscal and Structural Plan will be launched by Minister for Finance Simon Harris and Minister for Public Expenditure Jack Chambers.

The plan will set out spending until the end of the decade and is a requirement under EU law.

The Government had promised to publish the document in the summer and was criticised for delaying its release.

The Coalition’s repeated overspending beyond its commitments in the Budget has been highlighted by the Irish Fiscal Advisory Council.

The previous Fine Gael, Fianna Fáil and Green Party government abandoned a 5% spending limit and the former Minister for Finance Michael McGrath said it was “not a rigid rule”.

It is expected that the document, which will be published this morning, will commit the Government to 6% growth in spending annually in terms of capital and current expenditure over the lifetime of the Coalition.

It will focus on the delivery of infrastructure, in particular housing, and improved services including childcare.

It is expected the Government will say the latest plan pivots to a medium-term budgetary outlook anchored in credible fiscal policy and preventing in-year spending.

The Coalition’s spending for 2025 is already €4bn beyond its commitments made in October last year when the Budget was published.

Robert Kelly, Director Economics and Statistics Central Bank, said the Government’s aim to limit spending growth to 6% a year on average will need to be “sustainable.”

He said the Government is linking its Medium Term Fiscal and Structural Plan “to the growth in the economy, through the cycle and adjusted for the long-term inflation.”

“We need to think about how it smoothes the cycle, so we don’t want to be leaning in and making decisions which increase the levels of spending when times are good that we’ve to really cut back.

“We’ve seen what that was like 15-20 years ago now.

Mr Kelly said the economy is “very complex to measure.”

“When we think about Corporation tax and the excess Corporation tax receipts, it’s about having a simple rule that allows us to stick with.

“But building credibility in this place is incredibly important.”