The Government's own fiscal watchdog is warning a giveaway budget could overheat the economy.
The Irish Fiscal Advisory Council (IFAC) is warning against tax cuts and increased public spending in Budget 2025.
Acting Chair Michael McMahon said an over-expansive cost of living package does not reflect the finances of the State.
“The Irish economy is performing well and is operating at or above potential,” he said. “As a result, this is not the time for loose budgetary policy.
“Choices need to be made and doing everything now - tax cuts, current spending increases, ramping up capital spending - could all overheat the economy and add to price pressures.”
Budget 2025
The Government has previously said there will be cost of living measures in Budget 2025, expected to be announced in October.
Taoiseach Simon Harris said at the end of May that the Government knows that "a strong economy has to translate into tangible benefits for our people”.
“Cost of living increases have left [people] feeling their personal finances are insecure and might not withstand any further shocks,” he said.
"In the coming budget, we must ensure we provide the extra funding required to keep pace with the expanding population and a cost of living and welfare package that protects the most vulnerable.”
IFAC warnings
The IFAC also said health spending is already overrun by €1.6 billion this year, warning the spending on health is likely to overrun in winter.
Mr McMahon noted overruns from last year were not incorporated into the Budget for 2024 - and now overruns are happening earlier than in previous years.
It also said a downturn in a small number of sectors would impact income tax as well as corporation tax.
It said that just three firms accounted for 43% of corporation tax revenues in 2022.
According to the IFAC, income tax is also highly concentrated within a small number of well-paid employees paying the majority of tax.
Mr McMahon said the Government should not be over-reliant on corporation tax and income tax returns, warning that a “sectoral slowdown” could damage Ireland’s public finances.
