Government spending jumped by 54 per cent, or €36 billion, between 2019 and 2024, with increases in day-to-day spending on public services accounting for the lion’s share, the Government’s latest Medium-Term Expenditure Framework (MTEF) has indicated.
The document, required by the European Commission, sets out the Government’s spending priorities and assumptions for the next five years while assessing the trends in the previous period.
The latest review, published by Minister for Public Expenditure Jack Chambers, noted that total Government expenditure increased from just over €67 billion in 2019 to €103.7 billion in 2024.
This represented a total increase of €36.4 billion and an annual average growth rate of 9.4 per cent, nearly double the 5 per cent ceiling laid down by the Government’s spending rule.
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In the previous five-year period of 2014 to 2019, expenditure cumulatively grew by €13.2 billion, at an annual average growth rate of 4.5 per cent.
The Irish Fiscal Advisory Council (Ifac) has criticised the Government for failing to rein in spending and has predicted that overruns in day-to-day spending are likely to top €2.5 billion this year.
In a report this week, the budget watchdog said the spending overruns were more broad-based than in the previous years, with expenditure across education, children, justice and health all more than anticipated.
The Government’s spending framework document noted there was “a level shift” in spending in 2020 following the onset of the Covid-19 pandemic.
“While large elements of pandemic related expenditure have subsequently been unwound, the expenditure base is permanently higher,” it said.
The report noted that one of the major challenges facing Ireland’s economy over the past decade has been efforts to improve Ireland’s infrastructure, which it said continued to lag behind that of other high-income European countries with significant shortfalls in housing.
Setting out its future spending priorities, the department flagged the importance of capital investment “in economically strategic areas including housing, water, electricity and transport”.
It envisaged three scenarios in which spending rises by €9 billion (continuing the trend of recent years); by €7 billion (with specific priorities for current and capital spending) and; by €5 billion (where capital investment and current spending on demographic-related provision would be prioritised).
These scenarios do not take account of “any adverse economic shock” which could require additional labour market related expenditure or take into account capacity constraints in the labour market and wider economy.
Minister Chambers said: “Taking a wider multi-annual view will complement and guide the annual budget cycle, enabling us to anticipate and prioritise effectively for the challenges and opportunities ahead.”
“This framework provides a number of insights to guide future budgetary decisions. Among these is the importance of capital investment in economically strategic areas to support housing delivery and to facilitate future economic growth,” he said.
