Fiscal council warns Government may breach rules with water refund

The chairman of the Fiscal Advisory Council (FAC), Seamus Coffey, has warned that the repayment of water charges could see the Government breach EU fiscal rules.

The Cabinet agreed on Wednesday morning to refund water charges to all households before the end of the year.

Speaking on the Irish Times Inside Business podcast, Mr Coffey said in its pre-budget submission this week the FAC advised against any further relaxation of fiscal policy in 2017.

“It looks now that the repayment of water charges will be such a relaxation, and when it comes to the fiscal framework or the fiscal rules that we have, it looks that they’ll be breached again in 2017.”

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The FAC has warned that there is a risk of significant deviation across 2016 and 2017, and Mr Coffey said “these repayments of water charges, unless they’re funded by additional revenues elsewhere, are likely to exacerbate that risk”.

The Government has previously said that public sector pay rises brought forward to April of this year would be funded through under-spending in other departments. Mr Coffey was doubtful that the same could be applied to the funding of water charges repayments. “It looks like this money has already been spent a number of times.”