Economy ‘at risk of overheating’

OVERHEATING in the Irish economy could potentially occur in the near future, the Oireachtas’s own Parliamentary Budget Office has said.

The PBO’s pre-Budget commentary said the current ‘best estimates’ do not highlight an immediate risk of overheating, but warned that ‘this could potentially occur in the near future.’

For that reason, it is ‘important to avoid higher spending during economic growth’, it said. The PBO urged Finance Minister Paschal Donohoe to ‘adopt a prudent fiscal stance for Budget 2019, targeting a balanced budget’.

With Brexit looming, the minister himself has emphasised prudence recently. The indications are that the total weekly benefits to average earners in next Tuesday’s Budget will not amount to more than €5 – and that there will be additional revenue-raising measures which could wipe most of it out.

The PBO was established in August last year as a source of financial and budgetary intelligence for members of the Oireachtas and the Committee on Budgetary Oversight. It particularly warned about spending increases, even though Fianna Fáil has secured an agreement that there will be €2 in spending hikes for every €1 in personal tax reductions.

‘Expenditure increases, particularly of a permanent nature, should not be funded through potentially unsustainable and volatile tax revenues,’ the report said. It comes as the Exchequer returns from the first nine months of this year are set be published by the Department of Finance today. They are understood to show a continuing cost overrun in the Department of Health.

Meanwhile, Sinn Féin finance spokesman Pearse Doherty has welcomed the call from auditors Ernst & Young for a tax relief for renters.

The Donegal TD declared: ‘A tax relief for people renting from private landlords without State support of up to one month’s rent is a key plank of Sinn Féin’s alternative Budget.’