OECD review of the Irish Fiscal Advisory Council 2026

2. The evolving domestic and international context

2.1. Domestic fiscal context

Ireland’s fiscal position has strengthened since the 2021 Review. Strong economic growth, sustained surpluses and a declining debt ratio have improved headline indicators. Windfall corporation tax receipts have also created additional fiscal space and supported the establishment of the Future Ireland Fund and the Infrastructure, Climate and Nature Fund to address long-term spending pressures.

Despite these favourable indicators, underlying vulnerabilities have increased. The public finances remain highly dependent on a narrow and concentrated corporate tax base, while structural spending pressures continue to rise (OECD, 2025[2]). Expenditure growth remains strong, particularly in healthcare, and around 85% of corporate tax receipts are being used to finance current spending (Irish Fiscal Advisory Council, 2025[3]). This increases exposure to volatile revenues and raises the risk of abrupt fiscal deterioration. Strong revenue performance can weaken incentives for fiscal restraint, increasing the likelihood that vulnerabilities build during periods of economic strength.

Ireland’s fiscal dynamics differ significantly from those of many peers. The relationship between output, revenues and debt is heavily influenced by multinational activity, meaning that standard indicators expressed as a share of GDP do not fully capture underlying fiscal pressures (OECD, 2025[2]). As a result, headline indicators may give a misleading impression of fiscal space even as risks accumulate.

This highlights the importance of expenditure-based fiscal anchors. Unlike budget balance indicators, expenditure ceilings can help insulate spending decisions from temporary revenue developments and reduce the risk that windfall revenues become embedded in permanent expenditure commitments.

Ireland submitted its first Medium Term Fiscal and Structural Plan in October 2024, followed by an updated plan in January 2026. The current plan sets out Ireland’s fiscal strategy, including indicative net expenditure ceilings. However, these ceilings have limited visibility and are not yet embedded within a clearly articulated national framework.

These features point to the need for a stronger and more credible national fiscal framework, better aligned with Ireland’s underlying risks and capable of providing a clear basis for transparency, accountability and oversight. In this context, well-designed expenditure rules can help manage revenue volatility and reduce pro-cyclical fiscal policy (Rozenov et al., 2025[1]).

2.2. EU fiscal reforms and their implications for Ireland

2.2.1. Key features of the 2024 EU framework

The EU fiscal framework has long shaped national budgetary governance. Successive reforms of the Stability and Growth Pact (SGP) have defined fiscal rules, guided national policy and played a central role in the development of IFIs.

The 2024 reform marks a shift towards a more country-specific and medium-term framework. Fiscal requirements are now derived from debt sustainability analysis, with Member States setting expenditure paths through Medium Term Fiscal and Structural Plans. This approach places greater emphasis on national ownership and alignment with country-specific conditions.

The reform is set out in Directive (EU) 2024/1265, which strengthens requirements for national budgetary frameworks. Member States must establish credible medium-term frameworks supported by numerical rules and effective institutional arrangements.

The Directive also expands the role of IFIs, including assessing the consistency, coherence and effectiveness of national fiscal frameworks and strengthening engagement with national parliaments. It further reinforces requirements relating to independence, resources, access to information and public communication.

These reforms shift greater responsibility to national frameworks and institutions to ensure effective fiscal governance and support fiscal discipline.

The deadline for transposition of the Directive was 31 December 2025. While several Member States have completed this process, Ireland has yet to do so, and it is not included in the most recent Government Legislation Programme (Department of the Taoiseach, 2026[4]).

2.2.2. Limits of the EU framework in the Irish context

The reformed EU framework presents specific challenges in the Irish context. In particular, reliance on debt and deficit indicators expressed relative to GDP does not fully reflect underlying fiscal risks. This reflects the disconnect between GDP-based metrics and underlying fiscal capacity in an economy heavily influenced by multinational activity.

Under the new framework, countries with low debt and deficit ratios are not required to undertake significant fiscal adjustment. In Ireland’s case, this may weaken the disciplining effect of the framework, as favourable headline indicators can mask underlying vulnerabilities. Fiscal conditions may appear strong even as imbalances build, reducing incentives for prudent policy.

At the same time, the Medium Term Fiscal and Structural Plan provides the main fiscal anchor through net expenditure ceilings. However, these ceilings have limited public and political visibility. In the absence of procedural consequences for non-compliance, their influence on fiscal decision making remains limited as long as EU thresholds are respected.

While the EU framework provides an important overarching structure, it offers only a partial, and at times weak, anchor for fiscal discipline in Ireland. This places greater weight on national fiscal arrangements to ensure effective oversight and policy discipline.

2.2.3. Implications for national frameworks and IFIs

The evolving EU framework increases the importance of well-designed national fiscal frameworks. Achieving sound public finances now depends more heavily on domestic arrangements that provide credible rules, clear benchmarks and effective oversight mechanisms.

For Ireland, this implies greater reliance on national institutions to interpret fiscal developments, assess risks and support policy discipline in a context where EU indicators provide only a partial picture. IFIs, in particular, play a central role in strengthening transparency, enhancing accountability and supporting informed fiscal debate.

The following section sets out the implications for the Council and identifies priority areas where its role could be strengthened.

2.3. Implications of evolving domestic and international context for the Council’s role

The evolving domestic and international context places new demands on the Council’s role. Four areas in particular stand out: strengthening parliamentary engagement and national ownership, deepening analysis of expenditure ceilings, expanding the Council’s role in assessing and improving the fiscal framework, and broadening its analytical focus towards medium‑ and long‑term sustainability.

2.3.1. Strengthening national ownership and parliamentary scrutiny of net expenditure ceilings

Strengthening parliamentary involvement would enhance national ownership and accountability for net expenditure ceilings. This would require the Oireachtas to formally approve the Medium Term Fiscal and Structural Plan, in line with practice in several OECD countries (see Figure 2).

The Committee on Budgetary Oversight already engages with the Plan, including hearings with Ministers (for example on 3 March 2026) (Houses of the Oireachtas, 2026[5]) and discussions with the Council (27 January 2026) (Houses of the Oireachtas, 2026[6]). However, the timing of the publication and submission of the Plan to the Oireachtas limited opportunities for parliamentary scrutiny before its transmission to the European Commission.

Formalising parliamentary approval and ensuring that the parliament has sufficient time for scrutiny before the plan is submitted to the European Commission offers the opportunity to strengthen national ownership of net expenditure ceilings. It will also provide a clearer institutional channel through which the Council’s analysis can inform fiscal decision making.

A more structured process would also improve the quality of engagement between the Council and parliament, focusing discussion on the realism of net expenditure ceilings, underlying assumptions and fiscal risks rather than repeating established positions.

Figure 2. Legislative role in approving medium-term budget proposal

Source: 2025 OECD Survey on Parliamentary Budget Oversight, Question 5.

2.3.2. Strengthening independent analysis of net expenditure path

The Council assesses compliance with net expenditure ceilings in its Fiscal Assessment Report twice a year. However, stakeholders called for enhanced scrutiny of the expenditure ceilings, in order to improve their visibility and effectiveness.

The Council could play a greater role in assessing whether net expenditure ceilings set out in Ireland’s Medium-Term Fiscal and Structural Plan are realistic, aligned with underlying cost pressures and consistent with medium-term fiscal sustainability. Such analysis is particularly relevant in the Irish context, where exceptional corporation tax receipts create a disconnect between headline budget balances and the underlying fiscal position. Monitoring expenditure developments alongside existing work the Council does on the risks around the sustainability of revenue growth will allow the Council to assess whether fiscal policy remains consistent with medium-term sustainability objectives even when headline indicators appear favourable. Scenario analysis focused on alternative paths for corporation tax receipts could form part of this assessment.

Experience in other countries provides useful examples. In the Slovak Republic, the Council for Budget Responsibility has developed tools to assess the realism of fiscal projections and monitor developments throughout the budget year (see Box 4). This approach combines detailed technical analysis with accessible communication, strengthening both transparency and policy impact.

To perform a similar role, the Council will require improved access to detailed bottom-up spending data, and information on the assumptions underpinning budget projections. Strengthened arrangements with the DPER, including a formal Memorandum of Understanding, a published Statement of Data Needs and clear escalation procedures, would support timely and comprehensive analysis.

Enhanced scrutiny of net expenditure ceilings would also help address stakeholder concerns that fiscal forecasts are not subject to the same degree of independent scrutiny as macroeconomic forecasts.

Box 4. How the Slovak Council for Budget Responsibility monitors compliance with expenditure ceilings

The Slovak Council for Budget Responsibility (CBR) has developed a set of tools to assess the realism of fiscal projections and monitor compliance with fiscal targets, including expenditure ceilings, on a continuous basis throughout the budget year. This has proven particularly relevant in a context where tax revenues have deviated from expectations and fiscal policy has been adjusted during the year.

A central element of this approach is the CBR’s Evaluation of the Budget Proposal, published after the budget is presented to parliament. This report provides an independent assessment of the government’s fiscal projections, including whether fiscal targets are likely to be met under existing policies. It identifies risks to the fiscal outlook and assesses whether additional measures may be required to ensure compliance. This is based on the CBR’s fiscal forecast under the most-likely scenario.

This analysis is complemented by the CBR’s Budgetary Traffic Lights reports (see snapshot below) (Council for Budget Responsibility (RRZ), n.d.[7]), which provide a simple and accessible framework for monitoring developments during the year. These monthly, one‑page reports use a traffic light system to signal the likelihood of deviations from fiscal targets, based on updated projections of revenues, expenditures and the overall balance. The monthly forecasts are based on existing policies and assume that end-of-year developments follow patterns observed in previous years. This approach allows risks to be identified early and communicated clearly to policymakers and the public.

The work is supported by detailed methodological work setting out how fiscal projections are produced, updated and evaluated.

 

The CBR also publishes ex post assessments of compliance using budgetary outturn data, including analysis of the drivers of any deviations.

Together, these tools enable the CBR to provide a continuous and forward‑looking assessment of fiscal developments, strengthening scrutiny of fiscal projections and improving the monitoring of compliance with expenditure ceilings and medium‑term plans.

Source: (Slovak Council for Budget Responsibility, 2026[8]; Council for Budget Responsibility (RRZ), n.d.[7])

2.3.3. Strengthening the Council’s role in assessing Ireland’s fiscal framework

The reformed EU Directive expands the role of IFIs to include assessing “the consistency, coherence and effectiveness of the national budgetary framework” (Council of the European Union, 2024[9]). Such a role is particularly important in Ireland, where the EU framework has limited traction in capturing country-specific risks.

In transposing this requirement into national legislation, consideration could be given to establishing a statutory requirement for a periodic assessment of Ireland’s national budgetary framework, conducted and published by the Council at regular intervals. Such independent assessments would help drive the development of a stronger national framework that is better aligned with Ireland’s underlying fiscal dynamics and vulnerabilities.

Beyond monitoring fiscal developments, IFIs can also contribute to the design and improvement of fiscal frameworks. This includes providing independent opinions on proposed reforms and assessing whether existing arrangements effectively support fiscal discipline.

Experience from Spain illustrates this role. The Independent Authority for Fiscal Responsibility (AIReF) has provided a comprehensive assessment of the national fiscal framework and proposed reforms to strengthen its coherence, credibility and effectiveness (see Box 5).

Box 5. AIReF’s opinion on proposed reforms to the national fiscal framework

In November 2025, Spain’s Independent Authority for Fiscal Responsibility (AIReF) published an Opinion on the Reform of the National Fiscal Framework to support the transposition of the reformed EU Economic Governance Framework.

The Opinion provides a comprehensive assessment of the design and functioning of the fiscal framework, identifying key weaknesses including limited coherence between rules, weak enforcement mechanisms and low levels of compliance. It argues that reform should go beyond formal compliance with EU requirements and be used to strengthen the framework in line with national fiscal challenges.

In this context, AIReF sets out a series of proposals aimed at improving the consistency, credibility and effectiveness of the framework, including:

• a stronger medium‑term orientation, with clearer links between fiscal plans and policy measures

• placing an expenditure rule at the centre of fiscal oversight, aligned with the EU framework

• enhanced transparency and data availability to support monitoring and accountability

• more effective supervision and enforcement mechanisms, including clearer corrective tools

• stronger ownership across levels of government, alongside an enhanced role for the IFI

This approach illustrates how an IFI can contribute proactively to the design and improvement of the national fiscal framework.

It also reflects the type of analysis envisaged under the EU Directive, which assigns IFIs a role in evaluating the consistency, coherence and effectiveness of national frameworks.

Source: (AIReF, 2025[10])

2.3.4. Expanding the Council’s analytical focus more towards fiscal sustainability

The evolving fiscal framework places greater emphasis on medium‑ and long‑term sustainability. In Ireland, this is particularly important given the absence of an effective national fiscal rule and the limited traction of EU indicators in capturing underlying fiscal risks. In this context, robust and systematic sustainability analysis becomes a critical complement to the fiscal framework.

While the Council has developed strong capacity in areas such as potential output and output gap estimation, there is a need to further strengthen analysis of structural spending pressures, demographic trends and revenue risks. Regular and in‑depth sustainability analysis can provide an alternative benchmark for assessing fiscal policy, helping to identify emerging vulnerabilities and inform policy decisions where formal rules are less firmly embedded.

Strengthening this function will require addressing the constraints identified in Chapter 1, particularly in relation to access to information, resources and operational independence. Dedicating stable resources to long-term analysis would help embed this work as a core function and reinforce its role in supporting a more credible and resilient fiscal framework.

While demographic pressures remain important, fiscal sustainability analysis should also continue to examine risks associated with the concentration and volatility of corporation tax receipts. Scenario analysis assessing the implications of weaker revenue growth or a normalisation of corporation tax receipts would complement the Council's existing work and provide an additional benchmark for assessing fiscal policy.