WEALTH October 5, 2025 0 Comments

When Past Budget Mistakes Keep Haunting Your Profits: The Hidden Drain Sabotaging Your Success

Looking back at a decade of economic rollercoasters in Ireland, I can’t help but wonder: are we really celebrating growth, or just cleverly juggling numbers while riding the tax haven wave? Remember Ashoka Mody, the IMF’s fiscal watchdog between 2010 and 2013? He was brutally honest about Ireland’s economic reality — full employment didn’t mean genuine expansion, but a masked facade. Fast forward to today, the hush before Budget 2026 feels too quiet to be reassuring. With government spending on everyday running costs set to leap past €100 billion next year — nearly doubling since 2019 — and infrastructure investments quietly climbing beyond public admission, there’s a tension simmering beneath the surface. Opposition parties scream for more spending, yet the Central Bank warns against flooding the market with cash we apparently don’t need. It’s a financial dance that’s as fascinating as it is fraught, and it’s begging one bold question: are we gearing up for sustainable prosperity or just replaying the pre-2007 script with a fancier soundtrack? Let’s unwrap this budget story carefully — it’s about more than numbers; it’s about where we’re headed next. LEARN MORE

Gavan Reilly looks ahead to Tuesday’s budget while looking back at where the country has come from over the last decade.

A few years ago, as he was publishing a new book, I interviewed Ashoka Mody. That’s a name that might bring out a cold sweat among some of you – he was one of the senior figures in the IMF responsible for the fiscal governance of Ireland between 2010 and 2013.

I asked him, at a decade’s remove, how he felt about Ireland’s economic nadir and the dramatic subsequent comeback.

Mody — now a visiting professor at Princeton — was blunt.

At full employment, he said, there was no feasible way that GDP figures could represent a meaningful expansion in Ireland’s economy.

We were, he said, a tax haven. Those warnings, from disasters past, came back to mind this month as I observed the strangely muted build-up to Budget 2026.

The combination of a presidential election with the preempting of the capital spending plans in July’s National Development Plan means much of the haggling has already been done.

Yet this unremarkable build-up is itself remarkable.

When Jack Chambers gets to his feet in the Dáil chamber on October 7, he’ll likely be announcing that spending on the everyday running of the state will surpass €100bn in 2026.

That’s a significant surge in the everyday costs of running the country.

The budget delivered in October 2019, drawn up when the pandemic was just a twinkle in a bat’s eye, outlined plans for current spending of €62bn.

That’s everyday spending — on running the health service, paying doctors, nurses, teachers, gardaí, public servants — rising by 62 per cent, in a window where the population rose only by about a tenth.

Much of that increase is justified.

Readers need not look too far to find evidence of systematic underinvestment in research and development, in the provision of services for disabled citizens, or in the country’s everyday defence capabilities, to name but a few — not to mention the country’s massive deficits in infrastructure of all sorts.

But this increased spending comes at a time when the government claims — publicly, at least — to be putting the brakes on.

The government also says it’s increasing capital spending next year by a comparatively modest €2bn, compared to 2025 levels.

A deeper dive into the published literature suggests otherwise: the aforementioned National Development Plan actually projects the country to spend €19bn on infrastructure next year, compared to under €15bn in the ‘bonanza’ budget that preceded last year’s general election.

If this is making you feel a little uneasy, let me add some more queasy seasoning: the fact that there is virtual unanimity among opposition parties that the plans for spending are not nearly enough.

On any given day you can’t move without hearing demands for the government to restore the ‘one-off ’ energy credits paid for each of the last four winters.

At 1.8 million households, and €150 three times for each, that’s a casual demand for the state to spend €810m subsidising energy bills.

Worthy? Perhaps.

Many households will suddenly feel squeezed this Christmas without really knowing why.

The bills will have the same bottom line, but the capacity to pay them will feel that bit less.

Sustainable? Hardly.

That’s only one measure being sought. Throw in demands to add €10 or €15 to weekly social welfare rates and so on, and the costs quickly add up.

Then, enter the Central Bank, stripped of any concerns about realpolitik, with the kicker: with the economy still outperforming expectations and employment at record highs, there is simply no need to put an extra €9.4bn into circulation.

budget
Gavan Reilly — When Jack Chambers gets to his feet in the Dáil chamber on October 7, he’ll likely be announcing that spending on the everyday running of the state will surpass €100bn in 2026.

Perhaps it’s that the policy mandarins aren’t bothered about underinvestment in roads and rail, or insufficient public services.

Or perhaps it’s that during the pandemic we became very accustomed to an interventionist state spending big and have forgotten how to live more frugally.

Either way, the cocktail of regulatory restraint and political ambition is all beginning to feel a little too 2007 for my personal liking.

I hope I’m overreacting — I fear I’m not.