Ireland to channel tax windfall millions into spending

DUBLIN (Reuters) - Ireland will use two-thirds of 2.3 billion euros more tax set to be collected than initially anticipated this year for additional spending by government departments, the finance department said on Saturday.

The Irish economy is expected to be the best performing in Europe for a second successive year in 2015, with forecast growth of more than 6 percent reflected in surging tax revenues.

While that has helped bring a budget deficit that ballooned during the economic crisis under control, the government said last week it would spend some of the gains, particularly in the struggling health service which has consistently required extra funds and needs an added 600 million euros this year.

The leeway afford by the extra revenue will allow government departments to spend 39.5 billion euros this year, meaning spending will have fallen by 2 percent since the crisis hit in 2009 despite years of budget cuts that were implemented before, and during a 2010-2013 international bailout.

Since collapsing in 2009, tax revenues have risen by 35 percent over the past six years to over 44.5 billion euros this year, returning towards levels seen during the "Celtic Tiger" boom years as a result of personal tax hikes, levying of new taxes and, most recently, the recovering economy.

While the government will still comfortably cut its deficit below the European Union target of 3 percent of gross domestic product (GDP) this year, the 1.5 billion euros allocated for extra spending is double the level permitted for next year's budget under EU fiscal rules.

With an election due in the next six months and Prime Minister Enda Kenny considering calling it as soon as November, opposition politicians accused the government of trying to buy votes.

"It is striking that the government intends to spend twice the amount in supplementary estimates before the end of the year than all of the extra spending pencilled in for next year in next week's budget," Michael McGrath, finance spokesman for the largest opposition party, Fianna Fail, said in a statement.

"With an election looming and strict fiscal rules coming into effect in the new year, the suspicion will be that the government is trying to circumvent the rules through the back door and essentially buy votes."

(Reporting by Padraic Halpin; Editing by Mark Heinrich)