Leo Varadkar's budgeting plans have been dealt a blow - by his government's own fiscal watchdog.

The new Fine Gael leader wants to relax Ireland's plans to lower its national debt, and use the extra money for other projects instead.

The proposal to lower the national debt to 55% of GDP, rather than the current plan of 45%, could have freed up around €25 billion to be put towards other day-to-day or capital spending.

But the Fiscal Advisory Council says not only should the original target should be kept, but in fact set even lower.

It says that the current method for calculating the national debt is unstable and unreliable - but that even the original target may not have been prudent.

It says the 45% ratio "should not be considered a low/prudent debt burden", especially after the 'leprechaun economics' controversy of last year - when GDP grew by 26 per cent in a single year.

Opposition parties have said the warning undermines Varadkar's economic credentials - and have also pointed to concerns about how the State is growing increasingly reliant on corporation tax.

Our political correspondent Gavan Reilly reports: