The Republic’s population is 180,000 bigger than what the Government anticipated as recently 2021, Minister for Public Expenditure Paschal Donohoe has told the Oireachtas Committee on Budgetary Oversight, as he defended the Government’s €8.3 billion budget plan.
Mr Donohoe said the strong growth in population necessitated an adjusted fiscal stance. The Republic’s population was estimated at 5.3 million at the end of 2023.
“The need to continue to improve public services and capital infrastructure to support a population that has grown faster than expectations” was a key objective, he said.
Mr Donohoe insisted the budgetary parameters set out in this week’s Summer Economic Statement (SES) was “appropriate, prudent and sustainable for the taxpayer”.
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Minister for Finance Jack Chambers said the package set out in the SES would ensure “that Government has the scope to once again adjust tax credits and bands to ensure workers do not find themselves paying a higher rate of tax because of higher wages”.
Under the strategy, there will be €1.4 billion set aside on budget day to pay for tax measures, most of which will be used to widen tax bands and thresholds to compensate for the effects of inflation.
Mr Chambers got into a heated exchange with Sinn Féin’s finance spokesman Pearse Doherty over why the SES did not contain projected Government surpluses beyond 2025.
“This is simply not acceptable, we are going into an election cycle and opposition parties have to prepare an alternative budget,” Mr Doherty said.
“How can any political party prepare a manifesto for an election they expect in October when the department and the ministers have – for the first time – not supplied general government balances (GGBs) to opposition parties,” he said.
Mr Chambers rejected what he described Mr Doherty’s insinuation that “certain information was being hidden or withheld” and that the department would set out projected budget surpluses after 2025 as part of the upcoming budget.
Later the Department of Finance’s chief economist John McCarthy explained the projected surpluses contained in the Stability Programme Update, published in April, had not been updated because there are had been a number of changes in relation to corporation tax, inflation forecasts and because there was a lack of clarity around OECD-led (Organisation for Economic Co-operation and Development) tax reforms.
“There has just been so many changes over the past couple of months we could not incorporate them into later years…that’s the reason for stopping the forecasts in 2025,” he said.
Earlier on Wednesday the State’s financial watchdog sharply criticised the Government’s proposed budget plan, claiming it is “significantly more expansionary” than previously signalled and would pump money into an economy already at risk of overheating.
In a series of tweets on X, the Irish Fiscal Advisory Council (Ifac) claimed the Coalition’s tax and spending plans were coming at a time when the economy was already performing well and at a time when employment was at a record high.
“The economy does not need more money pumped into it from Budget 2025,” it warned.
The council claimed the Government was adopting an “everything now” approach to budgeting while avoiding difficult choices.
The €8.3 billion package includes a €6.9 billion increase in public spending, which corresponds to an annual increase of 6.9 per cent, significantly above the Government’s own 5 per cent spending rule.
The additional spending was linked to the continuing need to improve public services and infrastructure in the context of a bigger population.
But Ifac insisted if the Government wanted to increase spending by more than 5 per cent this “required tax increases to pay for the extra spending”.
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“The Government appears to be avoiding making choices in Budget 2025. Instead, an ‘everything now’ approach of current spending increases, tax cuts and increased investment are all planned for next year,” it said.
The watchdog said breaking the spending rule “now increases the risk of the economy overheating and adds to inflation pressure”.
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