The Government on Tuesday unveiled a huge spend-and-save budget that boosted permanent spending and promised large cash giveaways in the coming months, but also channelled billions in windfall tax revenues into long-term national savings and investment funds.
With a general election due within 18 months, budget Ministers Paschal Donohoe and Michael McGrath responded to intense political pressure to increase spending on both permanent allocations and on one-off giveaways. The result was a package that will see households gain from tax cuts, spending increases, welfare boosts (including a double payment of child benefit), childcare subsidies, energy credits and – for some – mortgage relief.
But the huge resources at their disposal also enabled Mr McGrath and Mr Donohoe to unveil a far-reaching plan – to be enshrined in legislation – which will see billions of euro in windfall corporation tax revenues saved for when they are needed in the future.
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Mr McGrath said that the main Future Ireland fund could reach €100 billion by the middle of the next decade, while a second fund, for climate action and infrastructure purposes, will see injections of €2 billion a year for seven years. The climate fund, Mr McGrath said, could be tapped to help meet Ireland’s climate targets.
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Elsewhere, the budget saw expected increases in public expenditure which had been flagged during the summer. But Department of Health sources acknowledged that its increase, at €800 million for next year, would not cover the cost of this year’s overspend plus the rising cost of services.
In his budget speech Mr Donohoe made pointed reference to the need to “improve financial oversight across the health system”, and senior Government sources said that budget negotiations had been extremely difficult. Ministers denied on Tuesday night that any health cuts were on the way.
Mr McGrath announced a total budget package of some €14 billion when he rose in the Dáil chamber at 1pm to deliver his first budget speech as Minister for Finance, the first Fianna Fáil TD to hold the office since the late Brian Lenihan in 2010.
Permanent expenditure increases will cost about €5.3 billion, while tax cuts amounted to €1.1 billion. There is also a package of “once-off” cost-of-living giveaways costing €2.7 billion, which will put hundreds of euro into people’s pockets in the coming months, and over €4.5 billion in “noncore” expenditure, including the cost of Ukrainian refugees, residual Covid costs and a new €1 billion “health resilience fund”.
The budget package will bring total Government spending next year to over €100 billion.
Revised Department of Finance forecasts underlined the general health of the public finances, notwithstanding recent concerns about corporation tax receipts, with growth in the domestic economy to be 2.25 per cent both this year and next. A surplus of €8.8 billion is projected for this year, falling slightly to €8.4 billion next year.
As expected income tax and USC changes will see tax bills falling, while welfare increases and a range of “one-off” giveaways including three €150 energy credits for everyone and a double payment of child benefit will begin this year.
Mortgage payers who have seen their repayments increase sharply with ECB interest rates rises will see a new tax break on their interest payments, capped at €1,250.
But Opposition parties were scathing about a measure to give tax relief to small landlords. “We needed a budget for renters. Instead we got a budget for landlords,” the Sinn Féin finance spokesman Pearse Doherty told the Dáil.
“You simply could not make this up. In this budget the Government has provided nearly twice as much to landlords as it has to struggling renters...This sop to landlords will go down as one of the stupidest tax reliefs ever to be provided by a minister for finance in recent times.”
