Last week, the Government published its Summer Economic Statement 2024. The document sets out the Government’s medium-term budgetary strategy and outlines the fiscal parameters within which discussions will take place ahead of Budget 2025.
Against a backdrop of a larger population and higher price levels, Government is adjusting its fiscal parameters for Budget 2025. To accommodate higher capital expenditure and to provide additional public services, core spending will now increase by 6.9 percent next year.
Budget 2025 will provide an overall package of €8.3 billion, of which €6.9 billion represents additional public spending. Taxation measures of €1.4 billion are intended to help shield workers from higher taxation arising from wage inflation.
The Budget will be presented to Dáil Éireann on 1 October 2024. Commenting on the document, the Minister for Finance, Jack Chambers TD, said:
“The Government’s forceful and timely policy responses have helped ensure the continued resilience of the economy in the face of a succession of major external shocks. Encouragingly, inflation is now back at rates consistent with price stability and the economy continues to operate at full employment. However, while the economy is in reasonably good shape at present the external outlook remains highly uncertain with elevated geopolitical tensions.
In terms of the public finances, at the headline level, our public finances are performing well and budgetary surpluses are in prospect over the coming years. However, the headline fiscal position masks the underlying vulnerabilities present in our public finances, the most significant of which is the exposure to volatile corporation tax receipts.
The two new investment vehicles – the Future Ireland Fund and the Infrastructure, Climate and Nature Fund – signed into law last month will help us to address some of the risks around windfall tax revenues, but this must be coupled with a balanced approach to budgetary policy.
There remains the continuing need to improve public services and infrastructure, particularly in the context of a growing population and economy. The Government has adapted its fiscal strategy to take account of this, to support the continued delivery of better healthcare services as well as accommodate higher capital spending. On this basis, an overall package of €8.3 billion is being made available, consistent with expenditure growth of 6.9 per cent.
It is important to stress that in the provision of additional public services, additional financial resources must go hand-in-hand with mechanisms that improve public service delivery. Value-for-money considerations must be to the fore and an increased focus on efficiency and productivity is needed.
On the taxation side, a package of €1.4 billion has been allocated which will 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.
I strongly believe that the strategy that we have announced represents an approach that takes into account the economic realities of today while still ensuring the sustainability of the public finances into the future. There are many challenges on the horizon but there are also opportunities. It is crucial that we use the current window of opportunity presented by the relative health of our economy and public finances to seize them.”
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