'We are conscious people are under a lot of pressure': Health of economy set out ahead of €6.7 billion budget

It is understood that three billion euro of the total is pre-allocated, and €3.7 billion is left to be divided between Government departments.
'We are conscious people are under a lot of pressure': Health of economy set out ahead of €6.7 billion budget

“We are in the context of a unique set of circumstances coming out of Covid-19, supply chain difficulties and balances between supply and demand, which created its own inflationary cycle."

This was originally sent under embargo Budget 2023 will be worth €6.7 billion and aims to balance the support needed by people struggling with the cost-of-living crisis, and the need to avoid adding to the current inflation shock.

The Summer Economic Statement, announced on Monday, sets out the health of the Irish economy and the parameters for next year’s Budget.

It outlines an increase in spending of €2.2 billion compared with last year’s Budget.

The overall package will be made up of additional public spending worth €5.65 billion, and taxation measures worth €1.05 billion.

It is understood that three billion euro of the total is pre-allocated, and €3.7 billion is left to be divided between Government departments.

The planned change to tax bands and credits aims to ensure that workers are not “dragged” into higher levels of taxation by virtue of wage inflation, the Statement said.

The exact change to tax bands was not detailed as part of the Summer Economic Statement.

Budget 2023 will also include €4.5 billion in non-core expenditure for temporary measures, which include humanitarian support for Ukrainian refugees (€3 billion), the Brexit Adjustment Reserve (€600 million) and some Covid-19 measures (€1 billion).

The Summer Economic Statement also notes the vulnerability of the economy to high public debt in Ireland, particularly when coupled with financing an ageing population, climate change mitigation, the digital transition and implementing Slaintecare.

Concerns were also raised about the severe economic disruption to the Irish export market if Russia were to completely withdraw its gas supplies from Europe, in retaliation for the sanctions imposed by the EU over the ongoing invasion of Ukraine.

Despite this, the Irish economy appears to have recovered well from the Covid-19 pandemic.

There was an Exchequer deficit of about €5 billion in the first half of last year, compared with an Exchequer surplus of €4.2 billion for the first half of this year.

This amounts to an overall turnaround of €9.5 billion compared with the first half of last year.

Tax revenue was projected at €75.8 billion this year, up almost 11% on an annual basis; the statement notes that a large part of any tax revenue “overshooting” will be due to corporation tax receipts, whose “continued flow cannot be guaranteed over the medium term”.

The details of the Summer Economic Statement were given on Monday by Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath.

Earlier, Taoiseach Micheal Martin said his Government will take Budgetary measures to alleviate the pressure on people over the cost-of-living crisis.

Speaking ahead of the Cabinet meeting, Mr Martin said: “We’re going to get the balance right here. The Summer Economic Statement sets out the parameters of what’s possible.

“We are in the context of a unique set of circumstances coming out of Covid-19, supply chain difficulties and balances between supply and demand, which created its own inflationary cycle.

“And then the war in Ukraine has been very dramatic in terms of its impact on energy prices, which has fed into the broader economy.

“So we do have to, through a combination of budgetary and temporary measures, try to alleviate the pressures on people, and that is the objective.

“Now remember, we already have taken taxation initiatives, around fuel and so on.” 

Mr Martin added: “We do have to think of 2023 and beyond and to make sure that we have sustainability in our public finances and also to see what to do for the remainder of 2022.

“We are conscious that people are under a lot of pressure on households and so forth.

“So therefore we do have to see what we can do between now and the end of the year through the Budget and also how we have sustainability in pay and taxation measures.” 

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