Government plans €8.5bn budget package

Padraic Halpin, Reuters

The Government is planning an €8.5 billion package of tax cuts and spending hikes in October's budget for 2027, a less generous package than a year ago as it seeks to moderate growth in day-to-day spending.

October's budget will be split between €1.5 billion of mainly income-focused tax reductions and €7 billion in additional public expenditure, the Department of Finance said on Wednesday. That would represent a 5.9% year-on-year increase in spending.

Spending is set to rise by more than 8% this year after extra funding was provided in April on top of the overall €9.4 billion budget to pay for supports to soften the impact of surging fuel prices and cover overruns in the education budget.

Ireland's independent fiscal watchdog, the Irish Fiscal Advisory Council, has estimated that €5.5 billion will be required next year to cover a new public sector pay deal and maintain the current level of services and benefits in real terms to keep up with inflation and an ageing and growing economy.

The Government has already committed to increasing capital spending by €1.1 billion in 2027 to narrow a large infrastructure deficit, leaving little room for new spending measures.

Responding to the publication of the Summer Economic Statement, Chambers Ireland, urged the Government to prioritise a budget that reduces the cost pressures facing businesses and unlocks faster delivery of the infrastructure needed to underpin competitiveness.

Ian Talbot, Chief Executive, said: "Businesses are facing sustained increases in energy, labour, regulatory and operating costs. At the same time, infrastructure delivery is not keeping pace with the needs of a growing economy. Budget 2027 must therefore focus on measures that reduce cost pressures, accelerate delivery, and support investment, employment and regional growth."