The Government is to make €8.3 billion in additional funding available for use in Budget 2025, its last before the next general election.
€1.4bn of that money is to be spent on funding tax cuts and €6.9bn is to be used for increased expenditure.
It means that total spending will rise by 6.9% in 2025, once again breaching the Government’s own National Spending Rule, which is supposed to limit overall annual spending increases to 5%.
The Government has also approved another €1.5bn in funding for the health service this year.
It said this money is needed because of the need for better quality healthcare, the complexity of providing health services and the legacy impact of a post-pandemic and heightened inflationary environment.
The Government has said this decision was made in order to accommodate higher capital spending and to provide additional public services against the backdrop of a larger than assumed population.
The details are contained in the Summer Economic Statement, which was approved by the Cabinet this morning and is being published this lunchtime.
The document sets out the broad fiscal parameters ahead of the budget.
Last week it emerged that the Department of Health is already €1.1bn over budget for this year.
Minister for Public Expenditure Paschal Donohoe has held a number of meetings with Minister for Health Stephen Donnelly in recent weeks to try to formulate a plan to deal with the overspend.
The budget will be the first to be led by new Minister for Finance Jack Chambers who took over the brief just two weeks ago following the nomination of Michael McGrath to the European Commission.
A strong performance by the exchequer in the first six months of the year is likely to raise expectations of a pre-election giveaway budget.
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However, last week Mr Chambers sought to downplay the prospect of this, saying the Government had made it very clear that it wants to have a very sensible and careful budgetary policy.
The Taoiseach has said the upcoming Budget will try to “balance” the need to support people during a cost of living crisis and the need for prudent fiscal spending.
Speaking on his way into a meeting of the Cabinet, Simon Harris rejected opposition suggestions that the Summer Economic Statement would be the first stage of a giveaway budget.
He said “I always wonder what that phrase means” and that “every budget” gives money away, but that he hopes autumn’s budget will “provide real and practical assistance in terms of income” for people.
The Taoiseach would not say when asked what the overall budget package will be in the Summer Economic Statement, or the tax versus spend breakdown, saying this must be agreed by Cabinet today.
The Irish Fiscal Advisory Council (IFAC), Central Bank of Ireland and Economic and Social Research Institute have all urged the Government to show restraint in the budget, so as to not risk overheating the economy.
Exchequer returns for the January to June period last week showed that the State is on course to record a surplus of €8 billion this year due to bumper tax receipts, driven in the main by windfall corporation tax returns.
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Spending to exceed €105bn in 2025
The SES shows that Government spending overall next year will be €105.4bn.
€90.9bn is being provided for current spending, with €14.5bn going to capital spending.
Of the €6.9bn earmarked for additional spending next year, €5.1bn is already accounted for.
Of this, €1.2bn will go to the Department of Health to cover the cost of additional levels of service, €1.3bn will go towards the cost of the public sector pay deal, €1.3bn will pay for measures previously announced in Budget 2024 and €1.4bn will be used for additional capital spending.
This will mean there will be €1.8bn left for new spending measures, as well as the €1.4bn for tax cuts.
In relation to the additional allocation to the health service, the SES says it is imperative there is a clear link between the investment being provided and the delivery of healthcare outputs and better health outcomes for the population.
“As part of this funding agreement, therefore, the Department of Health and the Health Service Executive will ensure effective procedures are in place to provide for appropriate responsibility and accountability, allocation of budgets, definition of expected outputs and outcomes and clear performance monitoring processes are in place across all service areas,” it says.
No ‘pre-election giveaway’ budget
Speaking at a press conference in Government Buildings, the Minister for Finance said the priority in the tax package in the budget would be to ensure ordinary workers incomes, which have increased in recent years, are not eroded by tax.
Asked if this represented a pre-election giveaway budget, Mr Chambers said it did not.
He said the core of the increased funding related to maintaining existing levels of service and capital spending.
Minister Donohoe said the €1.8bn in new spending measures was in line with the size of what was allocated last year and there is no new core-spending.
Regarding the measures put in place to control health spending, Mr Donohoe said he was not only confident that they would prevent further overspend later in the year, but he “expects” it.
He said the agreement around the supplementary health spending includes delivery of a recruitment strategy where the HSE will stay inside agreed staffing levels this year and next and also commitments regarding agency staff and overtime this year and next.
The ministers also confirmed that the budget would once again contain a €4.5bn contingency fund for next year to help deal with unexpected costs arising from the fallout from the war in Ukraine and the pandemic.
They said a decision on whether there would be additional one-off measures contained in the budget would be made nearer the time.
Sinn Féin’s finance spokesman, Pearse Doherty, claimed that the Summer Economic Statement shows that the State has the resources to tackle the problems that workers and families are facing but what is lacking is political will.
“Today’s statement indicates that the government will provide no additional public investment to deliver social and affordable housing in response to the Housing Commission’s finding that we are currently short of 250,000 homes in the State,” he said.
“Today’s statement also makes clear that Sinn Féin were correct in calling out the irresponsible underfunding and mismanagement of our health service by Minister Paschal Donohoe.”
Labour spokesman on Finance, Ged Nash said it was clear that the Ministers wanted to give the impression of a giveaway pre-election budget.
But he questioned if any of the proposed figures can be believed, following the massive and unprecedented €2.7bn revision to health spending.
“Last year we highlighted that the Health budget was a fiction, and today’s Summer Economic Statement confirms that view with €1.5 billion extra committed this year to clean up the mess created by the Minister for Public Expenditure last October, and a pre-emptive €1.2 billion allocated for 2025 to sustain existing levels of service,” he said.
“Minister Donohoe needs to make a statement to the Dáil to explain how he got the figures so wrong in the first place.