Bumper €8.3bn tax and spending package earmarked for Budget 2025

The upcoming budget will be framed around a massive tax and spending package of €8.3 billion, Government Ministers confirmed on Tuesday, as they published the Summer Economic Statement (SES).

Budget 2025, which will be delivered a week earlier than scheduled on October 1st, will include additional public spending of €6.9 billion and taxation measures amounting to €1.4 billion.

The SES, which sets out the financial parameters for the October budget, was approved by the Cabinet earlier on Tuesday.

The spending element corresponds to an annual increase of 6.9 per cent, significantly above the Coalition’s 5 per cent spending rule. The rule aims to keep core spending inside a 5 per cent ceiling, which is viewed as sustainable over the medium term.

The enhanced spending figure comes amid warnings from the Central Bank and spending watchdog the Irish Fiscal Advisory Council that a big budgetary package could overheat an already expanding economy.

The Department of Finance said the Coalition’s expenditure strategy was being adjusted to “accommodate higher capital spending and to provide additional public services against the backdrop of a larger-than-assumed population”.

Minister for Finance Jack Chambers insisted there would be no “giveaway budget” in October while indicating a package of once-off cost-of-living measures, possibly including further energy credits and increases to the rent tax credit, was still under consideration.

Mr Chambers, who took over the finance portfolio two weeks ago, said “workers will be the priority” in the budget.

Under the strategy set out in the statement there will be €1.4 billion set aside on budget day to pay for tax measures, more than previously signalled. Most of this will be used to widen tax bands and thresholds to compensate for the effects of inflation.

“A lot of workers have increased wages. We want to make sure we’re not levying taxation in the context of wage growth,” Mr Chambers said.

The higher level of core expenditure reflected increased spending on public services and a higher capital spend aimed at alleviating some of the State’s infrastructural problems, he said.

“There remains the continuing need to improve public services and infrastructure, particularly in the context of a growing population and economy,” Mr Chambers said.

“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,” he said.

The higher level of spending earmarked for the upcoming budget, the last before the general election, comes in the wake of buoyant exchequer returns data last week, which show tax receipts up almost €4 billion or 9 per cent on last year.

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The exchequer returns also indicated that health spending, a perennial hotspot in the budgetary arithmetic, was already €1.1 billion over budget at the end of June.

In the SES, the Government announced it was providing an additional €1.5 billion in funding for the health service for this year “to account for 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 document noted that health spending now accounted for 28 per cent of current expenditure, up from 22 per cent in 2015.