Budget plans to take account of 're-occurring health overspend'

Increases in core spending required to take into account the fallout from inflation, Oireachtas committee told

Public Expenditure Minister Paschal Donohoe told TDs that health overspending was being 'treated very seriously by the Government' as it seeks to understand the amounts of spending that would re-occur next year. 

Finance Minister Michael McGrath and Public Expenditure Minister Paschal Donohoe have said the scale of next month's budget will be required to offset the effects of soaring inflation, as the Government seeks to understand the potential fallout of overspending in health.    

The budget will also take into account the likelihood that the "extraordinary" growth rates in corporation tax revenues would in time fall back, the ministers told the Oireachtas budgetary oversight committee. 

The hearing is the last parliamentary oversight before October's budget and comes after the Irish Fiscal Advisory Council, the Central Bank, and other economists warned about the potential for the budget to add to inflationary pressures at a time when prices continue to rise sharply and the economy continues to perform at full tilt.  

It has also emerged that the Government will have to take account of overspending in the health budget this year and estimate the scale of the spillover effects for its 2024 budget.  

Mr Donohoe told TDs that the health overspending was being "treated very seriously by the Government" as it seeks to understand the amounts of spending that would re-occur next year. 

The Irish Fiscal Advisory Council earlier this month accused the Government of abandoning its own 5% spending growth ceiling. The Government's budget plans are also under increased scrutiny this year because it could be the last before a general election. 

However, Mr McGrath told the committee that increases in core spending were required in 2024 to take account of the fallout from inflation on households and businesses, saying that although slowing, inflation is "still at elevated levels".  

No decision on USC

Responding to criticisms over the budget package of €6.4bn which includes €5.2bn in core spending measures and €1.1bn in tax measures, Mr McGrath insisted that no decisions had yet been made over any income and USC measures. 

"The increased budget package provides us with the scope that we need to continue to provide support to businesses and households, protect our public services, and invest in the productive capacity of our economy, without adding excessively to inflationary pressures," Mr McGrath told the TDs. 

The ministers also pledged to return to the spending rule when the time was right. 

"In framing this year’s budget however, the Government is more than cognisant that the economy is at full employment and that we must begin a smooth transition back to the 5% expenditure targets to ensure long-run sustainability," said Mr Donohoe.  

Mr McGrath said his budget plans would "provide Government with the flexibility to act as necessary today without jeopardising our ability to respond as necessary to the challenges of the future".