Government considering social welfare rate increases in upcoming budget

Central Bank governor Gabriel Makhlouf warned that the Government needs to begin raising new funds.

The Government is considering increases in headline social welfare rates as well as the need to cut borrowing as budget discussions begin across departments.

However while many sources say an increase in the pension is likely, there is no talk in Government of a "giveaway budget", with Finance Minister Paschal Donohoe adamant that reliance on pandemic-level borrowing must be ended.

In a newspaper article over the weekend, Mr Donohoe said "our level of borrowing must reduce" as debt is "a burden on future generations and it is inequitable to saddle future tax payers with large debt-servicing costs".

That was seen by some as a warning that the budget, which will be announced in October, will not feature much in the way of tax cuts or additional discretionary spending. 

However, sources also acknowledged that state pensions have not been increased in the last two budgets and that this means an increase this year will be necessary.

A primary focus of the budget is expected to be housing as the Government looks to give financial muscle to its Housing For All plan, launched last week. 

That department may receive up to a €400m increase in voted spending to help Housing Minister Darragh O'Brien deliver on his aims.

Public Expenditure Minister Michael McGrath is understood to be in the beginning of the process of finalising the budgetary estimates and starting the political discussions with his Cabinet colleagues. 

However, with a desire to roll back borrowing, there will be fierce competition for funding across departments.

Central Bank governor Gabriel Makhlouf, in a letter published last week, warned that the Government needs to begin raising new funds by "measures such as broadening the tax base, reducing certain tax reliefs or changing certain tax rates", but the Coalition has said that tax increases are not on the agenda.