Summer Economic Statement: One in three euros spent next year going on tax packages

Covid spending is to be slashed by almost €7bn, the Government's Summer Economic Statement reveals 

Finance Minister Paschal Donohoe said the Government has set out "a credible medium-term strategy for returning the public finances to a sustainable position". File picture: Sam Boal/RollingNews.ie

Fine Gael has secured a major Budget win with one in three euros spent next year going on tax packages.

Covid spending is to be slashed by almost €7bn, as the Government hopes that as supports are phased out the cost of Covid-19 will drop.

Housing will also receive a significant funding boost in October's Budget.

The measures are outlined in the Government's Summer Economic Statement, published this evening, which sets out medium-term budgetary strategy and outlines the fiscal parameters within which discussions will take place ahead of Budget 2022.

The document states that "pandemic-related supports must be unwound as appropriate over the course of this year and next".

"Progress on returning the public finances to a sustainable path depends on a significant reduction in Covid-related spending in 2022."

Temporary spending, which is now predominantly Covid-19 related, will go from €14.8bn this year to €8.1bn in 2022, falling to €0.5bn in 2025.

However, the Government has warned there will still be spending "trade-offs" as we emerge from the Covid-19 pandemic.

The overall increase in core expenditure as part of Budget 2022 is 5.5% reflecting what the Government claims will be "a significant uplift in capital investment".

This would allow for an increase of €4.2 billion in overall core expenditure with current expenditure increasing by €3.1 billion and capital investment by €1.1 billion.

The document states that "with the pandemic now in retreat and assuming this is not derailed by the delta or, indeed, other variants – Government is now re-focusing its effects on ramping-up housing supply".

The Housing Minister has promised to shortly publish his Housing for All strategy containing a detailed set of policies designed to boost housing output, including social housing.

"As we emerge from the pandemic, fiscal trade-offs will once again re-emerge," the document states.

"Resources will be finite and choices will have to be made. We will also need to refocus our attention on the longer-term challenges which face us, including an ageing population, and the need to finance the digital and carbon transitions."