Tax receipts boost gives Government €6.5bn budget pot

Finance Minister Michael McGrath said he will be taking a "fresh look" at the tax package, but added that he will be looking at measures to keep landlords in the sector as well as developing supports to encourage start-up businesses and to scale up enterprises. Picture: Damien Storan

A massive boost in tax receipts has given the Government a €6.5bn budget pot to dip into for spending and tax measures.

October's budget will be broken down into €5.25bn in extra expenditure and an additional tax package of €1.15bn.

Further funding for once-off cost-of-living measures will also be found, however, the exact amount will not be agreed until closer to budget day and will be dependent on inflation and other factors.

Finance Minister Michael McGrath said he will be taking a "fresh look" at the tax package, but added that he will be looking at measures to keep landlords in the sector as well as developing supports to encourage start-up businesses and to scale up enterprises.

Following on from last year, it is expected that income tax bands will be adjusted again to ensure that workers don't see an effective salary reduction as a result of inflation.

A €2.25bn fund taken from corporate windfall taxes will be used to deliver schools, healthcare facilities, garda stations, and other infrastructure projects that are shovel-ready.

But Minister for Public Expenditure Paschal Donohoe denied that the funding, which will be allocated over the next three years, is a pre-election sweetener.

Ministers have also stressed that corporation taxes, which jumped by 20% in the first half of the year, cannot be relied upon.

Mr McGrath said it would not be prudent to use windfall taxes as "these receipts will not continue into the future" and he will be developing a long-term savings fund and a public investment fund to be utilised during any future economic downturns.

Minister for Public Expenditure Paschal Donohoe denied that the funding is a pre-election sweetener. Picture: Gareth Chaney/Collins Photos

He said previously when a recession hit we stopped spending, which must be avoided in the future as investment is needed "through the economic cycle".

"If we hit a shock or a downturn in the future, that's when the government has to be able to step in and sustain a high level of public capital investment programme."

Mr McGrath is still working on how these funds will be introduced and will bring a memo to Government on this in the coming weeks.

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Unveiling the Summer Economic Statement (SEC), which sets out the broad parameters for the budget, Mr McGrath said the Government's strategy represents "a credible, essential and sustainable pathway for our public finances".

The allocations set out in the SEC will see an overall increase in core expenditure of 6.1%, which is in breach of the Government's own spending rules that limit expenditure hikes to 5%.

But Mr McGrath insisted that the spending strategy "takes into account the economic realities at present, while still ensuring we retain the flexibility and the fiscal resources necessary to respond as needed to the challenges we face in the future".

Mr Donohoe confirmed that a separate €4bn "non-core" package will also be spent on items that are deemed as temporary and so will not come out of regular core spending.

"These relate to the humanitarian supports that are needed for all those fleeing awful war in Ukraine and the more limited support that will be made available for those parts of Government and our economy that are experiencing legacy impacts from the pandemic," said Mr Donohoe.