Cabinet agrees a €6.4bn Budget 2024 package after late-night leader talks

The Coalition has agreed a budget package worth €6.4bn, signing off on the Summer Economic Statement which saw a tax package worth €1.15bn agreed.

Core expenditure will rise by €5.25bn in 2024, or 6.1 per cent, giving an overall Budget package of €6.4 billion.

The Summer Economic Statement sets out the parameters for Budget 2024.

Discussions have been ongoing for five weeks with multiple meetings between party leaders and Minister for Finance Michael McGrath as well as Minister for Public Expenditure Paschal Donohoe.

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As reported in The Irish Times, the Government will breach its own budget spending rules for the second year running, although Ministers were told on Tuesday morning that the adjustment is “modest.”

Ministers heard that an extra €1bn for core expenditure has been provided for above the amount set out in the Stability Programme Update in April.

In 2021, the Government adopted a National Spending Rule that effectively seeks to tie core expenditure growth to the estimated sustainable nominal growth rate of the economy, at 5 per cent per year. Core expenditure growth will be 6.1 per cent next year instead.

[ Inside Politics: Let the budget games begin ]

[ Budget 2023 main points: Details of the tax, rent, childcare and cost-of-living measures ]

Cabinet was told that the extra spending is in the context of “an economy with GDP output of nearly €600billion next year” and that it “strikes a balance between providing resources to invest in public services and supporting living standards and, on the other, not adding to inflationary pressures.”

Extra capital expenditure will be provided for funded from windfall receipts. The details of the Budget will be worked on throughout the summer, including one-off measures which could add upwards of €4bn to the overall package.

Budget 2024 will also provide for “non-core expenditure” including humanitarian supports for refugees from Ukraine.

The Government is projecting a surplus for 2024 equal to the windfall receipts from Corporation Tax, meaning the budget is balanced after being adjusted for those windfall gains.

Mr McGrath will return to Cabinet in a number of weeks with another memo detailing four strands to his financial plan.

The first will be to set up and build-up a long-term savings fund. The second will be to build-up a public investment fund buffer. The third will be to reduce debt and the fourth will be targeted increases in capital investment.

With a €6.4bn core budget package, excluding one-off measures, the Government is taking a cautious approach, due to fears about inflation and overheating an already expanding economy.