Budget package of €6.4bn to proceed even if tax take shows more volatility, says Donohoe

Plans to deliver a budget package of about €6.4 billion will proceed even if there is more “volatility” in Ireland’s tax receipts this year, Minister for Public Expenditure Paschal Donohoe has said.

With just over a month until budget day government departments are finalising and submitting spending demands ahead of meetings with Mr Donohoe while Minister for Finance Michael McGrath works on the tax package.

With inflation and energy costs remaining high, despite cuts by some providers, there is pressure on the Government to bring in further cost-of-living measures.

Corporation tax receipts fell sharply in August, down €1 billion on the same month last year, raising fears about a key source of revenue to the exchequer.

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Mr Donohoe said on Thursday that the Government had already outlined its plans for the size of the budget in the summer economic statement (SES), adding: “We will still deliver that even if we see some more volatility in tax during this year.”

Under the SES there are plans for an additional €5.25 billion in core spending and a tax-cutting package of €1.15 billion – some €6.4 billion overall.

Mr Donohoe also said the budget would include measures “focused on the cost of living and they will be included in the budget even with the changes that have happened in corporate tax”.

Elsewhere, Ministers set out some of their budget asks, including measures related to childcare and housing.

[ Is Ireland’s corporation tax party over? ]

Minister for Children Roderic O’Gorman did not say if he would seek the full additional 25 per cent cut in childcare costs he had previously flagged.

However, he said he would look for further cost reductions for parents, including bringing childminders into the National Childcare Scheme of subsidies, and that he wanted to expand the AIM [access and inclusion model] scheme that supports access to early learning for children with a disability.

Mr O’Gorman said the idea of new means-tested second tier of child benefit aimed at taking children out of poverty is “worth consideration” but he stopped short of saying it should be in the budget.

The proposal is contained in research by the Economic and Social Research Institute (ESRI) which suggested more than 40,000 children could be lifted out of poverty by the measure at a cost of about €700 million per year.

Mr O’Gorman highlighted the existing IQC (increase for a qualified child payment) and the working family payment and said he would like to see further investment in those schemes.

He said the ESRI had provided new options but he also signalled a preference for “things we know have a proven record of reducing child poverty”.

Separately, Minister for Housing Darragh O’Brien called for the €30,000 help-to-buy scheme for first-time home buyers to be extended beyond the end of the year in this year’s budget.

Inflation in the Irish economy rose to 6.3 per cent in August, driven by a more than 50 per cent jump in mortgage interest repayment rates in the last 12 months.

The increase in the consumer price index, the official measure of inflation in the Republic, is up from an annual rise of 5.8 per cent recorded in July.

The largest price increases in the 12 months to August 2023 were for housing, water, electricity, gas and other fuels.

Mr Donohoe rejected any suggestion that the scale of expenditure announced in last year’s budget has had a major impact on the current levels of inflation, saying: “Expenditure has gone up at a slower pace than inflation in Ireland over the last two years.”

He said: “If it is having an effect on inflation levels I think it’s going to be a low level.”

Mr Donohoe was speaking as he announced that Ireland had submitted its first payment request under the European Union’s post-pandemic recovery and resilience facility (RRF) seeking a sum of €324 million.

[ Ireland will settle its last Anglo and Irish Nationwide debts on Thursday ]

Ireland is to receive about €914 million under the National Recovery and Resilience Plan funded by the RRF.

The funds are to be used to contribute to “a sustainable, equitable, green and digital recovery effort” and will be paid in instalments provided delivery targets and milestones are met in the various projects being funded.

The current payment request relates to investment in jobs and skills through the work-placement experience programme, broadband connections for schools and work to enable the future electrification of public transport in Cork.

Under the scheme Ireland finances the projects though its own exchequer funds but later gets refunds from the EU once targets are met.