Overheating economy now less of a concern, says Varadkar ahead of budget

Taoiseach Leo Varadkar says the Government is listening to experts in all fields, and from all walks of life, as it drafts the budget but it was running a society and not just an economy.

Responding to warnings from the Central Bank and the Irish Fiscal Advisory Council (IFAC) of there being an inflationary risk to Budget 2024, Mr Varadkar said he noted bodies such as the Central Bank said the economy was not going to grow as fast as previously predicted and that this was not necessarily a bad thing.

“Not that long ago people were talking about the economy overheating, growing too fast. So it’s encouraging that the Central Bank is now saying that we don’t need to be as concerned about that as maybe were in the past. In relation to inflation, what they say, of course, is true,” the Taoiseach told reporters in New York, where he is attending the United Nations General Assembly.

“If you increase people’s pay, if you increase people’s pensions, if you give people who are on welfare, like people who are carers or disabled people, more money, that can increase inflation. What does that really mean? You should never do it?”

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In Dublin Minister for Public Expenditure Paschal Donohoe responded to the warnings of the Central Bank and IFAC about an inflationary risk in Budget 2024 by insisting the Government’s spending plan would stay within the limits set by him and Minister for Finance Michael McGrath earlier this summer.

Mr Donohoe said that in 2023 and in 2024 the Government would be running a surplus on a “considerable scale”.

“The concern of the Central Bank and the IFAC is that we will spend the windfall we receive from corporation tax on day-to-day spending,” he said, adding that both bodies had warned of the inflationary risk.

He said he was determined that the spending plans for Budget 2024, which will be published on October 10th, would stay inside the guidelines that had been set in the Summer Economic Statement.

He and Mr McGrath outlined an overall package of €6.4 billion. They have earmarked €5.2 billion in additional public spending, with taxation measures of €1.1 billion. Core spending will increase by 6.1 per cent in 2024, and an additional €2.25 billion will be allowed to capital infrastructure projects over a two-year period between 2024 and 2026.

Mr Donohoe was speaking in Government Buildings where he announced the details of expected progress on the State’s 50 biggest infrastructure projects under Project Ireland 2040. The document sets out a pipeline of how those projects are expected to proceed over the next decade and a half, and purports to give commercial companies an insight into opportunities that might arise and when they are likely to arise.

The document sets out that construction on Metrolink could begin as early as 2025 and continue into the early 2030s. Similarly, the first of the four distinct projects in Dart Plus could commence as soon as 2024, but again it is a project that could take another decade or more to complete.

Similar timelines are laid down for another multibillion euro project, Bus Connects Dublin, with that project currently estimated not to reach conclusion until 2030 or later.

On the biggest road projects the M20 from Cork to Limerick has a construction commencement timeline of 2027 (with completion in 2031), while the Galway City Ring Road (currently the subject of a new decision by the planning board) has a provisional timetable for construction of starting in 2026 and being completed in 2029.

It predicts that 2024 will be the end-date for construction of the national children’s hospital.

Mr Donohoe was also asked about a reported fall of one third in overseas visitors to Ireland this year, and asked was the fact that so many hotels were accommodating Ukrainian refugees a factor.

“Many hotels are playing a role in providing accommodation to refugees and asylum seekers,” he replied. “We are trying to provide accommodation to 90,000 people who were not here a year ago.”

He said if the State had not done that there was a risk of them being homeless otherwise. He pointed out the hotel sector was receiving payments for accommodating refugees. “That being said, it is not a sustainable position to use hotels to provide accommodation in the medium term.” However, he accepted it was going to take time to provide alternative accommodation.

Mr Donohoe said VAT had been at 9 per cent for many years, and the current rate of 13.5 per cent was the “place it should stay at for the foreseeable future”.