‘Spend and save’ budget unveiled with tax giveaways and mortgage relief

The Government yesterday unveiled a €14 billion spend-and-save budget that boosted permanent spending and promised large cash giveaways in the coming months.

Budget 2024 has also channeled billions in windfall tax revenues into long-term national savings and investment funds, tapped from the boom in corporate tax receipts.

With a general election due within 18 months, budget ministers, Minister for Finance Michael McGrath and Minister for Public Expenditure and Reform Paschal Donohoe, responded to intense political pressure to increase spending on both permanent allocations and on one-off giveaways.

The result was a package that will result in households gaining from tax cuts, spending increases, welfare boosts (including a double payment of child benefit), childcare subsidies, energy credits and – for some – tax relief on increased monthly mortgage bills from rising interest rates.

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The large resources available to the ministers allowed Mr McGrath and Mr Donohoe to unveil a far-reaching plan, to be enshrined in legislation, that will result in billions of euros in windfall corporation tax revenues saved for when they are needed in the future.

Mr McGrath said the main “Future Ireland” fund could reach €100 billion by the middle of the next decade, while a second fund, for climate action and infrastructure purposes, will involve injections of €2 billion a year for seven years. The climate fund, Mr McGrath said, could be tapped to help meet Ireland’s climate targets.

[ Analysis: New climate fund is arguably the single most important element of Budget 2024 and a historic first ]

Elsewhere, the budget included expected increases in public expenditure which had been flagged during the summer. Department of Health sources acknowledged that its increased budget, at €800 million for next year, would not cover the cost of this year’s overspend plus the rising cost of services.

In his budget speech, Mr Donohoe made pointed reference to the need to “improve financial oversight across the health system”, while senior Government sources said that budget negotiations had been extremely difficult.

Mr McGrath announced a total budget package of some €14 billion when he rose in the Dail chamber at 1pm to deliver his first budget speech as Minister for Finance, the first Fianna Fail TD to hold the office since the late Brian Lenihan in 2010.

Permanent expenditure increases will cost about €5.3 billion, while tax cuts amounted to €1.1 billion.

There is also a package of “once-off” cost of living giveaways costing €2.7 billion, putting hundreds of euros into people’s pockets over the coming months.

The budget includes more than €4.5 billion in “non-core” expenditure, including the cost of Ukrainian refugees, residual Covid costs and a new €1 billion “health resilience fund”.

Budget 2024: What it means for households and businesses

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The package will bring total Government spending next year to more than €100 billion.

Revised Department of Finance forecasts underlined the general health of the public finances, notwithstanding recent concerns about corporation tax receipts.

The department expects growth in the domestic economy to be 2.25 per cent both this year and next, while inflation will fall from 5.25 per cent this year to 2.9 per cent next year. A surplus of €8.8 billion is projected for this year, falling slightly to €8.4 billion next year.

As expected, income tax and changes in the universal social charge (USC) will reduce tax bills, while the national minimum wage will rise by €1.40 an hour to €12.70. Mr McGrath said that a full-time worker on the minimum wage would see their take home pay rise by about €2,300 annually.

There were welfare increases of €12 a week and a range of “one-off” giveaways, including three €150 energy credits for everyone and a double payment of child benefit before Christmas, while a double payment of social welfare benefits will be made in the new year.

This will be in addition to the traditional Christmas social welfare bonus, to be paid in December.

Mortgage payers who have seen their repayments increase sharply with 10 European Central Bank interest rates increases since the summer of 2022 will benefit from a new tax break on their interest payments, capped at €1,250.

[ Budget 2024 families: Something for everyone in the audience ]

Opposition parties were scathing about a measure to give tax relief to small landlords.

“We needed a budget for renters. Instead we got a budget for landlords,” Sinn Féin finance spokesman Pearse Doherty told the Dáil.

“You simply could not make this up. In this budget, the Government has provided nearly twice as much to landlords as it has to struggling renters.

“This sop to landlords will go down as one of the stupidest tax reliefs ever to be provided by a Minister for Finance in recent times. It is shameful what he is doing with public money in this regard.”

Budget 2024: What it means for households and businesses

Listen | 37:33

Minister for Housing Darragh O’Brien hailed the budget allocation of more than €5 billion for housebuilding as “the highest ever in the history of the State.”

“This funding will ensure we can continue to deliver new affordable homes for purchase and rent at pace,” he said.

Reaction from interest groups was mixed. Trade union Siptu said the budget would hollow out the tax base while squeezing public services.

“These tax cuts are being funded by squeezing public services,” said general secretary Joe Cunningham.

“By 2026, spending on public services for every man, woman and child is projected by the Government to be cut in real terms. This is despite the challenges of our ageing demographics and rising population. Rather than cutting public service expenditure, we need to increase spending.”

Business group Ibec said the budget strikes the “right balance”.

The organisation welcomed the Government’s “investment ambition”, but says the success of the measures will be judged by the effectiveness of their implementation.