Budget 2023: Package of more than €6.5bn planned amid soaring inflation

Summer Economic Statement to be published following Cabinet meeting today

The Coalition is planning to unveil a budget package of more than €6.5 billion, with significant increases in spending for tax changes and welfare increases.

Ministers and officials were on Sunday night finalising the Summer Economic Statement, and sources said it will see an increase in spending of more than €2 billion in comparison to last year’s budget.

The Government originally planned for a budget day package which included €1 billion in new spending measures and €500 million for tax changes. It is understood that €1.5 billion extra will now be put aside for new expenditure, with spending on new tax measures to increase from €500 million to €1 billion.

The Government had already flagged an extra spending package across departments of more than €4 billion, some of which is additional spending across health and housing but some of which is also to maintain existing services.

Sources have cautioned that a public pay agreement will have to come from these figures, eating into the Government’s room to manoeuvre, and that much of the money in Budget 2023 will be used “simply to stand still”.

The three party leaders will meet on Monday morning to sign off on the plan before it goes to Cabinet in the afternoon. Sources said there was growing momentum for budget day to be brought forward into late September, and if Ministers agree to this then this will also be announced on Monday.

The Irish Times reported last Friday that normal budget spending rules will be suspended on a “one-off basis”, and Ministers are now planning for a major package of both one-off supports, such as another €200 energy credit and an autumn social welfare bonus, and a larger set of welfare increases and tax cuts. This means that the Government will not be bound by rules which limit increases in permanent spending to 5 per cent.

Fine Gael is pushing for a reduction in childcare costs, student fees and to retain the cut in public transport fares, which the Green Party is also pushing for. Fine Gael is also seeking an extension of free GP care and the lowering of medical costs, as well as increases in welfare payments.

The Coalition is also planning to extend the current fuel tax cuts and the reduced VAT rate for electricity well into next year. Some Fianna Fáil TDs have called for welfare increases of at least €15 a week, which would cost the State more than €1.1 billion.

Speaking on Sunday, Minister for Foreign Affairs Simon Coveney said there was “a lot more to do” to help households with the rising cost of living. He said that while the Government could not “reverse inflation with one budget”, buoyant tax revenue would now allow the Coalition to do more.

“One of the things that’s unusual this year is very high tax-take in certain sectors. That may not be an annual trend but this year it allows us to make once-off payments to respond to what we hope will be a once-off dramatic increase in the cost of living, at least in the near term. That would allow us to spend in a way that we normally wouldn’t at the back end of the year.”

He also said the Government was potentially looking at a social welfare bonus payment, an extra week’s payment in the autumn “to help people prepare for winter”.

“It will be a combination of one-off payments, because we can afford to do it, and also more permanent changes,” he told RTÉ's This Week programme.

He said he would support bringing the budget forward to September if it was manageable.

The publication of the Summer Economic Statement, setting out what is available to the Government for the budget, comes as households face record price hikes, with Electric Ireland announcing further bill hikes last week and inflation at 9.6 per cent.

Jennifer Bray

Jennifer Bray

Jennifer Bray is a Political Correspondent with The Irish Times