Ireland must use its exchequer surplus wisely and “we should not spend everything today”, Minister for Finance Paschal Donohoe has warned as the Government announced a bumper budget of €11 billion.
Pointing in the Dáil to a surplus this year of €1 billion and €6.2 billion for next year, the Minister warned that last year there was a deficit of €7 billion.
He said he and Minister for Public Expenditure Michael McGrath were announcing a €4.1 billion package of once-off measures, alongside budgetary measures worth €6.9 billion.
However, throughout his 45-minute address to a packed chamber, Mr Donohoe consistently stressed the dangers and challenges along with announcing “significant figures” for significant needs.
The Minister highlighted that 10 multinational companies account for more than one-third of total tax revenue and this “excess” corporation tax may be vulnerable to a “shock” of €8 billion-€10 billion. He also pointed to updated inflation predictions of 8.5 per cent this year and just over 7 per cent in 2023.
Mr McGrath said “this is a budget for its time, a budget that seeks to respond with unprecedented resources, with a breadth of measures and a speed of execution we have not seen before”.
He too stressed the need to manage national finances properly and guard against current and future risk. “This budget will make a difference, and people will see that difference quickly.”
Mr McGrath said “these are not normal times” and “we have not experienced inflation like this for 40 years”.
Mr Donohoe said borrowing costs had increased by more than 2 percentage points since January, and while the market viewed Ireland favourably, “market sentiment can turn swiftly”.
Based on current strategy, public debt could stabilise at €225 billion, some €44,000 per head of population. But he was “confident we will be able to continue to support individuals, families and businesses”.
Outlining details of the budget, the Minister for Finance said the Government had a “responsibility to strike a delicate balance between helping with the cost of living pressures but, on the other hand, not making them worse by adding fuel to the inflationary fire”.
Many of the measures announced had been leaked, including the increasing of the standard rate tax cut off to €40,000, but the Minister also changed the USC band rate to ensure those receiving minimum wage increases would not have to pay the top USC rate.
A vacant home tax will apply for houses occupied for fewer than 30 days a year.
Mr Donohoe cut VAT on newspapers from 9 per cent to zero and said the reduced 9 per cent rate for the hospitality sector will remain until February next year.
Zero VAT rates will also apply to hormone replacement and nicotine replacement therapies, and for a small number of period products currently charged at 9 per cent.
There were murmurs of discontent in the chamber when Mr Donohoe announced the carbon tax increase from €41 per tonne of carbon dioxide to €48.50 from October 12th, but he said prices at the pump will not go up as a result of levies.
Cigarette products will increase by 50c per packet of 20, but small producers of cider and pear cider will receive up to 50 per cent in excise relief.
There were many risks but he wanted to end on a “positive note”. He said: “We need to do more, build more homes, continue to improve public services, respond with courage and resolution to our defining challenge of climate change. But we can, and we will.”
Mr McGrath outlined three sets of measures — for households and businesses; for public services, sports clubs and other groups to deal with energy and other costs; across the board social welfare increases and a 25 per cent reduction in childcare costs, bringing the childcare budget to €1 billion, “five years ahead of target”.
Some applause greeted his announcement, one of numerous leaked measures, of free books for primary school students.
Mr McGrath highlighted Ireland’s 50 years of membership next year of the European Union and the funding the State received as the country most impacted by Brexit.
He ended by quoting Seamus Heaney: “Hope is not optimism, which expects things to turn out well, but something rooted in the conviction that there is good worth working for.”
The Minister added that “a better and a fairer Ireland is a good we will continue to strive for”.