One-off budget giveaways will be less than last year to avoid firing inflation, McGrath says

One-off measures in the budget will be less than the €4 billion announced last year, the Minister for Finance Michael McGrath has indicated, as warnings from official bodies continue that a big budget giveaway would stoke inflation further.

Both the Central Bank and the Irish Fiscal Advisory Council have warned about the dangers of pushing inflation up by a big giveaway budget.

Speaking to journalists outside Government Buildings, Mr McGrath sought to dampen expectations of a big budget giveaway but declined to give any specifics. “I just want to be realistic about the scale of what can be achieved with the overall budget package.”

He said the growing cost of providing public services and the prospect of public sector pay increases meant that the “headroom” to introduce new spending programmes was very limited.

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“There will be help for people,” he said. “We’ll do the very best we can . . . but we won’t be able meet all of the demands that are there. The advice from the Central Bank in relation to fiscal policy and the need to avoid stoking inflation . . . is one that we need to be very conscious of in the decisions we make on budget day.

“I would agree with the Taoiseach that the when it comes to temporary one-off measures in the budget they should not be on a scale comparable with last year. There will be a package of measures on budget day but in the round I do think it should be on a lesser scale to the budget last year.”

He also indicated that most of the giveaways would be paid this year, but he did not rule out some measures being implemented next year.

He said the Department of Finance’s forecasts for the economy are broadly in line with the Central Bank forecasts today (Tuesday).

Mr McGrath said that he and Minister for Public Expenditure Paschal Donohoe had largely agreed on the size of the package but resisted invitations to be specific, beyond saying that it would be smaller than last year.

Sources with some knowledge of discussions in Government expect that the package of measures – likely to include universal energy credits and additional welfare payments – will cost between €3 billion and €4 billion.

Mr McGrath also confirmed that a third rate of income tax, proposed last year by Taoiseach Leo Varadkar, was not on the cards for this budget. He said that a review of the personal taxation code would be published on budget day, and acknowledged that there were “plusses and minuses” in a third rate. But he said it would not form part of the forthcoming budget.

“You can’t implement it in January 2024, that is absolutely the case . . . You would need a long lead-in period.”

However he gave no indication that it would go ahead in the future.