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Billions set aside for budget - but much of the spending is running to stand still

Minister for Finance Jack Chambers did not betray any inexperience during the Summer Economic Statement, but October will be the true test

Paschal Donohoe and Jack Chambers: The new Minister for Finance may have looked a little nervous at times but he clearly had his homework done. Photograph: Stephen Collins/Collins Photos
Paschal Donohoe and Jack Chambers: The new Minister for Finance may have looked a little nervous at times but he clearly had his homework done. Photograph: Stephen Collins/Collins Photos
Harry McGee's picture
Harry McGee Political Correspondent
Tue Jul 09 2024 - 20:25

It may have been the Summer Economic Statement but from a political perspective there were two big considerations. The first was: are we in line for a giveaway budget? And the second: how is Jack Chambers scrubbing up as Minister for Finance?

Chambers and Minister for Public Expenditure Paschal Donohoe repeatedly said the budget on October 1st would not be an “election budget”.

But the headline figures suggest otherwise, at first glance. The overall budgetary package will come to a lofty €8.3 billion in terms of tax cuts and spending. For the first time, total expenditure by the State will surpass €100 billion in 2025 – €6.9 billion higher than in 2024.

But once we drill down into the figures, a lot of the extra expenditure is “running to keep still” money. A total of €5.1 billion in additional spending is required next year to meet existing costs and commitments: including the public sector pay deal (€1.2 billion); an extra €1.5 billion for the HSE in 2024 (and a further €1.2 billion for 2025).

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There is, nonetheless, room for manoeuvre for a Government facing into an election. Chambers’ tax package will be €1.4 billion and Donohoe will also have some discretion from the €6.9 billion allotted for current and capital spending.

It’s unlikely that we will see a third tax rate being introduced, rather changes in the tax thresholds aimed to avoid “fiscal drag” for low- and middle-income earners.

“The key objective is to help avoid a situation where workers pay a higher percentage of income as earnings grow,” said Chambers.

Most of the indications in advance of the budget look positive. There are 2.8 million people working. Unemployment is 4.5 per cent. Inflation dropped to 1.5 per cent in June, the lowest since 2021. Corporation tax remains buoyant despite the constant warnings of its fickle nature.

The other outstanding item is the mammoth €4.5 billion that will be provided in 2025 for contingencies – at the moment, that is providing accommodation for Ukrainian refugees and international protection applicants. As we have seen during the summer elections, that issue has also become politicised.

As for Jack Chambers, if there remains a deficit in his wherewithal for such a senior position, he did not betray it during the hour-long press conference. He looked a little nervous at times but clearly had his homework done. He even appropriated the lingo, speaking at one stage of putting money aside for “countercyclical interventions”.

Asked if he was confident he had the ability to deliver the budget, he insisted his experience having spent four years in Cabinet would stand to him. October 1st will be the test of that.