Minister for Finance Simon Harris still expects to introduce income tax reductions in the next budget despite the three-quarters of a billion euro in additional spending and tax cuts announced in the last three weeks.
The Minister has “said repeatedly that he expects there to be an income tax package in the next budget and that position has not changed”, said his spokesman.
The Department of Finance has said it will publish in the coming weeks revised estimates for spending projections and a smaller surplus. This follows the €505 million package announced on Sunday evening and the €250 million announced last month.
The department said the excise reductions would cost €260 million until July, while the deferral of the carbon tax increases would cost €22 million.
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Behind the scenes, though, there are also fears in the department that the current package of measures will be extended beyond July 31st. And this would add further costs into the hundreds of millions.
There is understood to be considerable unease within the department and across Government about the rush to extra spending at a time when a global economic slowdown is expected to lead to slower growth here and higher inflation.
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Moreover, concerns are also mounting that the Government’s budget projections are no longer credible because of the impact of the package.
“The budget numbers are meaningless now,” said one source who spoke on condition of anonymity.
In addition, sources were sceptical that the Government will increase the carbon tax on home heating oil – deferred from May as part of the package – next October, as people face the winter.
Economic and Social Research Institute economist Alan Barrett said the Government had already committed to spending nearly 20 per cent of the €5 billion budgeted surplus. “I don’t think anyone thinks that this is going to be the end of it,” he added.
Irish Fiscal Advisory Council chairman Seamus Coffey said that the implications for next year’s budget of the extra spending this year would be contained if the fuel package is not extended.
But he warned, “We’ve seen before how one-off spending has extended for more than one year.”
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Meanwhile, trade unions signalled that the Government’s willingness to spend extra money would be “factored into pay negotiations across all sectors of the economy in the next year”.
Irish Congress of Trade Unions general secretary Owen Reidy said: “Trade unions across Ireland have taken note of events over the past week. While we are told the importance of being reasonable with pay demands, blockades and barricades have been rewarded with a €500 million package of tax breaks. The Government has repeatedly indulged business interests and shown a willingness to rely on the public purse to do so.
“We represent 800,000 workers who have seen inflation increase by around 20 per cent over the past five years. Everyone is struggling with the cost-of-living crisis. We know that the first and best response to this is improved pay.
“The Government has demonstrated, repeatedly, that the loudest lobby wins and that working people, who engage in good faith through proper structures, are rewarded with less than those who disrupt.
“A Government that can find €500 million for one industry at the drop of a hat has no credible case to make for restraint at the pay talks table. The Government has set a clear precedent.
“Workers will remember it.”
