Summer Economic Statement ‘strikes delicate balance’ on and inflation

Grainne Ni Aodha and David Young, PA

The Government’s Summer Economic Statement strikes a “delicate balance” of providing enough for society while not adding to inflationary pressures, the Minister for Finance has insisted.

Michael McGrath and Minister for Public Expenditure Paschal Donohoe will later publish the statement that sets the overall parameters for the spending and taxations measures that will be included in the autumn budget.

Arriving at Government Buildings ahead of presenting the plans to Cabinet colleagues, Mr McGrath confirmed his intention to use some of the billions of euros of corporation tax revenue from multinationals to reduce the national debt and for longer term investment and savings initiatives.

“In framing the Summer Economic Statement, we have had to strike a delicate balance between ensuring that we provide enough for our society, for our economy, while at the same time not adding to inflationary pressures and recognising that it is an economy that is now pretty much at full employment, there are capacity constraints,” he said.

“And so striking that right balance has been a challenge, but I’m confident that we have now arrived at an appropriate budgetary package for Ireland, which ensures that essentially windfall revenues that we are currently collecting can be protected.

“And in the coming weeks I will bring a further memo to Government seeking agreement on the overall architecture of setting up a long-term savings fund, a public investment fund, and also making provision to ensure our national debt becomes more sustainable.

“So we sought to strike that right balance today between increases in core investment in of day-to-day core expenditure, while also providing for some additional capital investment from windfall receipts.”

Mr McGrath said no decisions had been taken on potential further temporary s that could be included in the autumn budget for people struggling amid the cost-of-living crisis.

“Inflation is still high, it is thankfully falling, but that is primarily because of base effects rather than actual reductions in price levels,” he said.

“So we’re not making decisions in the Summer Economic Statement about potential temporary or one-off items.

“The budget is still three months away and those decisions will be made closer to the time once we take of the economic circumstances, the inflationary situation, at that point in time.

“What the Summer Economic Statement sets out essentially is what the budget package will be for 2024, the core budget package in of recurring expenditure items and indeed the taxation package as well.

“And there’ll be a whole series of detailed negotiations then that will result in a lot of individual decisions then to decide what makes up the budget package, but this does set the parameters of the budget, and it does provide the guardrails and really does impose a certain level of discipline that the budget will now come within the scope of what hopefully will be agreed today in of the Summer Economic Statement.”

Mr McGrath said increasing the numbers of affordable homes would be a key focus of the budget.

“In recent years, our priority has been in areas such as housing, continue to ensure that our local authorities, approved housing bodies and the Land Development Agency have the resources necessary to significantly increase supply of social, affordable-cost rental homes,” he said.

“So that will be a top priority for the Government in the budget.

“But there will also be a continued focus on reducing costs.

“So, in the last budget, we made a very significant step forward in relation to childcare costs.

“We also pressed down, where we could, education costs, health care costs, transport costs, so that will be a focus of Government because at a time of high inflation, there are different ways in which we can help people. And one such way is to try to reduce costs for households and families that are simply unavoidable in their day-to-day life.”

On the prospect of increasing funding to the health sector, Mr McGrath said Mr Donohoe and Minister for Health Stephen Donnelly would be engaging on the issue ahead of the budget.

He added: “I think the overall takeaway here is that Ireland is in a good position in of the health of our economy and our public finances.

“We will be running a large surplus this year and a large one next year, which does make our finances safer into the future. And it gives us options then around meeting future costs through a long-term savings fund and also to put funding into a public investment fund, as well as reducing the national debt.

“We are pretty much at full employment, over 2.6 million people working, the economy is continuing to grow and we’re seeing significant inbound investment flows coming into Ireland.

“So we just have to manage this time in the economic cycle well, and make sure we make the best possible decisions with the resources that we have available and I think we have found the right balance in the Summer Economic Statement being published today.”