By Padraic Halpin
DUBLIN (Reuters) – Ireland will detail in Tuesday’s budget how it intends to use one of the healthiest public finances in Europe to cut future pension and climate costs while also introducing a raft of measures to ease current cost of living stresses.
Budget surpluses are a rarity in Europe following a jump in spending during COVID-19 but a surge in Irish corporate taxes paid by a small number of foreign firms snapped Dublin quickly back into a surplus of 2.9% of gross national income last year.
With the surplus forecast to keep rising, Finance Minister Michael McGrath will lay out how much the government intends to invest in a sovereign wealth fund that his department says could cover much of Ireland’s age-related costs to 2035 if enough of the corporation tax receipts are saved.
McGrath will also set up a second, smaller 14 billion euro ($14.8 billion) infrastructure and climate fund, available to catch up on targets to cut greenhouse gas emissions and act as a buffer against capital spending cuts in any future downturn.
“The costs that we are providing for are going to come at us really quickly. We have a window of opportunity now and it’s one that we need to avail of very quickly because the sands are shifting internationally,” McGrath said on Saturday.
Two successive recent falls in monthly Irish corporate tax returns – the first substantial decline in the volatile category for years – was a reminder of the need to act now, he added.
McGrath said there was “no cause for panic” with data also pointing to a slowdown on the rapid economic growth of last year and that ministers will press ahead with plans to cut income tax and break its own budget rule again by increasing recurring government spending by 6.1% or 6.4 billion euros next year.
A package of one-off financial supports totalling another 2.4 billion euros will be added on top of that, a source familiar with the process told Reuters.
The government has pledged that a combination of tax cuts, rises in welfare rates, help with energy bills and reductions in childcare, university and school costs will push incomes ahead of inflation that is forecast to fall slowly from 6% currently.
A similarly expansive budget a year ago that included even more generous one-off measures handed little political momentum to the three-party coalition. The left-wing opposition Sinn Fein remains well ahead in polls, with elections due by early 2025.
($1 = 0.9478 euros)
(Reporting by Padraic Halpin; Editing by Toby Chopra)