Budget 2024: Michael McGrath says way is clear for incomes and living standards to improve

Minister for Finance Michael McGrath has predicted that his budget on Wednesday will pave the way for incomes to rise ahead of the rate of inflation and for living standards to improve.

Mr McGrath accepted that, economically, there had been a “mixed picture” over the last year and many people were genuinely hurting. While the economy had performed well, he said increases in the cost of living had put some people under real strain.

“When you look at the big picture, over the past 18 months, some people have had a deterioration in their living standards because their income hasn’t increased in line with inflation. I do believe that that is about to change.”

However, he added a note of optimism in terms of what will occur over the next 12 months.

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“What the Government will outline on budget day is our plans in both tax and expenditure but, more broadly, an expectation and an optimism that living standards are about to improve for people, that incomes will rise ahead of the rate of inflation, that people will make gains and, in real terms. their life will be better,” he said.

Mr McGrath will present his first budget on Tuesday. Speaking alongside Tánaiste Micheál Martin at the Cairde Fáil (Fianna Fáil fundraising group) dinner in the Clayton Hotel in Donnybrook, the Minister disclosed that work on the tax side of the budget has now been completed. The overall package of tax measures will come to €1.2 billion.

However, he said that some issues remained outstanding on the expenditure and public services side. He said his colleague, Minister for Public Expenditure Paschal Donohoe, continued to work “in the trenches” with colleagues to bring other matters to resolution.

The three party leaders, Mr McGrath and Mr Donohoe will meet on Sunday evening with a view to get final agreement on all big outstanding issues.

Mr McGrath also argued that the multibillion-euro rainy day fund he will announce in the budget on Tuesday is not for the benefit of future generations but for people who are working and living now. Addressing criticism that he was setting aside money for some undefined moment in the future rather than addressing current needs, Mr McGrath dismissed the suggestion that the current generation would not benefit from it, saying it could be required much sooner than some people think because of an increase in volatility and uncertainty in global markets.

“It’s not about the never-never. It’s not about future generations,” he said of the fund. He is expected to announce an allotment of several billion euro for the fund in the budget on Tuesday, most of which will be funded from corporation tax receipts.

“It’s about people who are alive today, who are children, but also people of working age. The costs that we are providing for are going to come at us really quickly.

“It’s not about decades into the future. This fund that we will establish will benefit every person in the country today. And we have a window of opportunity now to set that up.”

[ Budget 2024: The table, the couch and the art of pulling a budget together ]

In a reference to the drop-off in corporation tax during 2023 as against predictions, he said: “It’s one that we need to avail of very quickly because the sands are shifting internationally.

“There is a lot of uncertainty, a lot of volatility. We’ve had a reminder of that with our corporation tax receipts in the last couple of months. There’s no cause for panic. But I think it is a reminder for us to act now, and to take advantage of the opportunity that’s there.”

Mr Martin said the Budget was challenging because of increases in public expenditure, partly on public sector pay increases and partly because of the impact of the population growth on the public service.

“There are 1.5 million extra people in the population since 2000. Our population has grown very significantly over a relatively short space of time. That is creating pressures on public services and hence there is a challenge for us to stay within the framework [of approximately €6.4 billion in additional expenditure for 2024].”