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Chambers warns Ministers as spending pressures build ahead of budget

Minister for Finance says Ministers will have to prioritise in new post-Covid, post-inflationary crisis period

From left, Minister for Public Expenditure Paschal Donohoe and Minister for Finance Jack Chambers. Photograph: Sam Boal/Collins Photos

Eoin Burke-Kennedy Economics Correspondent
Wed Jul 3 2024 - 20:43

Minister for Finance Jack Chambers has warned Ministers they will have to “prioritise” to remain within their spending profiles in the upcoming budget.

“We’re out of the Covid environment, the inflationary environment has changed... and that means Ministers will have to prioritise,” he said after announcing record half-year exchequer returns on the back of another surge in corporation tax.

The latest figures showed the Government collected €44.7 billion in tax in the six months to the end of June, €3.8 billion or 9 per cent up on the same period last year, placing it in a strong financial position in advance of the budget.

The performance was in the main driven by corporation tax, which generated almost €6 billion in the month of June alone, 38 per cent more than the same month last year.

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Nonetheless, Mr Chambers warned spending pressures in several departments were building. The exchequer returns showed health spending was already running €1.1 billion or 11 per cent above profile this year.

“All of those combined already apply a great degree of pressure on our expenditure profile for 2025,” he said, noting the budget would be about embedding the public services “that we have advanced over the last four years”.

[ Surging corporation tax boosts State finances ahead of pre-election budget ]

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The exchequer figures indicated total gross voted expenditure in the first half of the year amounted to €47.1 billion, €5.2 billion or 12.4 per cent above the same period in 2023 and €1.5 billion or 3.3 per cent above what had been expected.

Mr Chambers, who was appointed as the State’s new Minister for Finance only last week, inherits the brief at a time of unprecedented budgetary resources but also amid warnings from several agencies, including the Central Bank and the Economic and Social Research Institute (ESRI), that the Irish economy was dangerously close to overheating.

He said the Government’s response to the overheating risk was to establish two new investment vehicles, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, which would divert vital budgetary resources away from the economy to be used at a later date.

“This would also help to address some of the risks around windfall tax revenues,” he said.

Mr Chambers said the Government would set out the fiscal parameters for Budget 2025 in its annual Summer Economic Statement next week.

Minister for Public Expenditure Paschal Donohoe also sounded a warning about the build-up of spending pressures.

“The end-June spending figures are a reminder to departments of the importance of staying within budget and I will continue to engage with my colleagues across Government to ensure enhanced expenditure management in the period ahead,” he said.

Mr Donohoe, however, said capital expenditure remained on an upward trajectory, increasing by €1.6 billion or more than 50 per cent compared with the same time-frame last year. “This expenditure is delivering increased investment in our schools, housing and transport infrastructure,” he said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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