Government projections show the State’s surplus is set to grow from €5 billion to more than €9 billion this year, a revision likely to lead to intense pressure to increase spending later in the year.
The spring economic forecasts published by Minister for Finance Simon Harris and Minister for Public Expenditure Jack Chambers suggest the Government’s finances will be bolstered by economic growth this year to finish significantly ahead of expectations at the time of last year’s budget.
Senior Government figures acknowledged on Tuesday that the revised projections would increase the pressure on the Coalition to provide further financial assistance to the public later this year.
In the Dáil, Sinn Féin leader Mary Lou McDonald told Taoiseach Micheál Martin: “Your Government is taking in billions more and yet people can’t heat their homes, people can’t pay their electricity bills.
READ MORE
“It is as though there are two different realities in this country. One in your forecast of growth, of surpluses, and another at kitchen tables across the land – cold homes, mounting bills and real fear.”
Sinn Féin finance spokesman Pearse Doherty said all the new figures from the Department of Finance “tells us is that the money is there”.
Labour’s Ged Nash said the Government needed to focus the extra resources “on targeted energy credits, fuel supports, accessible retrofitting and forms of grant aid to some firms as things are likely to worsen as a result of this energy shock and global volatility”.
In response to the forecasts, the Irish Fiscal Advisory Council renewed its criticism of Government spending trends.
The forecasts set out for the years ahead show spending trends that were not sustainable, it said, pointing out that expenditure would increase by 7.4 per cent this year, higher than the 6.6 per cent committed to in January.
The spending watchdog said the plans outlined up to 2030 were above the sustainable growth rate of the economy. Lower surpluses were being planned in the years ahead which, it said, would leave less room to react to economic difficulties. It said the Government was planning to spend €5 out of every €6 of corporate tax collected.
Irish Congress of Trade Unions general secretary Owen Reidy said: “The Government has clearly demonstrated that they have the reserves to, as they see it help people through the crisis, therefore we need to ensure that any increases in spending is felt by many people and not just narrow sectional interests.”
While the document published by the Department of Finance is full of warnings about the international economic fallout from the war in the Gulf and its effects on fuel prices, it shows that officials are not so pessimistic about the ultimate outcome for Ireland.
The document contains three scenarios – “baseline,” “adverse” and “severe”. But even in the severe scenario, it expects growth to continue. The department said that “as of today” the most likely outcome is somewhere between the baseline and adverse scenarios.
The department said it had planned to increase its growth projections for the economy this year before the war broke out, in part because of strong investment in data centres at the end of last year and the beginning of this year.
In the severe scenario, however, inflation could rise above 6 per cent in the second half of this year.
In the baseline scenario, the department projects an exchequer deficit of €1.2 billion – an improvement of more than €600 million from the time of last year’s budget.
It forecasts a general government balance of 2.5 per cent of Gross National Income – an improvement from the 1.4 per cent projected last year. In cash terms, this means the projections for the surplus in the General Government Balance this year have increased from €5 billion to €9 billion.
Despite Government pledges there would be no unplanned spending increases during the year, it was announced that the expenditure ceiling is being raised by €700 million to €118.5 billion.
However, Chambers insisted that Ministers must observe budgetary discipline and said there would be a levy imposed on all departments next year to pay for this year’s overspending in the Department of Education.
Harris declined to speculate whether the Government would be forced to extend the fuel package when it expired in July, though he said that “Budget 2027 will have to have measures to assist people in their own lives”.
