Finance Minister Michael McGrath and Public Expenditure Minister Paschal Donohoe have emphasized the importance of next month’s budget in addressing the impact of soaring inflation and overspending in the health sector. Speaking to the Oireachtas budgetary oversight committee, the ministers acknowledged the need to consider the potential decline in corporation tax revenues and the concerns raised by the Irish Fiscal Advisory Council and the Central Bank regarding inflationary pressures. Furthermore, they highlighted the necessity of estimating the spillover effects of health overspending on the 2024 budget.
The Irish Fiscal Advisory Council recently criticized the government for exceeding its 5% spending growth ceiling. This year’s budget is also attracting increased scrutiny as it may be the last before a general election. Nonetheless, Minister McGrath stressed the need for increased core spending in 2024 to address the impact of inflation on households and businesses. He clarified that no decisions had been made regarding income and USC measures in the budget package of €6.4bn, which includes €5.2bn in core spending and €1.1bn in tax measures.
Minister McGrath assured the committee that the increased budget package would allow for continued support to businesses and households, protection of public services, and investment in the economy’s productive capacity, without exacerbating inflationary pressures. Both ministers also expressed their commitment to returning to the 5% expenditure targets when appropriate, acknowledging the importance of long-term sustainability. Minister McGrath emphasized that his budget plans would provide the government with the necessary flexibility to address current challenges while ensuring the ability to respond to future challenges.