Government defends spending plans after accusations of ‘giveaway Budget’

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Louise Thomas

Editor

The Government has defended its spending plans after it was accused of running a “giveaway Budget” ahead of an impending election.

Minister for Finance Jack Chambers and Minister for Public Expenditure Paschal Donohoe pushed back against criticism that it was a Budget on “steroids” and was designed to buy votes in an election.

Several supports for parents, one-off welfare sums and tax changes were to alleviate problems and pursue “great opportunities”.

Mr Chambers said Budget 2025 has “the common good at its core” and provides a “unique” opportunity to provide better public services, more housing and significant infrastructure projects.

The Budget, worth 8.3 billion euro in tax changes and new spending measures, was accompanied by a cost-of-living package worth 2.2 billion euro.

The cost-of-living measures, worth just 500 million euro less than last year despite reduced inflation, come amid mounting speculation that the coalition Government may call a general election before the end of the year.

The Budget was widely criticised for “splashing cash” around and creating spending risks in the future.

Mr Donohoe responded: “Look, on one hand, they point to the difficulties in relation to the cost of living, and they condemn us for not spending more of the surplus. They can’t have it both ways.

“The Government has tried to get the balance right.”

He said running large surpluses is the right thing to do given the dependence on “few taxpayers”.

He said the multibillion-euro windfall in the Apple tax case will go into long-term investments and not day-to-day spending.

“The opposition, on one hand, say we’re trying to help but not helping enough. They say the cost of living is an issue for everybody. They criticise support measures. They accuse us of spending, but they’d say they’d spend more,” Mr Donohoe added.

Mr Chambers said: “Everyone in the opposition that’s criticising the Budget would spend more.

“We have to a lot of negative diatribe in the Dail today. A lot of our focus was spending for the future on infrastructure.

“It’s about unlocking future opportunities, when it comes to digital and green economy, our investment in energy infrastructure, similarly, using windfall receipts to examine how we can best scale affordability in our housing system, and that’s why we’re being careful with the Apple windfall receipts and how that can be best used to unlock further economic opportunity for our country.”

Mr Donohoe said wage growth is set to out rise above inflation.

The Fine Gael minister said: “If the economic forecasts that have been produced by the Department of Finance do evolve, next year will be a year in which wage growth in our economy will be ahead of the rate of inflation, I suspect, for most of that year.

“That means then a real possibility that living standards will begin to rebuild because of wage growth, supported by the taxation changes introduced by Minister Chambers.

“If that were to occur across next year, it would have to have a very big impact on the design of the (next) budget.”

The Irish Fiscal Advisory Council said that the Budget “repeats Ireland’s past mistakes of pumping billions into the economy” when it is at full employment.

The watchdog said the “very large” Budget package will add pressures and widen the underlying deficit.

It noted positives such as record employment and steady growth, but warned that the strengthening of the economy comes with pressures

Addressing the Dail chamber, Mr Chambers said the Irish economy is in “relatively good shape”, hailing a fall in inflation and a low unemployment rate of 4.5%.

He said inflationary pressures had “eased considerably”, falling from close to 10% two years ago to below 2% since March.

But he warned that people were still “struggling” with high prices and that the state’s reliance on billions in corporation taxes from multinationals must be “kept in mind”.

The Budget includes several tax relief measures, a 12-euro increase in all welfare supports and a rise in the minimum wage.

Other noteworthy measures are:

– A “baby boost” payment of 420 euro for newborns– A 12-euro increase to welfare and pension payments– A 250-euro increase in the rent tax credit, taking it to 1,000 euro– The threshold for paying the higher rate of income tax will increase by 2,000 euro to 44,000 euro– A reduction in the universal social charge from 4% to 3%– The national minimum wage will increase by 80c to 13.50 euro from January 1– An increase in stamp duty on the bulk buying of homes from 10% to 15%– A third rate of stamp duty of 6% was introduced for properties valued at more than 1.5 million euro– A reduced VAT rate of 9% for gas and electricity has been extended until April 30– Free public transport is extended to children aged five to eight– Mortgage interest relief introduced in the last budget is being extended for another year– Inheritance tax will increase for all thresholds, with the higher group increasing from 335,000 euro to 400,000 euro– Petrol and diesel costs will increase from October 9 as the carbon tax rate per tonne of CO2 emitted increases– The cost of a packet of cigarettes is to increase by a euro to 18.05 euro– The cost of a typical disposable vape will rise from around eight euro to 9.23 euro including VAT

Other measures include increased free access to IVF and the introduction of free hormone replacement therapy from January, which could save women between 360 and 840 euro a year.

The Free Schoolbooks initiative to all transition and senior cycle pupils and the Hot School Meals programme will be extended to all primary schools, including a pilot programme for school holidays.

The 1,000-euro reduction in the student contribution will remain and funding will continue for the school transport fee reduction and state exam fee waiver.

An exemption from income tax, capital gains tax and capital acquisitions tax on payments made to the women impacted by the failures in the CervicalCheck scandal was also announced.

Mr Chambers also suggested work would commence to investigate an income volatility scheme which farmers have long been calling for, as well as possible tax relief for people who use gyms or other fitness centres ahead of the next budget.

Another measure sees 13 million euro allocated to help integrate Ukrainians newly arrived in Irish communities.

Mr Chambers said people remain concerned about high prices, while Mr Donohoe said price increases of 19% between January 2021 and August this year have left many worried.

They said this was why a cost-of-living package of 2.2 billion euro was being announced.

Among the measures in that package are:

– Two 125-euro energy credit payments– Two double child benefit payments– A 400-euro lump sum for those in receipt of the working family payment– A 300-euro lump sum for those in receipt of the fuel allowance– A 200-euro lump sum for those in receipt of the living alone allowance.

At the start of his Budget speech to the Dail parliament, Mr Chambers said the Irish economy was in a strong position.

“The outcomes of the progress made were not inevitable,” he said. “It is a result of the drive and the focus of this Government to provide a better future for everyone and in the careful management of our public finances.

“I believe Budget 2025 puts in place the policies and measures to continue this positive trajectory and to ensure that all our people see a promising and hopeful future in this country.”

Mr Chambers said the Government will use 14.1 billion euro of backdated taxes due from Apple to address challenges in “housing, energy, water and transport infrastructure”.

Mr Donohoe said his officials would begin work on developing an investment framework for the Apple funds, ensuring there was co-ordination with investments already planned through the National Development Plan.

He said he and Mr Chambers had played “an essential role” in “lessening our problems” and “in pursuing the great opportunities that await”.

The minister also said he was making three billion euro from the sale of the state’s shares in the Allied Irish Banks (AIB) available for infrastructure spending.

Mr Chambers said the Government wanted to give hope to young people that they will be able to afford their own home in Ireland.

“Budget 2025 puts the country on a firm footing for the future,” he said.

“Progressivity, fairness and catalysing real opportunity for the future have been at the core of this Government’s budgets and these principles have been central to how Budget 2025 was being designed.”

Before the budget, the leaders of Ireland’s coalition Government insisted the measures would not fuel inflation.

Taoiseach and Fine Gael leader Simon Harris said the Government had taken a “balanced approach” as he dismissed claims that he was trying to buy votes ahead of an election.

Mr Harris said: “I make no apology, none whatsoever, for giving people a little bit of their own money back between now and Christmas, because that’s the buffer we need to provide people to allow the timeline between inflation falling and bills falling.”

Pressed on whether the giveaways in the Budget risked overheating the economy, Fianna Fail leader and deputy premier Micheal Martin said: “I don’t think the Budget in itself would be a significant fueller of inflation.

“We have to keep all of those issues under review, obviously, over the next 12 months – but the economy right now is in a healthy space.”

Green Party leader and Children’s Minister Roderic O’Gorman told reporters on Tuesday that the Budget meets “requirements in terms of supporting parents, children and families and supporting the planet”.