Another spring cost-of-living package has been ruled out by Minister for Finance Michael McGrath who warned that other financial once-off measures must be tapered off as the Government plans to return to smaller-sized budgets.
The Minister has also heavily indicated that taxpayers are in line for further USC and income tax cuts in this year’s budget, despite “volatile” corporation tax receipts, some €11bn of which he says cannot be relied upon this year as they could be windfall in nature.
Last spring, the Coalition unveiled a €1.3 billion package of cost-of-living measures, including €200 bonus welfare payments and a €100 child benefit top-up. Later in the year, the Cabinet signed off on a €14bn budget which included three energy credits and a double payment of child benefit amongst a raft of other measures.
In an interview with The Irish Times, McGrath ruled out a spring package: “It is our intention that the next major fiscal intervention will be the budget later on this year. That is our intention, that there will be no spring package in 2024.”
Asked about once-off budgetary measures, such as the €150 energy credits, McGrath significantly dampened any expectation of further exceptional measures.
“Those exceptional interventions cannot be the norm and in a more normal economic environment you cannot fund those interventions indefinitely. So it is our intention to revert to a more normal approach to budgetary policy in the future.”
“All things being equal, we will see a further tapering off of the one-off exceptional supports that we’ve been providing. The expectation is that the cost of living pressures will ease across 2024 with some key costs that people face falling and incomes rising,” he said. He also said the Government intends to stick to its own spending rule, which sets out to limit the overall increase in spending to 5 per cent annually.
“That is our intention for Budget 2025.”
McGrath said while he does not see the Universal Social Charge being removed from the tax base in the coming years, he believes “that further progress can be made in reducing the burden of the USC and income tax generally.”
“We made good progress in the most recent budget. The full-year cost of the package was about €1.5bn and I do believe that we will be able to do more in the budget later on this year” although he said he could not state how much this year’s tax package would be worth yet.
Asked whether he was under pressure to deliver a bonanza budget, given it will fall just before a general election if it is held in early 2025, he said: “the next budget will not be determined by the imminent general election.”
“I’m not sure the Irish public rewards governments who bring in budget bonanzas in advance of elections. They want a government that manages the country’s finances responsibly. There are not many countries in the developed world that are in a position to run significant budget surpluses and that are setting up funds with an eye to securing the future for all of us.”
The Minister said while inflation figures for December, which showed a monthly increase to 3.2 per cent from 2.5 per cent the previous month, were a “step backwards”, he expects inflation to track downwards this year.
“I think we have much to be optimistic about going into 2024, the country is essentially at full employment and notwithstanding the increase in inflation in December, the overall trajectory is downward in nature.”
“The December data was a step backwards, but it did come following a very significant reduction in inflation in November. I think you have to assess inflation over a number of months. You have to look at the trend. And the overall trend here is that inflation is falling.”