Ministers McGrath and Donohoe publish Summer Economic Statement 2023
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Ó: An Roinn Airgeadais; Department of Public Expenditure, NDP Delivery and Reform
- Foilsithe: 4 Iúil 2023
- An t-eolas is déanaí: 12 Aibreán 2025
- Budget 2024 will deliver an overall package of €6.4 billion and will be presented to Dáil Éireann on 10 October 2023
- additional public spending will amount to €5.2 billion and taxation measures will amount to €1.1 billion
- core spending will increase by 6.1% in 2024
- an additional €2¼ billion over the period 2024-2026 to boost delivery of critical capital infrastructure projects and make a contribution to the existing Climate Action Fund
- today’s Exchequer figures show that tax revenues to end-June were €40.9 billion
- this was 10.9 per cent higher than last year, reflecting the underlying strength of the economy, but also is heavily driven by volatile corporation tax receipts
- total gross voted expenditure to end-June amounted to €41.9 billion, €3.4 billion or 8.7 per cent ahead of the same period in 2022; this reflects support for our public services and our growing population, and the ramping up of NDP investment
- an Exchequer surplus of €0.3 billion was recorded in the first half of the year
- on a 12-month rolling basis, the Exchequer recorded a surplus of €1.1 billion in June. However, excluding one-offs, an underlying deficit of €5½ billion was recorded on a 12-month rolling sum basis
The Minister for Finance, Michael McGrath, and the Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe, today (Tuesday) published the government’s Summer Economic Statement 2023 following agreement at Cabinet this morning. This document sets out the government’s medium-term budgetary strategy and outlines the fiscal parameters within which discussions will take place ahead of Budget 2024.
In the Summer Economic Statement 2021, the government adopted a medium-term budgetary strategy based on public expenditure growth of 5 per cent per annum over the medium-term. Annual increases in spending were anchored to the economy’s estimated trend growth, taking into account an assumed inflation rate of around 2 per cent.
Last year, in the context of a highly elevated inflationary environment, the parameters were temporarily adapted for Budget 2023. While inflation is now easing, it is still expected to remain above trend next year. On this basis, Government is adjusting its fiscal parameters for Budget 2024. To protect public services, core spending will now increase by 6.1 per cent next year. Over the medium term (2025-2026), as inflation pressures moderate, core expenditure growth will return to a rate of 5 per cent per annum.
Budget 2024 will provide for an overall package of €6.4 billion; this has been calibrated to balance the need to provide further support while avoiding adding to inflationary pressures.
The overall package will be composed of additional public spending amounting to just over €5.2 billion and taxation measures amounting to just over €1.1 billion. This budgetary strategy is balanced between investing to deliver improvements in public services, while minimising the impact of fiscal policy on inflation and maintaining the public finances on a sustainable trajectory over the medium term.
In order to increase the pace of delivery of enhanced infrastructure, €2.25 billion of windfall receipts will be utilised to boost delivery of critical infrastructure over the period 2024 to 2026.
A ‘non-core’ expenditure provision of €4.0 billion will be put in place for 2024 for temporary measures. This will help provide humanitarian supports for refugees from Ukraine and more limited COVID-19 provision in respect of certain potential continued requirements.
The Department of Finance also today published the Exchequer Returns for the first half of the year.
An Exchequer surplus of €0.3 billion was recorded at end-June 2023. This compares with a surplus of €4.2 billion in the same period last year. The annual decrease is driven by the transfer of €4 billion to the National Reserve Fund earlier this year.
Tax receipts amounted to €40.9 billion in the first half of the year, up €4.0 billion (11 per cent) on an annual basis, driven by robust income tax, VAT and corporation tax.
At €15.5 billion to end-June, income tax receipts were up 9 per cent on an annual basis, broadly in line with expectations and reflecting a labour market operating at, or beyond, full employment.
Corporation tax receipts amounted to €10.35 billion to end-June, up by €1.8 billion on last year due to increased profitability in the multinational sector and in line with expectations.
VAT receipts in the first half of the year were €10.3 billion, ahead of last year by €1.2 billion. This was broadly in line with profile and reflects the underlying strength of the Irish economy.
Total gross voted expenditure to end-June amounted to €41.9 billion, €3.4 billion or 8.7 per cent ahead of the same period in 2022 and broadly in line with profile (ahead by €100 million or 0.2 per cent).This reflects increased investment in public services and infrastructure from Budget 2023 and the NDP. This is delivering improvements in our schools, our healthcare system and supports for childcare. This expenditure is also supporting those arriving on our shores from Ukraine and providing for the Spring/Summer Cost of Living Package.
On a 12-month rolling basis — a better indicator of the trend — the Exchequer recorded a surplus of €1.1 to end-June. However, once one-offs are excluded i.e. transfers to the National Reserve Fund, proceeds from the sale of bank shares and estimates of volatile ‘windfall’ corporation tax are excluded, there was an underlying deficit of €5½ billion on a 12-month rolling basis.
Speaking today, the Minister for Finance Michael McGrath said:
“The strategy announced in the Summer Economic Statement today represents a credible, sensible and sustainable approach to our public finances. Households continue to face significant cost of living challenges and we have to ensure we protect people as much as possible from the full impacts of inflation. I believe this strategy takes into account the economic realities of today while still ensuring that we do not stoke inflation further.
"This is a framework that will provide for continued investment in our public services. It also provides for increased capital spending that will use some of our windfall corporation taxes to pay for improvements to the productive capacity of our economy. This means we can take advantage of today’s temporary windfall to build improvements that will benefit our economy and society for years to come. In relation to taxation, the priority will be to, once again, help avoid a situation where workers and other income tax payers end up paying a higher percentage of tax as their earnings grow.
"We have also today, published the Exchequer figures for the first half of the year. These show that, broadly speaking, we are where we expected to be in terms of tax revenue. Income tax and VAT remain robust, demonstrating the strength of our economy, but volatile corporation tax continues to pose a vulnerability for the public finances.
"The best way to ensure that we retain the fiscal firepower to address the issues of today and the challenges on the horizon is by maintaining a sensible budgetary policy that balances investment in our public services and infrastructure with the long-term sustainability of our public finances.
"The fiscal strategy for Budget 2024 that we have set out in the Summer Economic Statement today strikes that balance.
"Shortly, I will bring proposals to Government on the establishment of a long term savings fund and a public investment fund to be utilised during an economic downturn.”
The Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe, said:
“Better public service delivery is at the core of our ambitions and today’s figures show how we are supporting public services across a range of sectors. In the first half of this year we have spent almost €42 billion. This is delivering investment in our public services, our hospitals, our education system and childcare to cater for our growing population. The ramping up of the NDP is delivering more investment in housing, in schools and in the National Broadband Plan to provide for our current needs and investing in the future of our country.
"In addition, this spending is also providing vital supports for the various challenges faced by our country. It is providing supports for those struggling with cost of living pressures and those arriving on our shores from Ukraine.
"Today’s publication of the Summer Economic Statement outlines our budgetary strategy for 2024. In planning the fiscal and budgetary response, the government will continue with the balanced approach of supporting society while being conscious of fiscal sustainability and being mindful of the need to avoid adding to inflationary pressures. Our economy and people continue to show resilience and this has helped us to respond to the challenges that we have faced over the past number of years.
"I am pleased to announce that an additional €2¼ billion, from windfall corporation tax receipts, will be made available over the period 2024-2026 to boost delivery of critical capital infrastructure projects and make a contribution to the existing Climate Action Fund. This will continue to provide the additional schools, hospital and transport projects that are making a real difference to people’s lives while ensuring that due consideration is given to future environmental challenges that we will need to meet head on."
The continuation of the careful management of the public finances through the policies and strategies contained in the Summer Economic Statement will allow us to:
- provide increased resources for core public services, investing in quality of life in Ireland to support a strong, fair and equal society into the future
- deliver significant and essential infrastructural projects through our National Development Plan, providing for critical projects that support our employment prospects, economic development and regional growth
- put in place considerable supports that provide assistance to households and businesses to counter the external challenges we face, including the war in Ukraine and the COVID pandemic
Summer Economic Statement 2023
Summer Economic Statement 2023 - Summary
