The Government will have €1.5 billion for tax cuts in October's Budget, but ministers have been warned that new spending will involve "choices and trade-offs" as departments face belt-tightening.
The Numbers
Day-to-day spending: Up €5.9 billion next year
Capital expenditure: €1.1 billion
Tax cuts: €1.5 billion
Total government spending in 2027: €125 billion
The Catch
With some of the €5.9bn already accounted for, and no public sector pay deal yet - which could cost another €1 billion - Public Expenditure Minister Jack Chambers told ministers they will have to find savings to fund new programmes.
"There's less available across Government next year than there was last year, and that means real trade-offs and prioritisation will be required," Chambers said.
He pushed back on the focus on "additionality": "There's too often a focus on the margin of what extra the budget is delivering, and not enough about the total level of spend in the economy."
Departments will be pushed to "reprioritise" and reprofile spending. An expenditure levy on departments in recent weeks has "created space" for some initiatives.
Tax Package
While no details are decided, the €1.5bn opens the door for personal income tax cuts, as previously signalled by Tánaiste and Finance Minister Simon Harris.
Harris said continuing to raise the threshold for the higher tax rate is "logical":
"If you work a few hours extra, you get a promotion, and you decide to work harder, then you find yourself disproportionately disadvantaged. The higher rate tax was paid at €33,000 in 2015; you now pay it at €44,000... I do think all things being equal, this is an area that we can continue to make progress on."
Taoiseach's Pitch
Micheál Martin said the Budget will deliver a "significant tax package" that will particularly "look after middle-income workers and lower-income workers", reducing cost-of-living pressure on families.
Economic Context
The summer economic statement says the near-term economy is shaped by "two opposing forces":
Fossil fuel shock from disruption in the Strait of Hormuz
Strong AI growth working in the opposite direction
The Irish economy is described as in a "healthy position", with employment at a near-record high and unemployment below 5% for a record 54 consecutive months.
However, risks to public finances "remain significant" amid the wars in Ukraine and Iran, tariffs, and the digital transition.