THE IRISH FISCAL Advisory Council (IFAC) has warned that Budget 2023 must be a “delicate balancing act” between protecting the economy and looking after vulnerable families hit hardest by the cost of living crisis.
Yesterday, the Summer Economic Statement was presented to Government, a document which sets out the parameters for the Budget.
This statement revealed that the Budget package will be €6.7 billion, an increase in spending of €2.2 billion on the previous year.
The overall package will be made up of additional public spending worth €5.65 billion, and taxation measures worth €1.05 billion.
Three billion euro of the total is pre-allocated, and €3.7 billion is left to be divided between Government departments.
A planned change to tax bands and credits also aims to ensure that workers are not “dragged” into higher levels of taxation by virtue of wage inflation.
However, IFAC said that the Budget must not endanger the economy.
IFAC is an independent statutory body with a mandate to assess and endorse the Government’s official economic forecasts.
A spokesperson said: “Strong tax revenues have led to a new official projection for a budget surplus in 2022. But, much of the boost in tax revenues reflects strong corporation tax receipts. These should not be relied on to fund permanent spending increases. Overreliance on corporation tax should be reduced through contributions to the Rainy Day Fund or a new Pension Reserve Fund.
Budget 2023 involves a delicate balancing act in protecting the economy and poorer households, while avoiding adding to inflation through second-round effects.
“Better targeting of policy supports improves the trade-off between helping those most exposed and higher inflation. The Government’s policy measures will be set out with the Budget.”
Speaking yesterday, Taoiseach Micheál Martin said: “We’re going to get the balance right here. The Summer Economic Statement sets out the parameters of what’s possible.
“We are in the context of a unique set of circumstances coming out of Covid-19, supply chain difficulties and balances between supply and demand, which created its own inflationary cycle.
“And then the war in Ukraine has been very dramatic in terms of its impact on energy prices, which has fed into the broader economy.
“So we do have to, through a combination of budgetary and temporary measures, try to alleviate the pressures on people, and that is the objective.
“Now remember, we already have taken taxation initiatives, around fuel and so on.”
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