You might ask yourself three fundamental questions about the 2023 budget. Does it keep public finances on a sustainable path? Is this a wise use of public resources? And under current circumstances, will this add to inflation?
Ministers Paschal Donohoe and Michael McGrath seem to be sticking to the budget envelope of 6.7 billion euros announced in the summer economic declaration. This includes a €4.5 billion increase in current spending for 2023, an €800 million increase in capital spending and a €1 billion tax package. Additional current expenditure of €400 million is also planned for this year.
While this breaks the government’s 5% spending rule, it pretty much obscures it and, more importantly, keeps spending in line with the long-term growth potential of the Irish economy (set at 3% ) and inflation.
So, for the first criterion of keeping public finances on a sustainable path, the answer is yes. This year, however, the focus has been on the government’s temporary and additional one-off cost-of-living reduction program, which is expected to cost around €3 billion.
It is expected to contain a range of measures to help offset inflationary pressure, ranging from energy credits to doubling social benefits and family allowances. This is where the questions posed above become more difficult to answer. General measures such as energy credits are costly and help wealthy families as well as the poorest households.
The government will say that there are many middle-income families who earn too much to qualify for support but who are still badly hit by rising prices and that designing a system that would weed them out of the wealthiest households would be too onerous . Either way, a lot of public money will go to households that don’t really need it.