As employers’ group Ibec points out in its latest assessment of the economy, Ireland is in a rather unique position in fiscal terms. It can spend heavily to relieve cost-of-living pressures — as illustrated by its record €11 billion budget-day package in September — while still expecting to run an end-of-year budget surplus.
Most EU governments were trying to rein in spending after the massive outlays on Covid when the inflation emergency hit and now find themselves pulled in opposite directions. As the squeeze on households gets more intense, the political pressure to spend is rising, but raising more debt in the face of rising interest rates and a global slowdown is financially risky. Ireland is — to some extent — cushioned from this dilemma.
Total tax revenue — at almost €64 billion in the first 10 months of 2022 — was up by more than 65 per cent on the same period in 2019, an incredible jump in the circumstances.
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Most other EU countries have seen their tax take rise by between 8 and 18 per cent over the same period, Ibec noted in its report. The employers’ group expects total tax revenue here to rise to €82 billion for the full year of 2022 and to €87 billion in 2023, compared to €59 billion in 2019, on the back of surging corporation tax and higher income tax.
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“As a result, the Government have been able to do three things — provide a budget-day package worth over 4 per cent of national income (€11 billion), run a significant surplus, and put a similar amount of funds away in a state savings vehicle,” it said.
The Government expects to run a surplus of €1 billion in 2022 and €6.2 billion in 2023. “Having a combined surplus and saving of over €12 billion will also allow for ongoing flexibility should further support for the economy be needed into 2023 and beyond,” Ibec said.
Of course, all this might change. The outlook is extremely volatile but, for now, the public finances are being shielded from the worst of it.
