What does it cost to run Ireland per year? Which costs most: education, health or retirees?

Your pre-Budget guide to how much tax the State earns, and what it spends on health, education and other areas

Minister for Public Expenditure Paschal Donohoe and Minister for Finance Michael McGrath getting ready for one of the gala days of the year at Leinster House where large sums of money will be thrown around like snuff at a wake. But what does it all mean? Photograph: Dara Mac Dónaill
Minister for Public Expenditure Paschal Donohoe and Minister for Finance Michael McGrath getting ready for one of the gala days of the year at Leinster House where large sums of money will be thrown around like snuff at a wake. But what does it all mean? Photograph: Dara Mac Dónaill

Next Tuesday’s budget will probably be the most important event of this Government’s remaining time in office. With the polls looking sketchy at best, Sinn Féin tightening its grip on younger voters, and a general sense humpiness about the place, the Coalition badly needs a political success.

It will not, of itself, upend the political narrative. But the budget will offer the Coalition the opportunity to communicate directly with the public and identify itself with the economic strength of the country, as well as highlighting the benefits for ordinary people of that economic strength.

Most voters pay little enough attention to politics on a day-to-day basis. The budget is one of the few times in the year – for some, the only time – that they tune in to what politicians are saying. And Budget Day is dominated by the Government – its ministers, its message, its measures. It is a giant political megaphone.

At Leinster House, where it is one of the gala days of the year, budget numbers – the “millins” and “billins”, as Michael Noonan used to call them – will be thrown around like snuff at a wake.

READ SOME MORE

But how much do we really know about what those numbers actually mean? A few years ago, during an entertaining argument among friends (some wine had indeed been consumed, m’lud) about politics, one gentleman was wanging on about how something or other was a colossal, unpardonable, unaffordable, etc, waste of public money. What do you think it costs to run the country, I asked him. In total – what’s the national budget? It seemed to me that if you were to declare something to be unaffordable, you’d have to have some idea of the available resources.

Frantic final days of budget negotiations as deadline looms without agreementOpens in new window ]

Budget 2024: How to cut through the spin and spot the real changesOpens in new window ]

But my interlocutor was stumped. He – who worked in finance and had daily dealings with millins and billins himself – eventually essayed a figure that was about a quarter of the right answer.

I think many people are in the same boat. What does €100 million here and there actually mean? What does a billion mean? What is the context for the spending and taxing decisions that form the budget? So in advance of Tuesday, here’s a few budget numbers you might find useful when trying to understand what the flurry of numbers headed your way actually means:

Total: €100 billion

It will cost, give or take, about €100 billion to run the country next year. There are, of course, various ways of calculating the figure; Government finances, it often seems, are not designed to be comprehensible to the layman. But about €100 billion is the best figure, including both current (day-to-day) spending and capital (building things). Total voted spending by the Government last year – and remember, most spending must be authorised by a vote of the Dáil – was about €90 billion. Additional spending this year will push it up to the €100 billion mark – that’s eleven zeros.

Pay and pensions: €28 billion

This is the amount of money spent this year of public sector pay and pensions for retired public sector workers. It’s one of the chunkiest bits of the budget, and will rise further this year due to increased numbers in both categories; this year, the pay bill rose by 3.5 per cent and the pensions’ bill by 5.4 per cent. There’ll probably be a new public sector pay agreement by the end of the year, or possibly early next year, and that will push up costs further. The Department of Public Expenditure reckons that every 1 per cent pay increase for public servants pushes the total pay bill up by about €250 million.

The biggies: €25 billion, €23 billion, €14 billion

These are the biggies in terms of departmental expenditures. The State will spend more than €25 billion on the health and disability services this year and €23 billion or so on social welfare payments, including unemployment benefits, old age pensions, disability payments, child benefit, and so on. The next biggest area of expenditure is education (at all levels), where the State spends nearly €14 billion.

Overspending in HSE is a runaway train, but stopping it is politically unfeasibleOpens in new window ]

Taxes: €90 billion

That’s the amount of money expected to be raised by the State this year in taxes. The biggest is income tax, which last year raised about €30 billion; for the first time, corporation tax was the second largest, raising nearly €23 billion, which represented nearly a 50 per cent increase over the previous year. But as Michael McGrath and Paschal Donohoe never stop warning us, there are signs that the runaway growth may be over; corporation tax has undershot expectations for the last two months in a row and the great fear is that it will start to decline. VAT raised nearly €19 billion last year.

National debt: €225 billion

The national debt: €44,000 for every man, woman and child in the country. This figure isn’t as scary as it seems – for a start, it is declining. Secondly, countries don’t really pay back their national debt – they just keep rolling it over, refinancing it bit by bit. Because of the country’s extremely strong fiscal position, Ireland has been rolling over – ie, reborrowing – smaller bits of it every year, meaning the overall debt level is falling.

And finally: €10 billion

Actually, we’re talking about two €10 billions here: while we will have to wait until Tuesday, it is generally expected that the total budget day package – between annual recurring spending increases, tax cuts and once-off payments – will be about €10 billion, or maybe a little less. In addition to this, it is expected that the Government will announce the establishment of a long-term savings and investment fund, into which it’s likely that about €10 billion of surplus corporation tax will be lodged.

Oh, and by the way, a billion is a thousand million. Right. Everyone got all that?

Pat Leahy

Pat Leahy

Pat Leahy is Political Editor of The Irish Times