Ministers will have a huge surplus of €4.415 billion available in 2022 for one-off measures, including supporting energy bills, before even having to think about next year’s spending commitments, new figures from the Treasury Department show.
The annual White Paper, published at midnight on the Friday before each budget, establishes the state’s expenditures and revenues for the current year and projects what that would translate to the following year on a so-called “no budget basis,” meaning no tax changes or changes in spending policies.
Last night’s figures show that public finances are on track to end the year in a dramatically improved condition, throwing away a government balance or surplus of €4.415 billion – that’s the money expected to remain if all existing spending commitments of the state this year have been met without borrowing new money.
The surplus is expected to more than double by 2023 to a massive €11.78 billion.
The shift in public finances is drastic.
As late as April, Treasury Secretary Paschal Donohoe argued that early indications of a strengthening fiscal position were a false dawn, and predicted a deficit – a surplus of spending over income – for 2022.
That extremely cautious position has been dramatically left behind by the real result, notably the increase in corporate tax paid here, but other factors, including more VAT paid and much lower costs to support Ukrainian refugees moving here than first expected .
The result is a huge windfall in the hands of ministers to help households and businesses through the expected winter energy bill shock, without having to go to the markets and still balance a budget that is set at the beginning of the year. was not expected.
The potential surplus of nearly €12 billion for next year makes the €6.7 billion budget package for 2023 with higher spending and lower taxes appear relatively modest – although next year’s figures reflect a massive €22.7 billion in corporate taxes that officials now expect to pay.
That’s nearly five times more than the corporate tax collected in 2014, and the magnitude of the increase has raised major questions about how sustainable or reliable those funds are.
To answer that question, officials drafting the budget white paper included alternative figures based on a potential collapse of more than $9 billion in tax revenues.
Even without this so-called windfall tax level, the projections show a budget surplus in 2023.
The massive improvement in public finances boosts the government’s ability to support the economy during the energy crisis caused by the war in Ukraine and will increase pressure from inside and outside the cabinet for a higher budget next year, although more conservative voices will point to the need to hold a reserve amid labor market uncertainty, particularly in the technology sector, and the looming risks of a recession.
Even within the existing framework, its ministers are fighting through the budget lines, including over the huge and expansive health spending.
On Friday, major budget talks over the amount of health care spending next year stalled amid an altercation between Fianna Fáil ministers Michael McGrath and Stephen Donnelly and their officials.
Mr McGrath, the Minister for Public Expenditure, has offered Mr Donnelly, the Minister for Health, a total budget of just over €22 billion, including around €1.1 billion in new spending.
But the health ministry has said the €1.1 billion on the table will only cover existing spending commitments with no money left for new measures.
Donnelly wants to abolish hospital costs, cut prescription costs, expand free primary care, free contraception and start providing government-funded IVF.
“There will be new measures and a waiting list initiative, they just need to prioritize what they want to spend on the extra money they get,” said a source.