Irish Budget 2016: Michael Noonan, finance minister, has the money to spend and he has doubled the total pre-election giveaway to €3bn in tax cuts and spending rises, which he will announce on Budget Day tomorrow —  Tuesday 13 Oct.


On Friday the Department of Finance published estimates of spending and expected tax revenues before allowing for Tuesday's planned changes.

Additional spending this year include €600m for the Department of Health; over €400m for social protection to include the cost of a Christmas welfare bonus; about €100m for transport and €50m for education.

This spending above target totals €1.5bn for 2015. Strong corporation tax receipts are expected to yield €1.5bn of the expected €2bn in additional revenue for this year.

Last month the Fiscal Advisory Council said: "The proposed €1.2-€1.5bn tax and spending package for Budget 2016 reduces the primary (non-interest) structural budget deficit insofar as expenditure growth, adjusted for planned tax changes, is kept below the estimated potential growth of the economy. Given recent high growth outturns and falling unemployment, the Council assesses that the degree of slack in the economy is likely to be diminishing rapidly. This limits the economic case for a more expansionary fiscal stance. In addition, the debt-to-GDP ratio remains extremely high, leaving debt sustainability vulnerable to adverse shocks in the context of a volatile global economic environment."

Conall Mac Coille, chief economist at Davy Stockbrokers, says the total adjustment in 2016 will amount to €3bn.

"Over the weekend, the Department of Finance published its White Paper containing revised forecasts for the public finances. The White Paper is usually an insignificant event – setting the baseline for the forthcoming Budget but without revealing any significant policy changes.

However, this year’s White Paper reveals a policy decision by the government to raise spending by €1.5bn in the final three months of 2015. Exchequer returns for the year to September had shown the government on track to keep spending within Budget targets. However, net voted expenditure is now expected to equal €43bn this year, close to €1.5bn (or 0.7% of GDP) above the target. The majority of the additional €1.5bn of spending will be carried through into 2016. For example, a €600m health spending over-run will be locked into next year’s expenditure plans. The remainder looks to set to be distributed into the departments of Transport, Education and Social Protection.

Government expects deficit to equal 2.1% of GDP in 2015: The higher level of spending means the government now expects the deficit to equal 2.1% of GDP in 2015. We had expected the deficit to equal 1.7% of GDP in 2015. However, after the additional spending measures announced over the weekend, a figure closer to 2% now looks more likely. Tuesday’s Budget will announce a further €1.5bn (0.7% of GDP) worth of tax cuts and spending rises to be implemented in 2016.

So the total package of policy changes will equal €3bn, or 1.5% of GDP — a larger stimulus than we indicated in April’s Stability Programme. Effectively, the government has decided to loosen policy by twice the amount we had expected. It is likely to forecast a deficit worth close to 1.4% of GDP in 2016, higher than the 1.1% we had forecast. The total package of policy changes is now biased towards €2.25bn of spending rises and with just €750m of tax cuts.

No doubt the introduction of an additional €1.5bn of spending in the final quarter of 2015 has been influenced by the forthcoming election. However, the new expenditure benchmark, intended to limit spending growth to 1.8% in 2016, has had an inauspicious start, creating an incentive to bring forward spending into the final quarter of 2015. Also, by raising spending by an extra €1.5bn in 2015, the government could still attempt to present the Budget as consistent with April’s Stability Programme update."

Half Ireland's population paid public income supports / welfare in 2014

Irish Budget 2016 set for 13 Oct 2015 - Finfacts budget page  

Ireland budget 2016 tax revenues