The Minister for Finance has said the Government faces a challenge in the upcoming budget in getting the balance right between providing an appropriate amount of support needed for society and the economy without pushing inflation higher.
But addressing the Dublin Chamber annual dinner, Michael McGrath said he is confident it will get it right.
Mr McGrath said the budget would be framed against the backdrop of considerable international uncertainty, with persistent but falling inflation, monetary policy weighing on the global economy and the ongoing Ukraine war.
But he said there are solid reasons for optimism, with the Irish economy resilient in the face of shocks and a strong labour market.
Mr McGrath said it is in everybody’s interest to get inflation down as quickly as possible.
“The Government is acutely aware of the impact of monetary policy on households and on businesses and despite the inflationary pressure it is encouraging to see continued economic growth in Ireland and continued consumer spending over the second quarter,” he said.
But he also recognised that there are challenges ahead including capacity constraints in the economy.
“The central challenge that Minister Donohoe and I face, and the Government, is to get the balance right on the 10th of October, providing an appropriate amount of support which is certainly needed for our society and our economy without pushing inflation again in the wrong direction,” he said.
“And I am confident that we will get that balance right.”
The minister said the budget would be an opportunity for the Government to once again underline that having good quality public services, infrastructure and social supports is only possible when you have a strong and healthy economy.
He said the budget represents a once in a generation opportunity to secure the future, because of the significant surpluses in the public finances.
He added that there are options open to the Government that were simply unimaginable a few years ago.
The minister said the question was not what we should do with the money, but to start with an understanding of the ingredients that got us here.
These include the pursuit of pro-enterprise policies by successive Governments, a model of international trade, investment in education and skills, tax certainty, sound management of the public finances, a pipeline of talent, a commitment to the membership of the EU, a stable political environment and a spirit of partnership between public and private sectors, he stated.
He said the rate of growth in corporation tax in recent years has been extraordinary, but will not continue.
“Much of what we collect is potentially windfall in nature and cannot be committed to permanent spending or taxation commitments,” he said.
He said everyone is aware of the potential risks of using temporary windfalls to fund permanent commitments.
As a result the Government has increased investment in capital projects, he stated.
But the bulk of the windfall will be set aside, he added, to build up fiscal buffers and to be sure we can face future fiscal shocks from a position of strength.
He said they Government has already put €6bn into a National Reserve Fund over the last year, and work is already well underway on developing a new longer term savings fund.
Stephen O’Leary, Dublin Chamber President
In his speech to the dinner, Dublin Chamber President Stephen O’Leary said Dublin faces formidable challenges, but despite this he has never been more optimistic and excited for the future.
But Mr O’Leary, who is Managing Director of Olytico, said the Government needs to act and enhance its plans and ambitions for the region, given the population projections for it.
He said because the labour market is tight, better housing and economic infrastructure is needed.
“The labour force is diverse, yet many people, be they older or working in the home, face severe financial disincentives for their families if they take up employment,” said Mr O’Leary.
“For this reason, we have called on the Minister to remove and lessen these barriers in Budget 2024, with appropriate income tax measures and better universal supports for childcare.”
He said sustained progress and delivery of housing is required for many years ahead.
Mr O’Leary added that there are 50,000 inactive sites with planning permissions ready to go and creating high density living should not have to mean urban sprawl.
He also pointed to the need for improvements on public transport, calling for an accleration of Metro, rail, tram and Bus Connects projects.
Mr O’Leary also referred to the need for improved water supply and highlighted that legislation allowing water flow from the Shannon to the East, which was passed in December, has still not been made live by Statutory Instrument.
While on energy, the Dublin Chamber President said it is critical that the Powering Up Dublin project is completed on time for the 2029 target outlined by Eirgrid.
Regarding the debate around a Directly Elected Mayor for Dublin he said with the right powers and budget, they have the potential to be a great advocate and champion for Dublin.
“Government are considering how best to progress the debate as we speak,” he said.
“We believe further analysis of the functions that may be devolved to a Dublin Mayor is critical.”
“If there is to be a vote amongst Dubliners, it needs to be much better informed, and certainly not rushed.”
Mr O’Leary also called for the 20% Capital Gains Tax rate to be applied to indigenous, unquoted firms here.