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Ireland aims to ease cost of living squeeze with ‘two budgets in one’
Global Banking & Finance Review®
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By Padraic Halpin
DUBLIN (Reuters) -Ireland will deliver what ministers have called two budgets in one on Tuesday, making higher than usual spending increases and tax cuts while also helping firms and consumers pay soaring energy bills and putting funds aside if they need more help.
As one of the few European Union countries set to deliver a budget surplus this year – in Ireland’s case due to surging corporate tax receipts – the government will be able to spend more next year while keeping the public finances in the black.
Ministers said this was in contrast to the economic plan outlined by Britain last week that sent shockwaves through financial markets due to the level of borrowing required.
“It is a very large package but in contrast to what you’re seeing happening across the water (in Britain) or in other countries, this is being financed because we have a strong economy. It’s not being funded through borrowing,” Deputy Prime Minister Leo Varadkar told reporters.
Finance Minister Paschal Donohoe is set to put 2 billion euros into a national reserve fund and pledge to stash a further 4 billion euros away next year, two sources familiar with the plans said ahead of the budget announcement at 1200 GMT.
The government already announced in July it would boost the 2023 budget package to 6.7 billion euros ($6.5 billion) to increase recurring spending and the amount of money people can earn tax-free to help offset some of the effects of inflation hitting a near 40-year-high of 10%.
It also promised a one-off package including grants for companies and cash for households to pay energy bills. That will come in above 3 billion euros, bringing the total package to 10 to 11 billion euros, according to one of the sources.
With most of the one-off payments to be made within weeks, the 2021 budget surplus will be lower than the 0.9% of GDP predicted by the finance ministry, while the provisional 2.2% forecast for 2023 does not include budgetary measures.
In May, the European Commission forecast that Denmark would be the only country in the EU to deliver a surplus this year with Sweden, Ireland and Luxembourg joining them in 2023.
Ireland would still be taking in less money that it spends without the corporate tax haul mostly generated from its large multinational sector. The finance ministry, central bank and fiscal watchdog had all urged the government to start setting some of those windfall taxes aside.
The rest will help fund permanent hikes to social welfare rates, cuts in childcare, university and school costs, as well as a public sector pay deal. Additional child benefit payments and allowances aimed at protecting people against fuel poverty will be among the one-off measures.
($1 = 1.0350 euros)
(Reporting by Padraic Halpin; Editing by Andrew Heavens, William Maclean)
Corporate tax is a tax imposed on the income or profit of corporations. It is typically calculated as a percentage of the company's taxable income.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured annually.
Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country's borders in a specific time period.
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