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The Minister for Finance Michael McGrath has said that the changed inflation environment will influence Budget 2025 decisions.
But he said this does not mean that there will not be once-off payments.
“The changed inflation environment will have an impact on our approach to the Budget and we did have a vast array of inflation related payments, exceptional supports, one-offs last year,” he said on Morning Ireland.
“We are in a different environment and that will need to be reflected in the approach to the Budget because our ability to do what we did is because we have been managing the finances carefully, but you can’t have exceptional supports all the time, so there will be a change in the approach.
“That’s not to say that there won’t be any exceptional measures or any additional support. But that decision has not been made,” he explained.
He said it will be a different approach because inflation is coming back to the target level of 2%, which will mean a change of approach in terms of budgetary policy.
He added that there will be negotiations on Budget measures in the months ahead.
He said he and Public Expenditure, National Development Plan Delivery and Reform Minister Paschal Donohoe will ensure that the public finances are carefully managed.
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“Because we are in a good place, we need to guard and protect the progress we have made and we need to provide for the future and I think that our finances are healthy, but we can’t take that for granted,” Mr McGrath said.
“Being in the position we’re in does give us the capacity to have a tax package, to have a good welfare package, to invest in public services, to continue to spend more on housing and invest in public infrastructure,” he said.
“We will be in a position to do all that, but it is only on the basis of having a strong economy with the public finances well managed and we shouldn’t take it for granted,” he added.
The Finance Minister also said today that living standards are expected to improve this year, following a difficult few years.
“We anticipate interest rates falling this Summer and a further reduction in energy prices”, Michael McGrath said.
“People’s incomes will rise faster than the rate of inflation. In real terms, they will be better off and they will experience an improvement in living standards,” he stated.
Minister McGrath said that the “overall” financial situation is in good shape, but he warned there is a risk around the level of corporate tax receipts.
Mr McGrath said around €24.5 billion is expected to be collected this year.
He said that while this represents “an extraordinary rate” of growth, we cannot rely on them into the future and we should not be spending them.
He told Morning Ireland that surplus funds between 2022 and the end of this year have been used to reduce the national debt by €15 billion as well as establishing a holding reserve fund of €6 billion.
The NTMA now has cash and liquid financial assets of around €26 billion, he said.
“This gives us a buffer and comfort and the ability to plan for the future,” he added.
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