Tax and spending plans in budget will become a little clearer this week

Coalition leaders meet on Tuesday evening to sign off on the Summer Economic Statement, due to be published after Cabinet on Wednesday. It is a key pre-budget document as it gives the Government’s estimate of the size of the budget package and the expected breakdown between tax and spending.

This can change in the run-up to the big day in October, of course, but generally not by too much.

The Government faces two key questions. The first is what to announce in the White Paper in advance of the budget. The second is whether it really intends to stick to these figures. In recent years spending has, after overruns during the year, ended up well above the budgeted level.

Failing to account for this overspending on budget day then artificially depresses the starting point for the following year, meaning budgets have effectively been dead on arrival. The Irish Fiscal Advisory Council has done good work tracking this trend.

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This needs to change. Minister for Public Expenditure Jack Chambers is trying to introduce a tighter control system, limiting spending rises to 6 per cent, incentivising departments to stay within budget and to control overruns.

It will be no easy task. All the signs are that Ministers and Government backbenchers are rubbing their hands, planning a range of tax and spending giveaways. The risk, of course, is that this will ratchet up Ireland’s reliance on volatile corporate taxes by another notch.

The statement will be the first indication of how much money will be spent delivering on the promises. Figures between €9 billion and €10 billion are speculated, with perhaps €1.5 billion of this on tax cuts and the rest on spending. Much of the spending is already effectively allocated, of course, to meet the costs of a rising population. This sets up some hard talking within Cabinet over the summer.

The statement will set out the pitch for the budget. But the real test will be whether the Government sticks to it, on budget day and beyond.