It will be an interesting run up to Budget 2027. While much of the focus has been on taxation, the Minister for Public Expenditure, Jack Chambers, is engaged in an attempt to rein in the growth rate of pubic spending. Even though this is part of a medium-term strategy on which the rest of the Cabinet has signed off, he will face a fight with the big spending departments.
The growth rate in spending, which has been around 9 per cent over the last five years, needs to be slowed. There are a number of aspects to this, but the most important is restraining the growth of day-to-day spending to leave room for investment and ensuring that the State remains in a surplus, leaving the public finances better placed to deal with any shocks.
While there will be howls of complaint from spending departments, the planned increase of 6 per cent is still ahead of inflation and forecast spending growth up to 2030 is the fastest in the EU. This is not a return to austerity. Not by a long way. Perhaps it might better be portrayed as a return to reality, after successive years when surging corporate taxes paid for any overruns.
It will, as Chambers said when he launched a half-year spending review last week, require departments to make decisions on their priorities and achieve better value for money. Tougher measures are threatened for overspending departments.
RM Block
In achieving this, much will depend on whether the Minister has the support of Taoiseach Micheál Martin and Tánaiste Simon Harris.
It is no exaggeration to say that credibility needs to be restored to a budgetary process where overruns have become commonplace. In some cases they are inevitable – for example when Covid-19 hit, or inflation soared in 2022.
But more recently there have been no such excuses. The point of proper control is that it means spending is focused and is more likely to achieve better value for money– and that there is more likely to be room to react when the unexpected happens, either through a wider economic shock or some hit to corporate tax revenues.
