Jack Chambers (Dublin West, Fianna Fail)
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A Cheann Comhairle, is onóir dom é buiséad 2025 a thíolacadh, buiséad deireanach théarma an Rialtais seo, don Teach seo inniu in éineacht le mo chomhghleacaí, an tAire, an Teachta Donohoe.

INTRODUCTION

When this Government took office in June 2020, we were still dealing with Brexit and in the midst of a global pandemic that was having an unprecedented impact on our society and economy. The effect on families, businesses and our way of living was devastating. While only emerging from that pandemic, we were then confronted with the war in Ukraine and the cost-of-living pressures.

This Government, through successive budgets, has supported the individuals, families and businesses who have played an integral part in ensuring our economy is in such a strong position today. Government responded as it should have with a unity of purpose and provided extraordinary supports to deal with all the challenges we faced. The outcomes and the progress made were not inevitable. It is as a result of the drive and focus of this Government to provide a better future for everyone and in the careful management of our public finances. I believe budget 2025 puts in place the policies and measures to continue this positive trajectory and ensure that all our people see a promising and hopeful future in this country.

Today’s budget is my first and it is also unique in the opportunity it presents to plan, transform and deliver for the future. That future is not just about next month, next year or the next decade, it is about ensuring that the children born today in Ireland and every day from here on can live prosperous and fulfilled lives. They will enjoy better healthcare, live longer, have better education, more housing and significant infrastructure improvements as a result of the decisions made today. However, we also need to give hope to young people now and to their families, their parents and grandparents whether living here in Ireland or abroad that the decisions being made today will help them afford a home of their own and live a life here in Ireland achieving their full potential. Budget 2025 puts the country on a firm footing for the future.

Progressivity, fairness and catalysing real opportunity for the future have been at the core of this Government’s budgets and these principles have been central to how budget 2025 has been designed. Strengthening communities, building prosperity, tackling the cost-of-living challenges and enhancing living standards are all key components to build a better State that can make a real difference for the people of Ireland. We want our country to be an attractive place to live in, work in, raise a family, and create jobs and opportunity - a foundation of real progress for the future.

INFRASTRUCTURE AND INVESTMENT

Our ability to deliver for current and future generations is dependent on careful and prudent management of the State’s resources. The recent judgment from the Court of Justice of the European Union has provided the State with one-off revenue that has the capacity to be transformational. We know that the future economic performance of the State will depend on how the public infrastructure programme is prioritised and delivered over the next decade. It is imperative that this revenue is not used for day-to-day expenditure or to narrow the tax base. There should be a clear strategic direction in how it can be used to deliver for the future of our country, improving the lives of people and communities, and supporting our small and medium enterprises and multinational corporations.

Today, I will outline a framework that will set out the principles and directions on how this revenue should be allocated in a manner that will maximise its return. It is the Government’s view that we should utilise these revenues to address the known challenges that we face in housing, energy, water and transport infrastructure. Our economic, enterprise and industrial model is central to future progress. It has transformed our country from where we were 100 years ago. We must protect it. We must nurture it. We must continue to advance this model as a catalyst to support the transformation of our country, ensuring opportunities for the future. We will invest in a future that ensures Ireland is a country and a society that is fair, equitable and a beacon of hope, prosperity and progress.

We are in a global environment where competition for attracting foreign investment is intensifying. Infrastructure is a fundamental component of Ireland’s competitiveness, and is vital to businesses, large and small, and to attracting new foreign direct investment into the State. Maintaining our competitiveness and having the means to improve it are vital to maintaining employment in all sectors of our economy, no matter where those jobs are located.

The framework for allocation of the windfall receipts should be based on a number of high-level principles and parameters, but the guiding principle must be to benefit all citizens by supporting our future economic development.

The development of the framework will help ensure the maximum rate of return, both from an economic and societal perspective, from this once-off resource which can further complement the national development plan.

The Departments of Finance, and Public Expenditure, NDP Delivery and Reform, will build out this framework, with input from other relevant Departments and agencies. This will focus on the expected considerations for public investment in key infrastructure, including: deliverability; value for money; additionality; and prioritisation for economic impact. That work will begin now, with the target to bring the framework to Government for approval in the first quarter of next year.

The recent disposal of part of the State’s shareholding in AIB has presented us with an immediate opportunity to allocate additional funding towards capital spending over the coming years. To this end, today, I am making available €3 billion for infrastructure spending. This will help build on current progress, eliminating key infrastructural bottlenecks more rapidly, and help lay the foundations for further improvements in living standards and competitiveness. Deciding on the use of these resources requires prioritisation and it is important that their use results in tangible outputs.

I recognise that there are substantial needs in housing, but also in water and energy infrastructure that need to be addressed. Investment in these areas will allow us to meet the current and future needs of our country. To that end, I intend that these resources will be ring-fenced and drawn down when the funding is required and the necessary arrangements are in place to use it.

Water Infrastructure

In terms of addressing water infrastructure, €1 billion will be provided to Irish Water for non-domestic capital investment. This will allow for works to be carried out across the country on capital projects related to remedial action lists, connections for new housing and addressing urban wastewater pressures.

Housing

This Government has invested unprecedented levels into housing delivery and it is our priority to continue to accelerate the supply of new homes. To support this, a further allocation of €1.25 billion will be made available to the Land Development Agency, LDA. This will bring the total amount of funding now available to the agency to €6.25 billion to deliver thousands of more affordable homes. The LDA will be tasked with deploying this capital in a way that can continue to drive the delivery of social and affordable homes.

Electricity Grid Infrastructure

Confidence in our ability to provide a secure, stable and green energy infrastructure is important to position Ireland for future economic development and investment. To address this, I am also providing €750 million to facilitate an initial, direct equity injection to support capital spending on the further development of our electricity grid infrastructure. The upgrading of this key element of our national infrastructure will be instrumental in ensuring our economy is ready for the next phase of its development. Providing a secure, sustainable source of energy will encourage further industrial investment, facilitate the progression of the digital economy, enable decarbonisation and enhance our competitiveness. The upgrading of the national electricity grid will require capital investment in both the onshore and offshore grid. I believe the signalling of the provision of this funding to expand the capacity of our electricity grid will have a positive impact on future investment decisions currently being considered by both indigenous and multinational companies.

In the event of further AIB share sales, I will seek to provide further funding to these critical infrastructure areas of water, housing and the electricity grid to underpin our future economic development. With this level of investment in the future, it is important to reflect on where we have come from. In the century since independence, Ireland has grown more tolerant, more diverse, more prosperous, more equal and more influential around the world. We need to keep building prosperity for the future. The measure of our success is how we treat people, how we turn the tide of our economic success into a force that lifts everyone, especially those who need our help the most. We can appreciate our achievement as a country more because of the generations at home who have had to struggle for it but we should not forget the people who struggle still. It is our responsibility to help because we can and we will.

MACROECONOMIC OUTLOOK

I will now provide an update on the macroeconomic outlook. I am pleased to report that our economy, on aggregate, is in relatively good shape. Over the past year or so, inflationary pressures have eased considerably, our domestic economy has grown at a robust pace and we continue to experience record high levels of employment. Indeed, our economy has now been operating close to, if not at, full employment since the end of the pandemic. Almost three quarters of our working-age population are now in employment, with participation among female workers at its highest level ever. This is a truly remarkable achievement and one we should properly recognise.

The rate of inflation, which was close to 10% just two years ago, has eased significantly this year. Inflation has been at or below 2% since March. This easing comes as welcome relief to households throughout the country who have dealt with everyday financial struggles due to rising prices over the past two years. Even as the headline rate of inflation has declined, I am acutely aware that many are still struggling as price levels throughout the economy remain elevated. That is why budget 2025 includes a cost-of-living package designed to support the most vulnerable and ease the financial burden over the winter months.

It is clear that supply is the main constraint on growth at present. That is why it is imperative that we can continue to narrow the infrastructure gap and improve the productive capacity of the economy. The Government recognises the need to invest in our future and support our competitiveness in the years to come. As part of budget 2025, we are investing at scale to address these bottlenecks and put in place long-term solutions to ensure a more sustainable, productive and resilient economy.

Budget 2025 is taking place against a backdrop of escalating international conflict and geopolitical instability. Our experience over the last number of years has shown that we are now clearly living in a more shock prone world. As a small, open and highly globalised economy, a deterioration in the international economy would, of course, have immediate knock-on consequences for the Irish economy. While we cannot prevent external shocks, we can ensure that we are on the best possible footing to respond when they occur. Within this context, budget 2025 has been designed to strike the right balance between ensuring families, workers and businesses have the supports they need today while also investing in our public services and infrastructure to prepare us for the challenges into the future.

While external risks remain elevated, the short-term prospects for the domestic economy are encouraging. The period of elevated price pressures has passed and inflation has now returned to a more stable trajectory. This easing in inflation, which is projected to remain below 2% both this year and next, will allow for an improvement in real wages and help support growth in consumer spending.

Overall, my Department is projecting modified domestic demand, a proxy for the domestic economy, to grow by 2.5% this year and by close to 3% next year. The strong growth in the domestic economy is expected to continue to pay dividends in the labour market. Indeed, the level of employment is set to increase by almost 110,000 in the two-year period to the end of 2025 and the unemployment rate is projected to remain low at around 4.5%. My Department’s macroeconomic forecasts have been endorsed by the Irish Fiscal Advisory Council.

FISCAL OUTLOOK

As outlined, the Irish economy is very strong on a headline level. However, there are real vulnerabilities in our public finances and these must be kept in mind when constructing a budgetary package. We know that our public finances are heavily reliant on corporation tax, much of which is windfall in nature and not linked to our domestic economy. Many of our income tax receipts are linked with this highly concentrated revenue stream. As I have said many times before, we must not use these potentially transient receipts to fund permanent expenditure measures.

At this stage, we are all familiar with the structural challenges we have already started to face, namely, an ageing population, the climate and digital transitions and deglobalisation. We know that we are facing substantial costs on all of these fronts, not to mind the unknown challenges ahead. We must ensure that the budgetary decisions we make today continue to place us in a better position to deal with these issues.

This year, my Department forecasts tax revenue will amount to €105.7 billion, an increase of €13.6 billion on our spring forecast, mostly attributable to corporation tax receipts and the revenue from the Court of Justice of the European Union judgment.

Following the enactment of the Future Ireland Fund and Infrastructure, Climate and Nature Fund Act earlier this year, on July 30, I signed the commencement order to officially establish both funds. They are a critical part of ensuring that future generations are not left to deal with the known challenges facing us. They allow us, at a time when we are recording headline surpluses, to plan for the future while still being in a position to react and provide for those who most need our assistance, to continue to invest in improving public infrastructure and good public services and to continue to support our businesses. In September, €4.3 billion was transferred into the Future Ireland Fund and €2 billion into the Infrastructure, Climate and Nature Fund. A further €4.1 billion will be transferred to the Future Ireland Fund this year. Transfers to both funds next year totalling €6 billion will mean by the end of next year, more than €16 billion will have been transferred to the funds.

I can inform the House that we are projecting a general Government surplus of €23.7 billion, or 7.5% of national income, this year and €9.7 billion, or 2.9%, next year. When windfall taxes and the one-off revenue from the Court of Justice of the European Union judgment are excluded, an underlying general government deficit of €6.3 billion is projected for 2024 and an underlying general government deficit of €5.7 billion is projected for 2025.

Our debt ratio is moving in the right direction. When this Government took office in 2020 our general government debt stood at close to 110% of national income. My Department projects that this ratio will be 69% of national income this year and will decline to 56% of national income by the end of the decade.

BUDGETARY STRATEGY

The Government decided in the summer economic statement to provide a budgetary package of €8.3 billion for budget 2025, which is consistent with expenditure growth of 6.9% and will accommodate higher capital spending and provide for additional public services against the backdrop of a higher population. Budget 2025 consists of a net tax package of €1.4 billion and an expenditure package of €6.9 billion.