Ireland tries to balance cost of living help and spending restraint in generous annual budget

Ireland sought to stave off renewed public protests over high energy costs with another generous annual budget package on Tuesday, while also attempting to moderate runaway spending growth, a rare balance in an otherwise cash-strapped Europe. Ireland is among few ‌European countries to be in a position to cut taxes, hike spending and boost investments into a new sovereign wealth fund next year, thanks to a surge in corporate tax mainly paid by a small number of US multinationals.

Ministers focused much of the €8.6 billion ($9.7 billion) budget package on helping ease fresh cost of living pressures with inflation at ‌a three-year high of 3.9%. It cut income tax and childcare costs, increased welfare payments and extended cuts to fuel duties and energy supports for low-income households. "Today's ‌budget balances today's needs with tomorrow's musts," Finance Minister Simon Harris told parliament, as the government also continued to boost investment in strained public infrastructure.

SPENDING RESTRAINT Ireland was among the first European countries to cut excise duties on fuels in March after the start of the Iran war. However, it saw a wave of demonstrations in April against high fuel prices, which blockaded motorways and oil infrastructure, briefly leaving about ⁠a third ​of Ireland's petrol stations without fuel.

Organisers of those ⁠protests have said they may take to the streets again if the budget does not provide enough extra help. Public sector workers are also planning to take strike action next week if there is ⁠no progress on a new pay deal. Ireland's economy has grown strongly, helped by consumer spending and AI data centre investment, and Harris said modified domestic demand (MDD) - officials' preferred measure of ​economic activity - is forecast to grow by 3% next year.

The budget was the first presented by Harris since he became finance minister last November and ⁠one of two he is scheduled to deliver before returning to the prime minister's office next year under the coalition's rotating leadership arrangement. Harris made the establishment of a new personal savings and investment scheme a ⁠centrepiece ​of his plans, drip-feeding details for months on how he intends to encourage households that are among the highest savers in Europe to invest more.

He announced on Tuesday that the scheme will have a tax-free threshold of €50,000, above which a flat rate of 1% will be applied, and that savers will be allowed to ⁠contribute a maximum of €12,000 to the accounts each year. Harris and Public Expenditure Minister Jack Chambers have also pledged to keep increases in spending to 6% next year compared ⁠with an average of around 10% from ⁠2022 to 2025.

However Ireland's fiscal watchdog has said this year's package is still larger than appropriate. The independent body has consistently warned of the risks of funding routine spending overruns with the tax receipts of only a few companies, which ‌in some cases are based on ‌the success of specific products. ($1 = 0.8882 euros)