Mr. Niall Cassidy:

On behalf of my colleagues from the tax and economic sides of the Department of Finance, I thank the Chair for the opportunity to attend the committee today to discuss budget 2023, which was laid before the Oireachtas on 27 September.

I will begin by briefly outlining the budgetary process for this year. This process began in earnest with the National Economic Dialogue 2022 on 20 June in Dublin Castle, where participants debated a wide range of challenges facing the economy at this time. This was followed by the publication of the summer economic statement, which set out the Government’s fiscal strategy and the parameters for the subsequent budget. As the committee will recall, the Government set out a medium-term budgetary strategy in last year’s summer economic statement outlining a plan for keeping the public finances on a sustainable trajectory while allowing for reductions in personal taxation and continuing to invest in public services.

For this year, in the context of the changed economic environment, the Government departed temporarily from the parameters set out in the medium-term plan. To deliver a cost-of-living budget, the Government doubled the size of the planned tax package and increased public expenditure. The intention is that this will be a one-time departure in recognition of the exceptional circumstances we find ourselves in.

The process for budget 2023 took place in a uniquely abbreviated timeframe. In response to the pressing challenges facing the economy arising from the cost-of-living issue, the Government decided it was appropriate to bring forward the budget by two weeks from its usual date in early October. Following the summer economic statement, the tax strategy group set out policy options for consideration by Government across a range of tax policy areas as well as PRSI. The tax strategy group met on 12 July and the group's papers were published on 10 August.

The next staging post in the budget documentation was the publication of the White Paper on receipts and expenditure, which sets out a no-policy-change baseline estimate of the fiscal position for this year and next. In line with standard practice, this is published the Friday immediately preceding the budget to take account of the latest economic and fiscal data and to provide figures that are as accurate as possible. Accordingly, the White Paper this year was published on Friday, 23 September.

The documentation published as part of budget 2023 is comprehensive and aims to provide as much information as possible to the Oireachtas and the public. The core documentation published by the Department of Finance includes the Budget 2023: Tax Policy Changes document, which sets out the detail on budget tax changes across all heads, Budget 2023: Economic and Fiscal Outlook, which contains revised macroeconomic and fiscal projections out to 2025, and this year the Department also published a new document, Beyond GDP: Quality of Life Assessment. This included a distributional analysis of the impact of the tax and welfare changes that were announced as well as further analysis from a well-being, equality and green budgeting perspective to complement the more traditional macro fiscal analysis.

I will now turn to the key headline points of budget 2023. The total budget package for next year is €6.9 billion, consisting of around €1.1 billion in new taxation measures and €5.8 billion in public expenditure. In addition to this, there was a once-off package of cost-of-living supports to be introduced this year at a cost of €4.1 billion. This brings the total budgetary package across the two years to €11 billion. This is consistent with a general government surplus this year of €1 billion, or 0.4% of modified national income, GNI*. For next year, the surplus is projected to increase to about €6.2 billion, or 2.2% of GNI*. However, as the committee will be aware, the very positive headline figures are heavily skewed by windfall corporation tax receipts. The Government has frequently warned that this windfall revenue, while in many respects welcome, cannot be relied upon and must not be used to fund permanent expenditure commitments. That being the case, budget 2023 incorporates a new metric, the underlying general government balance, GGB, or GGB*, which sets out the fiscal position if these windfall receipts were excluded.

This metric suggests that removing excess corporate tax would lead to a significant deficit this year in the region of €8 billion. For next year we would face a deficit of about €3.8 billion.

In recognition of this vulnerability, the Government has decided to commit part of this excess to the national reserve fund. A transfer of €2 billion will be made this year, rising to €4 billion next year. This will enable the Government to take advantage of windfall corporate tax receipts by rebuilding fiscal buffers and providing resources that can be drawn down to meet future challenges while ensuring we do not allow unreliable tax revenue to fund ongoing permanent spending measures.

Budget 2023 was framed in recognition of the urgent challenges the economy faces, both through an expanded budget package and an accelerated timeline. It takes action to address the cost-of-living issue while outlining a credible pathway for rebuilding our fiscal buffers for the future. My colleagues and I are happy to try to address any issues the committee would like to raise. As members will appreciate, the budget covers a wide range of areas within the Department and it would not have been practical to bring all the lead officials to cover them today. As such, if there are specific issues outside of our remits, we are happy to get our colleagues to follow up afterwards.