Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank Deputy Shortall very much. I look forward to working with her over the period ahead.

In the summer economic statement 2021, the Government adopted a medium-term budgetary strategy that would ensure continued investment in public services and progressive reductions in personal taxation while maintaining our public finances on a sustainable path. This strategy was operationalised through ceilings on growth in public expenditure. Core current public expenditure growth will be capped at 5% per annum, broadly in line with the estimated trend growth rate of the economy over the medium term.

As the Deputy knows, last year, in recognition of the far less benign inflationary environment, this strategy was adapted on a once-off, temporary basis to provide for an increased budget 2023 package of €11 billion of new measures to continue to fund public services and provide relief for households and businesses struggling with the cost-of-living challenge. Crucially, however, it is planned that future budgets will return to the sensible and sustainable fiscal parameters set out in the medium-term budgetary framework.

In formulating budgetary policy in a context of inflation running at multi-decade highs, Government must strike the appropriate balance between continuing to support public services while avoiding poorly crafted fiscal policy. Inappropriate policy measures exacerbate the problem, contributing to a severely damaging inflationary spiral and becoming part of the very problem it was intended to address. As a result, the Government's response to inflation has focused on measures that are temporary, timely and targeted and aimed at those most in need. This is the most economically appropriate response to an inflationary shock driven primarily by global pressures where Government cannot fully absorb the impact. The Irish Fiscal Advisory Council, IFAC, also assessed that the Government's approach in the budget struck the appropriate balance between supporting vulnerable households and avoiding adding to inflationary pressures.

Structural fiscal headwinds in the coming years will involve major challenges. Perhaps I can elaborate further in relation to population, the impact of the international tax agreement and also climate action measures.

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