Michael McGrath (Cork South Central, Fianna Fail)
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This Government has acted on a significant scale to respond to the cost-of-living challenge, making available some €12 billion in direct support to help to ease the burden of inflation on households and businesses.

As the Deputy has highlighted, it is essential that the fiscal response is carefully designed to avoid adding to inflationary pressures, particularly given that the economy is already operating at – or beyond – full employment.

That is why Government policy has mainly focussed on measures that are temporary, timely and targeted to assist the most vulnerable, an approach that minimises the risk of fiscal policy itself becoming part of the problem. Through this approach, Government has, I believe, struck the right balance between supporting households and firms without unduly exacerbating inflationary pressures. This assessment was shared by the Irish Fiscal Advisory Council in their Fiscal Assessment Report published in June.

Responding swiftly and decisively to the cost-of-living challenge must also be balanced with the long-term sustainability of our public finances. While the fiscal performance in recent months has been robust, there are, as I have warned many times, real vulnerabilities that we must be conscious of.

A headline surplus of €10 billion is in prospect for this year, but this is entirely driven by windfall corporation tax revenues that are not linked to the domestic economy. If estimates of windfall corporation tax are excluded, there is an underlying deficit in our public finances. These receipts will not continue indefinitely, so it is essential that we do not repeat the mistakes of the past and use transient revenues to fund permanent expenditure.

Government is acting to address our reliance on corporation tax. €6 billion in windfall receipts has been transferred to the National Reserve Fund to rebuild our fiscal buffers, and my Department has published a scoping paper outlining options for a longer-term investment vehicle to use these receipts to prepare for the structural challenges ahead. Work on this proposal is well underway and I intend to bring proposals to Government in due course.

However, the best way to ensure that our public finances remain resilient is by continuing a sensible budgetary policy that provides for sustainable investment in our public services and infrastructure while also taking into account the cyclical position of the economy.

Government will set out the fiscal parameters for Budget 2024 in the forthcoming Summer Economic Statement, which will be published over the coming weeks.