# Ireland dips into budget surplus to ease cost of living squeeze
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-27
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Ireland taps surplus for spending hikes, tax cuts and
Meta Description: Ireland uses budget surplus for spending hikes, tax cuts, energy cost easing, and future challenges, setting cash aside for economic preparation.
URL: https://financedigest.com/ireland-dips-into-budget-surplus-to-ease-cost-of-living-squeezehtml

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By Padraic Halpin and Conor Humphries

DUBLIN (Reuters) -Ireland dipped into one of Europe’s few budget surpluses to fund higher-than-usual spending hikes and tax cuts, ease energy costs for firms and consumers and set cash aside in a budget it said was in sharp contrast to neighbouring Britain’s economic plans.

Finance Minister Paschal Donohoe said Ireland would still be left with a surplus of 2.25% of national income next year even after delivering what ministers have dubbed two budgets in one – mixing 6.9 billion euros of permanent spending increases and tax cuts with 4.1 billion euros of one-off energy measures.

Conscious that the [public finances would still be in deep deficit this year](https://www.financedigest.com/2019-year-must-re-build-public-trust-finance.html "2019 is the year we must re-build public trust in finance") without surging corporate tax receipts paid by a small number of multinational firms, Donohoe said on Tuesday he would put 2 billion euros into a reserve fund this year and set aside another 4 billion euros next year.

It is a major achievement for our country to be in a position to put additional resources aside in order to [prepare for future challenges](https://www.financedigest.com/german-exporters-prepare-for-a-challenging-2023.html "German exporters prepare for a challenging 2023"), and to run a surplus,” Donohoe told parliament.

And let me be clear there are the major challenges which we know are coming, and which we know will be very costly for [future generations.”](https://www.financedigest.com/inmarsat-empowers-next-generation-of-students-in-rwanda-to-harness-the-iot-for-a-more-sustainable-future.html "Inmarsat Empowers Next Generation Of Students In Rwanda To Harness The Iot For A More Sustainable Future")

The finance ministry, central bank and fiscal watchdog had all urged the government to start setting some of the [windfall corporate taxes](https://www.financedigest.com/exxon-sues-eu-in-move-to-block-new-windfall-tax-on-oil-companies.html "Exxon sues EU in move to block new windfall tax on oil companies") aside.

Deputy Prime Minister Leo Varadkar had earlier said that the budget was in contrast to the [economic plan outlined by Britain last week that sent shockwaves through financial markets due to the level](https://www.financedigest.com/using-agility-to-resist-economic-instability-and-level-the-playing-field.html "Using agility to resist economic instability and level the playing field") of borrowing required.

Ireland’s plans were being self-financed “because we have a [strong economy,” he told reporters](https://www.financedigest.com/strong-nighttime-earthquake-jolts-sleeping-mexicans-at-least-one-death-reported.html "Strong nighttime earthquake jolts sleeping Mexicans, at least one death reported").

In May, the [European Commission forecast that Denmark would be the only country](https://www.financedigest.com/four-european-countries-call-for-special-treatment-of-defence-in-eu-debt-rules-document.html "Four European countries call for special treatment of defence in EU debt rules – document") in the EU to deliver a surplus this year with Sweden, Ireland and Luxembourg joining them in 2023.

Ireland’s forecasts on Tuesday included a surplus of just under 0.5% of national income for 2022.

The finance ministry nevertheless slashed its forecast for modified [domestic demand](https://www.financedigest.com/turkeys-economy-grew-7-6-in-q2-driven-by-domestic-demand-exports.html "Turkey’s economy grew 7.6% in Q2 driven by domestic demand, exports") – its preferred measure of economic activity – to 1.25% for 2023 from 3.9% previously.

That was mainly because it now [sees inflation](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") averaging 8.5% this year versus 6.2% previously, and just over 7% in 2023 compared to the 3% expected five months ago.

To help ease the impact of inflation that is running at nearly a 40-year high, the budget included permanent [hikes to social](https://www.financedigest.com/uks-bellway-to-buy-back-shares-hike-social-housing-output.html "UK’s Bellway to buy back shares, hike social housing output") welfare rates, cuts in childcare, university and school costs, as well as a previously agreed public sector pay deal.

The amount of money people can earn tax-free before hitting the [higher rate](https://www.financedigest.com/credit-suisse-offers-higher-deposit-rates-in-asia-to-woo-the-wealthy-sources.html "Credit Suisse offers higher deposit rates in Asia to woo the wealthy – sources") of income tax was also increased.

Every [household will receive 600 euros off their next three energy bills](https://www.financedigest.com/44-of-uk-households-are-worried-theyll-have-to-foot-the-bill-for-net-zero.html "44% of UK Households are Worried They’ll Have to Foot the Bill for Net Zero"), with most small- and medium-sized firms eligible for 10,000 euros a month towards their energy costs in the coming months. Allowances [aimed at protecting](https://www.financedigest.com/u-n-summit-aims-for-global-pact-to-protect-nature.html "U.N. summit aims for global pact to protect nature") people against fuel poverty were also among the one-off measures.

($1 = 1.0350 euros)

(Reporting by Padraic Halpin; Editing by Andrew Heavens, William Maclean, Catherine Evans)


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