BY JOHN ELLIS, FINANCIAL ADVISOR
Budget 2025, presented against a backdrop of solid economic growth and an impending election, is a delicate balancing act by the Government. Faced with global economic uncertainty, surging costs of living, and the need for long-term infrastructure investment, the Budget reflects both political priorities and the need to address ongoing domestic challenges.
In the lead-up to the Budget, the Irish Fiscal Advisory Council (IFAC) issued a stern warning to the Government, cautioning against excessive spending, stating that the Irish economy was growing above its potential and criticised the Government for repeatedly breaching its 5% spending rule.
However, with a general election looming, political realities take precedence. The Taoiseach unapologetically defended the Budget, saying: “We are giving people back some of their own money.” This was reflected in the generous cost-of-living measures and investments using cash from record corporate tax receipts and windfall gains, including €14.1 billion from the Apple tax ruling and €3.1 billion from the sale of AIB shares, allowing the Government the financial flexibility to plan a Budget that would appeal to a wide array of voters.
Budget 2025 addressed several critical issues. The cost-of-living crisis remains top with a €2.2 billion package to ease financial pressures including a €250 electricity credit to be paid in two instalments, a €300 fuel allowance payment, and double payments for child benefits and long-term social protection recipients. Additionally, there will be targeted support for carers, pensioners, and those living alone.
On the business side, the Budget acknowledges the rising costs for small and medium enterprises. An extension of the 9% VAT reduction on gas and electricity until April 2025 aims to alleviate some pressure, especially for sectors like hospitality and retail, which have been under strain despite the broader economic recovery.
One of the standout features of Budget 2025 is the allocation of €3 billion for water, housing, and electricity grid improvements intending to address Ireland’s chronic housing shortage and modernise critical infrastructure.
However, as economist Jim Power pointed out, securing funding is only part of the challenge. The Government’s history of delivering projects on time and within budget has been questioned. To achieve meaningful progress “significant reforms in project execution and oversight will be necessary”.
While the Government has presented the Budget as a comprehensive response to immediate and long-term challenges, opposition parties were quick to criticise the plan. The Budget is labelled as a “giveaway on steroids” with the Government failing to address the housing crisis adequately. “This is a giving-up-on-housing Budget,” Sinn Fein’s Pearse Doherty argued, citing the continued shortfall in affordable and social housing.
Labour’s Ged Nash described the Budget as a “so-called giveaway” that lacks real substance, while Social Democrats TD Roisin Shortall said: “Never has a Government had so much and done so little, it can be argued. Sure, plenty of cash has been splashed around, but mainly in one-off measures.”
Despite these criticisms the Budget should provide significant support to the Irish economy next year underpinned by solid public finances, record employment levels, and a stable banking sector. However, global geopolitical risks and the uncertainty surrounding the US presidential election, pose potential challenges to Ireland’s export-driven economy.
While the Budget’s generous measures will likely provide short-term relief to many households and businesses, questions remain about the sustainability of such spending and whether it sufficiently addresses deeper, structural issues.
As economist Jim Power noted, “Budget 2025 is a very stimulatory package,” but the real test will be in its long-term impact on the economy. In the coming months, the electorate’s response will become clearer, and the Government’s gamble on voter generosity will face its ultimate test at the ballot box.
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