The Summer Economic Statement, published annually in July, outlines the total funds available for the coming autumn’s Budget. A set piece in the political calendar, the Statement marks the official beginning of ‘Budget season’ and explains how much Government have to allocate for public spending and taxation measures.
The Government have promised that their upcoming Budget, the first delivered by Tánaiste and Minister for Finance, Simon Harris, will have four core pillars: rewarding work, improving public services, investment in infrastructure and investing for the future.
Summer Economic Statement
Published today by the Tánaiste, alongside Minister for Public Expenditure, Jack Chambers, the Summer Economic Statement confirmed that Budget 2027 will comprise of an overall package of €8.5 billion. €7 billion of this will be earmarked for additional public spending, and the remaining €1.5 billion will be for new taxation measures.
The €7 billion increase in public spending will see the Government’s total expenditure for 2027 will grow to €125.5 billion. This is broken down by €5.9 billion for current expenditure, and €1.1 billion for capital projects.
The Government have been clear that changes to personal income tax bands will be introduced in Budget 2027 to reward workers. Changes to the entry point of the highest tax band was not a feature of Budget 2026, when the funding was instead allocated to introduce a 9% VAT rate for hospitality businesses. What this meant in practice was that with wages rising, more workers were pushed into the higher tax bracket and ended up paying more tax. While the 9% VAT rate was heavily lobbied for by industry, and indeed some members of the public at the time, this proved to be a controversial choice over the course of this year.
With the cost-of-living crisis showing little signs of abating, and many households still struggling to make ends meet, Government have been at pains to make clear that personal tax bands will be addressed in Budget 2027. Illustrative of this is the fact that rewarding work has been at the centre of the vast majority of Budget rhetoric thus far. With tax changes being a long held priority of Fine Gael and Simon Harris, expect to see increased political focus on this area over the coming weeks.
The Statement also provides an assessment on Ireland’s economy, which remains in a healthy position, though it still faces live threats. Despite the fact that Ireland has more people at work than ever before and tax intakes remain strong, there are real threats posed by headwinds such as the war in the Middle East, the increasingly unstable international political context, the impact of Artificial Intelligence and the State’s reliance on corporation tax. Currently, just ten companies provide more than half of total corporation tax intake by the State. It is not only corporation tax intakes where there is a clear imbalance, the top 5% of income taxpayers in Ireland account for €1 in every €6 collected.
Government has committed to balance these threats, and high levels of expenditure, with a focus on saving for the future. This will be done by running a budget surplus, investing in the State’s two long-term saving funds, and investing in critical infrastructure. This includes housing, transport, water and energy infrastructure, infrastructure badly needed not only to[DS1] improve living standards, but to secure Ireland’s competitiveness and agility into the future. Government have outlined their intention to invest heavily in these areas, but also that they intend to do so with an increased focus on value for money.
The Drury Perspective
Budget 2027 will be Tánaiste and Minister for Finance Simon Harris’ first in his new role, and his first working alongside Minister for Public Expenditure Jack Chambers. Whether the Tánaiste will follow in the footsteps of his predecessor, ‘prudent’ Paschal Donohoe, or carve his own path is yet to be seen. With Budget negotiations ramping up over the coming weeks, difficult choices will have to be made. Budget season will also put the relationship between the two money Ministers to the test. Minister Chambers had a positive relationship with Donohoe; we will soon discover if the same can be said regarding the Tánaiste.
With Ministers each heavily negotiating for their own priorities to be funded and to receive sufficient funding to fulfil their objectives, and with Budget negotiations frequently spilling out from behind closed doors in Government Buildings into newspapers and in the media, Budget negotiations can quickly become tense affairs. With Departments such as Education and Health frequently requiring additional funding packages, whether their overall funding in Budget 2027 will meet their needs will be a key focus over the coming weeks.
While we will not know what exactly will be included in the Budget until October 6th , what we can take from today’s Summer Economic Statement is that workers, infrastructure and value for money will be placed at the centre of Budget 2027. That said, with Budget kite-flying beginning earlier and earlier each year, it is safe to assume that we will have a fair idea of where the wind is blowing as the summer progresses!