Irish budget to deliver €5.2bn spending package

The Irish government has said it will deliver a tax and spending package worth an additional €6.4bn (£5.5m) in October's budget.

It will consist of additional public spending of about €5.2bn (£4.4m) and tax measures of about €1.1bn (£940m).

That will mean core public spending increasing by 6.1% in 2024, breaking the government's rule that it should increase by no more than 5% annually.

The finance minister said economic conditions justified breaching it.

"Households continue to face significant cost of living challenges and we have to ensure we protect people as much as possible from the full impacts of inflation," said Michael McGrath.

"I believe this strategy takes into account the economic realities of today while still ensuring that we do not stoke inflation further."

The tax measures will be focused on increasing income tax thresholds to avoid what is known as "fiscal drag".

Fiscal drag occurs when tax thresholds and allowances do not keep up with inflation or wage growth, resulting in more of a taxpayer's income being taxable.

The budget will also include an additional €2.25bn (£1.93m) for infrastructure spending drawn from "windfall" tax receipts.

Ireland has been reaping a corporation tax bonanza as reforms to global rules mean major US companies are choosing to pay tax on their international profits in the country.

The latest figures, published on Tuesday, show that €10.5bn (£9bn) of corporation tax was collected in the first six months of this year, up 20% on the same period last year.

Mr McGrath said he will shortly bring forward proposals on establishing a sovereign wealth fund which will be used to invest the tax revenue for the long term.