The Government’s Summer Economic Statement sets Budget parameters for 2027: an €8.5 billion package, involving €7 billion above the 2026 expenditure ceiling and €1.5 billion of tax measures. The €1.5bn announced for tax measures likely signals changes to income-tax bands, thereby preventing what is known as ‘fiscal drag’ – when wages rise with inflation, workers can be pushed into paying more tax despite having gained little real purchasing power. Protecting income-tax bands against inflation is a defensible policy of fairness, ensuring workers do not face higher effective taxation simply because their wages have risen with prices. It also likely produces, as no doubt Government strategists have calculated, a visible benefit for a large and electorally important group of ‘middle-income’ workers, indeed many of whom, through political discourse, misunderstand taxation as an individual ‘burden’ rather than as the means of financing collective provision.
Workers have legitimate reasons to value additional take-home pay, especially when cost-of-living pressures deepen. But a worker may gain several hundred euro through tax changes and then lose considerably more through rent, childcare costs, medical bills or inadequate public transport. What would be better, in the circumstances, is fair indexation of tax bands and credits alongside properly funded collective provision. The latter requires taxes on accumulated wealth, land and capital, closing unjustified reliefs, and ending the privileged treatment of property and inherited wealth. The €7 billion expenditure increase that has been announced must also be examined soberly. Approximately €1.1 billion represents additional capital expenditure, while much of the remaining current expenditure will be required to meet higher prices, demographic pressures, staffing requirements, and existing commitments. New money will not mean new services.
The Statement also presents the Government’s fiscal space as a neutral technical measure of what society can afford. Real constraints exist: inflation, revenue volatility and the like cannot simply be wished away. Yet fiscal space is also partly constituted by political choices. Reserving €1.5 billion for tax measures, retaining tax reliefs, and deciding which forms of wealth will be taxed all affect the resources available for public provision.
The Irish Congress of Trade Unions (ICTU) has advanced useful proposals for a more pro-worker budget focused on rebalancing taxation, public services, and public investment in transport and green infrastructure. But submissions and social dialogue will not secure these objectives by themselves. Employers, property interests, and wealthy households will lobby against those measures that reduce their privileges. An alternative Left budget is desirable, insofar as it is part of the battery of measures needed to win the confidence of sizeable sections of society. But implementing the kind of programme the ICTU proposes requires backing from the organised power of a politically-conscious strata of the working class with a stomach for defeating resistance from privileged interest groups – the strengthening of the class must underpin any meaningful political strategy of the Left.