Budget 2027 tells you who gets what this year. Ten years of budgets tell you who pays, and for how long.
Budget day is built for the news cycle. A minister stands up, reads out a list, and by the 6 o’clock news everyone knows what they are getting: a tax cut, an extra ten euro a week, or a subsidy for their heating bills. Budget 2027 is being reported as a giveaway: €8.5bn in all, with €1.5bn of it in tax cuts.
But annual budgets tell you little about the Irish state. Most of each year’s “new” money is spent before anyone stands up in the Dáil. Of the €9.2bn added to day-to-day spending in last year’s budget, only €2.2bn went on new policy. The rest went on pay deals, earlier commitments, extra pensioners and students, housing refugees, and paying for the cost of inflation.
To see what kind of state Ireland has become, and what successive FF/FG priorities are, we need to look at the bigger picture. Let’s take the past ten years. The state has grown fast in cash terms, no faster than the economy around it, and it is increasingly paid for by someone else’s profits.
Let’s start with what finances the state. Tax revenue has more than doubled in a decade, from €48bn in 2016 to €105bn last year. Corporation tax went from €7bn to €33bn over the same period. In 2016, it was one euro in seven of the tax take; it is now one euro in three. Ten corporations pay more than half of it.
The Department of Finance classes about €20bn of this year’s receipts as windfall, meaning money that cannot be explained by activity in the Irish economy and may not come back. Strip it out and the Fiscal Council puts the underlying deficit at around €11bn, in an economy at full employment.
This really can’t be stated loud enough: Ireland does not have a normal economy, and does not have anything that resembles a normal European fiscal policy. Last year Ireland reported GDP of €602bn and GNI* of €334bn. Almost half of what the country counts as “output” is not Irish income. The country is financed by US multinational profit shifting.
This means the government is awash with cash, can throw money at every problem, without ever having to make a difficult choice, or explain their vision (or lack of).
The corporate tax boom has quietly become the business model of the state. The Fiscal Council estimates that seven euro in every eight of corporation tax now goes on permanent spending commitments. And every year the government has been slicing away at the broader tax base: a wider standard rate band, higher credits, a trimmed USC, a lower VAT rate for restaurants.
If you exclude the windfall corporate tax boom, Irish total revenue has fallen to about 37 per cent of national income, which is low by Ireland’s own standards. Most of that fall is in consumption taxes. Ireland is narrowing the tax base of the actual Irish economy, while leaning on the fake economy of multinationals.
Now look at what this money buys. The departmental budgets voted by the Dáil have roughly doubled in ten years, from about €55bn to €118bn. The starting point matters. In 2016 the state was only beginning to come out of austerity: public investment had been cut to the bone, pay had been cut, and services hollowed out. The clearest shift since is in investment. Capital spending, the money that builds homes, water pipes and the electricity grid, has gone from under €4bn to €19bn, a fivefold rise that is finally making up for the lost decade after the crash.
But capital investment is still only a sixth of the total. The rest is the day-to-day state: pay, pensions, welfare and the running costs of hospitals and schools. The public pay bill alone is €34bn, with 70,000 more public servants than in 2020, two thirds of them in health and education. Welfare is €29bn, a quarter of everything. Spending on housing has doubled since 2021, to €11bn.
Some of this increase in spending is a structural response to rising prices and a growing population. The population is up 16 per cent in a decade, with 165,000 more people over 65 than in 2020, and consumer prices are up about a quarter. However, if you adjust for both, real spending per person is still up by around a third. So it is not just a response to changing demographics.
In ten years, Ireland has recovered from the disastrous austerity years, and refinanced a bigger state: subsidised childcare, expanded disability services, more teachers and nurses, capital investment, and a public housing programme. It is a welfare state of European design, if not yet of European size, built by successive governments that don’t know what they believe in. There is no social democratic vision behind it, no account of what the state is for, only a list of what each budget hands out.
The media narrative these days is focused on runaway spending. But measured against national income, the state has actually shrunk. In 2016, government spending was about 44 per cent of GNI*, the measure of national income that strips out the distortions of multinational accounting. Last year, it was 40 per cent. National income nearly doubled, and the state merely kept pace. By western European standards, Ireland still runs a mid-sized state on a low tax take.
The big structural change is in who pays. A decade ago the Irish state was financed, as most states are, by the taxes of the people who live in it. Today, a third of it is financed by the profits that a few American corporations choose to book here, profits that sit in Ireland because of decisions taken in Washington and Silicon Valley. Permanent commitments on pay, pensions and welfare now rest on impermanent revenue.
That is the talking point for Irish fiscal policy, and it will not be in the speech today. The annual budget tells you who gets what this year. The decade tells you that Ireland has built a welfare state of European size on an American tax base, without the social democratic politics that built Europe’s. The question worth asking on budget day is who pays for it, for how long, and what it is for.
This post was edited using Claude (Anthropic).
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