Christina Finn reports from Tokyo

TAOISEACH MICHEÁL MARTIN has moved to temper any expectations among the public of another cost-of-living or windfall Budget, stating that there are “challenging” times ahead.

Speaking to reporters in Tokyo, Japan, where one of the objectives is a major trade push, Martin said public expenditure has risen, on average, 8% to 9% over the last number of years.

“Such high levels of expenditure are not sustainable on the current basis. We met at the weekend myself, the Tánaiste, the Minister for Finance Paschal Donohoe, and Minister Jack Chambers to have an overview of the NDP (National Development Plan), budgetary matters, and the median-term financial framework.

“It was a sobering enough meeting, to be frank, in terms of the challenges that lie ahead, given the backdrop of tariffs and uncertainty in trade, and also the warnings we’ve received in terms of the once-off nature, or the temporary nature, perhaps, of certain corporation tax revenues,” he said.

It has already been revealed that VAT will be cut for the hospitality sector, while workers would be foolhardy to expect further income tax cuts. 

Making the comments, amidst the backdrop of new tensions between coalition partners over student fees, the Taoiseach said the government has to prepare the state’s finances for the next five years.

Two-hour meeting on Saturday

The meeting, which was held for two hours on Saturday, was “constructive”, the Taoiseach said.

However, he acknowledged that, much like every year before, each minister will have their own set of priorities when it comes to October’s Budget.

“There are challenges there,” he added, stating that the government “will be doing everything we can”.

The overall financial envelope that’s available for the government to spend is yet to be decided, said the Taoiseach. What is in the state’s coffers for spending is announced in the Summer Economic Statement, which is currently being prepared.

The pandemic, the post-Covid inflation period and the Ukraine war created a “very significant inflationary spiral that was very high for about two years, and the prices are still elevated”, the Taoiseach acknowledged. 

All the Budget talk is taking place against the backdrop of tariff negotiations going on between the EU and US.

The need for market diversification is one of the reasons the Taoiseach, along with his six ministers, will have visited Japan by the end of the year. 

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The Japanese relationship is a “very important relationship, particularly in an era when we’re under pressure in terms of tariffs, in terms of US change in policy”, said Martin.

It is important that we engage with like minded countries where there are strong markets, and this is a very strong market, he said.

Speaking specifically about tariffs, he said: “We are in more uncertain waters.”

Tánaiste Simon Harris told Cabinet today that with just a week to go there is positive momentum in EU-US trade talks – but he said the 10% baseline tariffs in some sectors will pose challenges for the Irish economy and businesses.

Ahead of the Wednesday week deadline, the Tánaiste will also this week chair a meeting of the Government Trade Forum on Wednesday and will travel to Berlin on Friday to meet with his German counterpart.