The Government is planning a budgetary package of €3.4 billion for 2019, of which €2.6 billion has already been allocated.

This means there is roughly €800m left to be allocated on Budget Day and is based on the Government achieving a headline deficit of 0.1% of GDP. 

In the Summer Economic Statement published this afternoon, the Minster for Finance said a minimal compliance with the fiscal rules would allow an additional expenditure of €900m. 

However, Paschal Donohoe said this was not appropriate for the economy at this stage of the economic cycle, and in any case it could only be funded by additional borrowing, which would push up the budget deficit.

He stressed it is vital that Government policy does not add "fuel to the fire" and so it will not be using all of the fiscal space available to it.  

The Department of Finance said the Fiscal Rules are currently "unhelpful" in the prudent management of the public finances.

A literal application of the rules would involve "pro-cyclical policies not remotely appropriate to our position in the economic cycle," it added. 

Instead the Government has decided to adopt a policy that will reduce rather than increase borrowing.

The Summer Economic Statement fixes the deficit target at 0.1% of GDP and says the "Government will not adopt taxation and spending measures that result in a larger deficit than this". 

In a firm statement, the Finance Minister said that "all demands cannot be met. Expenditure continues to exceed revenue and we are still borrowing to meet the shortfall. If more resources are allocated, the deficit will continue to grow".

As part of plans to reduce risks from excessive spending, the Government intends establishing a rainy day fund, putting aside any higher than expected inflows of corporation tax. 

"We cannot build permanent expenditure commitments on revenues that may not be sustainable," the Minister said.

The Minister also said that the economy is in good shape at the moment and this is reflected in the labour market. 

He noted that the level of employment is close to its highest level ever and the economy is approaching what could reasonably be called 'full employment'.  

"This is a welcome development but as capacity constraints are increasingly becoming a feature of some sectors this, in turn, could lead to overheating of the economy," the Minister said. 

"In this context, it is vital that Government policy does not add fuel to the fire but that we make sensible and prudent decisions now to secure our hard-won gains and ensure the continuation of sustainable future growth," he added.

Fianna Fáil's finance spokesperson Michael McGrath has said that the foundation stone of Budget 2019 must involve "practical measures" to tackle the crises in housing and parts of Ireland's health service. 

Meanwhile, Sinn Féín's Pearse Doherty said that the Government's Summer Economic statement will have "disastrous consequences for ordinary people". 

Joan Burton, finance spokesperson for the Labour Party, has said that there was up to €2.2bn available in the fiscal space for new measures in Budget 2019.