Minister for Finance Michael McGrath said there will be a difficult balance to strike in the upcoming budget.

Speaking at the opening of the National Economic Dialogue in Dublin Castle, Mr McGrath warned of vulnerabilities in the economy, particularly the volatile nature of corporate tax receipts.

Priorities in the budget, he said, would be housing, protecting living standards in terms of welfare and tax, continuing to invest in public services and providing for the future, but added that this would have to be done in a way that would not add to inflation.

He described this as a difficult balance to strike.

"It's about trying to strike the right balance of providing an appropriate level of support to our society and economy, while at the same time not trying to stoke inflation any further," Mr McGrath said.

Michael McGrath said 'budgetary policy cannot become part of the inflation problem'

Taoiseach Leo Varadkar, speaking to reporters at Dublin Castle, said inflation is moderating and some prices will fall and he did not think prices "in the round" will go back to where they were two years ago.

He said: "One-off measures can be very effective in helping people with things like energy prices, which will come down - electricity and gas will come down - but other prices, when they reset, will probably reset at a level that was higher than a year or two ago.

"We need to take that into account, that whatever weekly increase is in the budget in October is adequate to take account of that so that we don't see pensioners, carers, people with disabilities and others being worse off in real terms - but the exact amounts, we're way off being able to decide what they're going to be."

Mr Varadkar said it was not a question of moving away from one-off payments, that there was "room to do both".

"There is a choice between whether you spend the surplus, whether you save it, whether you reduce taxes, whether you increase spending - actually, what we've been doing for years, because the economy is so strong, is all of those things," he said.

"We're able to reduce income taxes, we're able to increase spending, we're able to reduce the debt, we're able to invest more in services and infrastructure, we're able to set aside money for future problems.

"We can do all of these things, so it's not a choice among them, the choice is a different one - it's the quantum and the split among those different options."

He said one thing that was "absolutely" agreed on "across Government" - and which it agrees on with the Irish Fiscal Advisory Council "and others" and the Central Bank - is that windfall tax receipts that may be temporary cannot be used for spending commitments that may be permanent or recurring - and that was an "absolute position."

He said: "But even if you accept that position, we still have plenty of room to manoeuvre, because of the growth of the economy, the fact we have more people working than ever before and the fact that incomes are rising."

The Government said the meeting is not intended to produce specific budget proposals

Sovereign wealth fund

The Taoiseach added that there is "unanimous support from Cabinet" to establish a sovereign wealth fund for large budget surpluses to tackle long-term cost pressures like pensions and infrastructure spending.

"My view, which is a very strong view, is that we shouldn't use any of our windfall corporate tax receipts which may be temporary for spending commitments which may be permanent - but still leaves plenty of room for a very good budget," Mr Varadkar said.

"So what we need to do with those windfall receipts - we know that 11 or 12 billion, depending on whose estimate you'd like to use - is use them for a mix of things.

"Debt reduction, to bring down the cost of borrowing, as Minister McGrath said; a future fund to pay for future liabilities like pensions and health and social care; but also an increase in capital spending on investment in public infrastructure.

"Because once you build a new school, once you build a new hospital you don't need to build it twice and that it doesn't have to be recurring spending - in the way for example that spending on public sector pay or tax reductions would."

He said the whole point of having a National Economic Dialogue, and consulting with parliamentary parties, which he would be doing this week, is so the decisions are not made in June, that they are made between June and December "and we're still listening to people and taking advice on all of that".

Ireland's tax laws

Meanwhile, the Taoiseach has said that Ireland is reforming its tax laws.

Leo Varadkar said there is an international agreement on corporate tax, and corporate tax for big companies in Ireland will increase, to 15% in January.

"Consistently over the years Ireland has been closing loopholes, got rid of stateless corporations, got rid of the so-called 'double Irish' - and contrary to all the pessimistic interpretations who said that tax receipts would go down, they've actually gone up even more," he said.

On personal taxation, he said it was Fine Gael policy at the last election and now to get to the point where nobody earning under €50,000 has to pay the higher rate of income tax, and those earning over €50,000 only pays it on the portion above €50,000.

He said he couldn't say whether that would be achieved in the next two budgets - "but we have gone from a cut-off point at €33,000 now to €40,000."

Mr Varadkar said it was an area where the Government and Fine Gael as a party has delivered, and the average worker is paying "something like €1,500 a year less in tax because of that, and that's significant."

'Enabling a sustainable future'

Minister for Public Expenditure, NDP Delivery and Reform Paschal Donohoe described the National Economic Dialogue as an important milestone in the annual budgetary calendar.

"I look forward to a productive and insightful discussion on the choices and tools required to sow the seeds for future development of our country into the next decade," Mr Donohoe said.

The National Economic Dialogue sees Government leaders, charities, trade unions, academics and business groups gather to discuss priorities ahead of Budget 2024.

In his address to the conference, Mr Varadkar said that upcoming public sector pay talks should focus on new entrant workers as these are often the people who feel the greatest impact of the rising cost of living.

The theme of this year's dialogue is 'The economy in 2030 – enabling a sustainable future for all' and will focus on longer-term factors that will shape economic trends and drive living standards in the future.

The Government said that the meeting is not intended to produce specific budget proposals or recommendations.

A cross-section of social, environmental and voluntary organisations is calling on the Government to use October's budget to tackle energy poverty and break Ireland's dependence on fossil fuel for home-heating.

Groups including the Society of St Vincent De Paul, Friends of the Earth, Threshold, the Disability Federation, Age Action, the National Women's Council and the Irish Heart Foundation have issued a joint statement.

They described the latest CSO figures, which show the number of people unable to keep their homes adequately warm doubling between 2021 and 2022 and reaching a record high, as an "unprecedented crisis".

The 27 organisations are calling on the Government to address inadequate incomes by raising social welfare rates in line with cost-of-living increases.

They want to see measures that tackle cold homes for low-income renters and homeowners, as well as steps to bring down bills and guarantee everyone's right to energy.

Clare O’Connor, Energy Policy Officer at Friends of the Earth, said initiatives must also be introduced to reduce our dependency on fossil fuels for home heating and ensure a fair energy transition.

"It is powerful to see so many organisations join together to call for an end to our dependence on dirty, expensive fossil fuel heating as a core part of tackling energy poverty and ensuring warm homes for all," Ms O'Connor said.

"It’s also essential that Budget 2024 tackles income adequacy by raising all core social welfare payments by a minimum of €25," she added.

Social Justice Ireland (SJI) has called for the budget to be split in two with once-off windfall tax gains being invested only in one off infrastructure projects and accounted for separately.

SJI's CEO Dr Seán Healy said the normal budget should be presented using the regular budget process.

"This would mean that Government could then ensure that regular Budget expenditure is funded through recurring revenue and there would be no sudden surprises of discovering a huge shortfall in revenue when the windfall taxes no longer flow," Dr Healy said.

The National Women’s Council (NWC) has urged the Government to invest in childcare and public services to tackle systemic inequalities

"We call on the Government to deliver a public, not for profit childcare model," said NWC’s Head of Campaigns Rachel Coyle.

"Equally, we must see investment in a universal State pension as the best way to ensure equality and an adequate income for women in old age."