Ireland unveils 10.5 billion euro pre-election budget giveaway

By Padraic Halpin and Conor Humphries

DUBLIN (Reuters) -The Irish government handed voters 10.5 billion euros of tax cuts and spending increases in a pre-election budget on Tuesday that also outlined how it will use a 14 billion euro ($15.6 billion) Apple tax windfall to improve creaking infrastructure.

Prime Minister Simon Harris must call an election by March but most analysts see November as the most likely date, when voters will start to benefit from the latest budget splurge resulting from Europe's healthiest set of public finances.

On the same day France announced steep spending cuts and tax hikes, Irish pensioners, parents, renters, workers and welfare recipients were given the equivalent of 2,000 euros for every man, woman and child, showing just how big an outlier Ireland is in the 27-nation EU.

The biggest non-pandemic budget since Ireland's Celtic Tiger years brought opposition accusations that ministers were trying to buy the election by breaking its own budget rules, supposed to cap spending growth at 5%, for the third successive year.

"Today's budget is unique in the opportunity it presents to plan, transform and deliver for the future," Finance Minister Jack Chambers told parliament.

"It is clear that supply is the main constraint on growth at present. We are investing at scale to address these bottlenecks and put in place long-term solutions."

An explosion in corporate tax revenues, mainly paid by a few large U.S. multinationals, has handed Ireland one of Europe's few budget surpluses. In a fresh set of forecasts, the finance ministry said the boom would continue to 2030.

The Apple back taxes are set to push that surplus to 7.5% of national income this year before returning to 2.9% next year.

The windfall resulted from an EU court decision that Apple had unduly benefited from favourable tax treatment in Ireland's tax regime, designed precisely to attract Big Tech companies to set up European headquarters in Ireland.

Those proceeds and 3 billion euros from bank share sales are to be spent on the long-term upgrade of water supply, expansion of the strained electricity grid, improving transport links and on infrastructure enabling large scale private house building.

"The main take away for investors today is that we've made some good decisions in terms of resource prioritisation," said Fergal O'Brien of business lobby group Ibec, welcoming the "re-scaling" public investment plans.

Ireland has struggled to keep up with the demands of a fast-growing economy and population and address problems in housing, transport and healthcare despite extensive capital spending.

The budget included a package of "one-off" cost-of-living support payments for the third year running, this time totalling 2.2 billion euros, even though inflation has fallen fast.

Harris denied that this was a return to the giveaway budgets of the mid 2000s that preceded the crash of the Celtic Tiger economy, pointing to the 6 billion euros the government was putting away in its new sovereign wealth and long-term infrastructure funds.

($1 = 0.8961 euros)

(Reporting by Padraic Halpin and Conor Humphries; Editing by Jane Merriman, Kevin Liffey, Alexandra Hudson)