The Department of Finance’s Summer Economic Statement was, in a sense, boring. This is not necessarily a bad thing as it meant there were no unpleasant surprises. However, it is only the opening salvo in the run-up to the budget and, if the rumours are to be believed, things may get more exciting, with unwise fiscal initiatives being canvassed.The Government’s commitment to continued public investment, along with measures to speed up delivery, are to be commended. This will lay the foundation for future growth in the economy and improve the living conditions of all of the population.Too often in the past, vitally needed public investment has been sacrificed to protect current services and minimise tax bills.The Central Bank last month spelt out the scale of increase in expenditure needed in 2027 to maintain existing services and provide for planned investment – almost €7 billion. This is the figure the Government has pencilled in its latest economic statement. While this would allow for indexation of welfare rates and wage rates to take account of expected inflation, there would be little room for improving services. The department report also shows that €1.5 billion is available for “tax cuts”. More than €1 billion of this would be needed to stop the average tax take rising as a result of inflation, as it has this year. The rest will be needed to pay for the carry-over costs of this month’s cut in VAT on hospitality. Thus, on the basis of the Government’s current numbers, there would be little, if any, room for significant further cuts in any taxes unless they are funded by alternative revenue-raising measures.Looking back over the period from 2022 to 2025, despite continuous sizeable overruns in some departments, the share of public expenditure in national income remained roughly stable. This was probably an appropriate out-turn. However, a big problem with overruns in expenditure is that the additional funds may go to areas that are badly managed, rather than funding a planned improvement in services where they are most needed. It is also true that, as departments often argue, overruns happen because predictable demand was underfunded. [ Budget 2027 expected to be tightest budget since before Covid-19Opens in new window ]Once again this year there will be overruns in expenditure. The package of “temporary” cost-of-living measures in response to the energy price protests is further skewing the allocation of public resources in ways that run counter to stated Government objectives. The cuts in excise taxes, in particular, benefit those who are best able to handle the rise in energy prices, instead of targeting those already in fuel poverty. They also send the wrong signal to consumers. Instead of warning them that they need to switch from dependence on volatile fossil fuel prices to reliable green alternatives, it encourages continued purchases of petrol and diesel cars. Both the climate and consumers will suffer from slowing the switch to EVs.The Commission on Taxation and Welfare, along with the official economy watchers – the Central Bank, the Irish Fiscal Advisory Council and the ESRI – have warned of the growing dependence on corporation tax. The cut in excise taxes on fuel continues a long-term reduction in revenue from indirect taxes, which have fallen from 12 per cent of government revenue a decade ago to only 10 per cent today.[ Landmines lurking in Budget 2027 are not so hard to spotOpens in new window ]Proposals to cut capital acquisitions tax on inheritances from the childless are both unwise and expensive – €350 million to increase the thresholds for transfers to relatives, other than children of the donor. This would mainly benefit those who are already well off, and further erode the tax base. As the Commission on Taxation and Welfare showed, the State needs to widen rather than narrow its tax base to fund the future challenges we face on ageing, climate and population growth. Last week the Department of Finance published a valuable piece of research on how the Irish economy would be hurt if the current AI bubble burst. There is a very real possibility of this happening. This paper shows there would be a substantial loss of income for the State, reflecting the importance of the IT sector in the economy, along with our close trading relations with the US, where most AI investment is happening.While much of the activity in the Irish IT sector is not directly related to developing AI, the tech giants, which are important to our economy, are also heavily invested in developing AI models, spending huge sums. It is hard to see how all of these firms will get their money back. [ The Irish Times view on the Summer Economic Statement: prudence cannot take second placeOpens in new window ]If any of the firms we rely on for a large chunk of corporation tax revenue were to show large AI losses in the future, it could have a big impact on our budgetary arithmetic.