The Cabinet has approved the Summer Economic Statement which forecasts a core budget package this year of €4.7 billion.
Of this, €1.5 billion will be available for new spending measures.
Covid-19 spending is to be slashed by almost €7 billion, as pandemic supports are “unwound” over this year and next.
However, Ministers have agreed to set aside €2.8 billion for income and business supports, should they be needed in 2022.
Fine Gael has secured a major Budget win with one in three euros spent next year going on tax packages, while housing will also receive a significant funding boost.
Cabinet has additionally signed off on new measures that would limit non-Covid spending increases to the estimated rate of economic growth, in a bid to move back towards balanced budgets by 2024.
Minister for Finance Paschal Donohoe said: “As we emerge from the pandemic, the budgetary strategy published today will guide fiscal policy over the medium-term, responsibly phasing out the range of temporary support schemes to allow resources to be directed at key national priorities.
“By 2023, we will borrow only for capital investment, which is being ramped up to provide for, among other things, significant additions to the housing stock.
“All-in-all, this fiscal framework is one that stabilises our debt ratio, gradually reduces the budgetary deficit, supports households and firms and invests in our future.”
The Government’s Summer Economic Statement sets out a medium-term budgetary strategy and outlines the fiscal parameters within which discussions will take place ahead of Budget 2022.