Spending money wisely is perhaps one of the most important jobs for any government.

In Ireland there are three big expenditure categories which absorb more than half of all taxes collected every year: Social Protection, which accounts for 22% of spending, Health (21%) and Education (10%).

Housing, which the Government says is its top priority, uses 6.7% of funding, or €8bn, up from €5.3bn in 2020.

Social Protection covers a huge array of benefits and is paid to 1.6 million people. It includes State pensions; illness, disability and carers’ payments and jobseeker benefits.

Health, where spending has risen quickly in recent years, covers hospitals, doctors, nurses and the HSE.

Most of the health budget, or 94%, goes on current spending such as wages and 6% on capital including new buildings.

Apart from the big three spenders, the Department of Children’s budget is €8.2 billion annually, Higher Education €4.6bn while Transport and Justice both spend €3.9bn.

All the other Departments have budgets of roughly €2bn or less.

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But where our taxes go in future is going to change.

Ireland’s unpreparedness for the housing crisis, which now manifests itself in a massive shortfall of homes, was partly due to a bigger than expected increase in the population.

The number of inhabitants is growing, and the age profile is becoming older.

This has huge ramifications for the three big spending areas and particularly pensions, healthcare and schools.

The Central Statistics Office currently estimates there are 5.4 million people living in the Republic.

The Department of Finance recently published growth scenarios, the highest of which points to a population of 7.59 million by 2065.

Ireland, like many other developed economies, has been underestimating population growth over recent years. Demographics are the cornerstone of economics. If a government doesn’t know how many people will be living here it can’t plan.

The old age dependency ratio, which measures the number of people aged 65 and older compared to the numbers of working age, is expected to rise from 23% in 2022 to 55% in 2065.

Officials in the Department of Finance have highlighted the “four Ds” as major structural changes facing the economy: demographics, decarbonisation, digitisation and deglobalisation.

We can, perhaps, add a “fifth D”: defence.

It is one of the smallest spending departments with a budget of €1.3bn this year.

That’s much less than other EU member states.

Ireland’s military expenditure in 2020 equated to 0.3% of Ireland’s gross domestic product or 0.5% of gross national income (arguably a better measure of the size of the economy).

As a proportion of GDP, Belgium spent 1.1%, Norway 1.9%, Portugal 2.1% and Denmark 1.4% in 2020.

Ireland is militarily neutral and not a member of NATO, unlike many other European countries.

Regardless of discussion about neutrality, there is no debate about the reality that Ireland has increasingly been subjected to cyber attacks and much more activity from Russian ships in the waters of the Irish exclusive economic zone.

The Commission on the Defence Forces published recommendations weeks before Russia invaded Ukraine in 2022, advocated increasing spending. The Government agreed to hike expenditure to €2bn by 2028.

But former Independent TD and ex-Defence Forces member Dr Cathal Berry says even that will fall far below what is needed in the current situation.

“You can either spend cheaply on deterrents or very expensively for the clean-up.

“We are a defenceless country rather than a neutral one.

“We are the only EU country without a military-grade surveillance system.”

He adds that the drone incursions currently being experienced by Denmark will happen here, and Ireland’s hosting of the EU presidency next year will make it a potential target.

He says it would be a “national disgrace” if major EU summits are cancelled due to security concerns and argues the Government needs to spend in the region of €4bn annually on defence.

The other area where the Government will have to set aside more funding is climate.

Ireland is expected to miss its target of reducing carbon emissions by 50% by the year 2030, resulting in an enormous EU fine.

So far, estimates for how much that could cost vary wildly. The Climate Change Advisory Council and The Irish Fiscal Advisory Council suggest it could be between €8bn to €26bn.

We don’t know what the final figure will be, but in the context of the Irish budget it is likely to be enormous.

Ossian Smyth, former Green Party Minister of State and the party’s climate spokesman, says: “The EU is on track to meet its targets and we are not. That’s a problem we really have to address.”

He adds: “One reason to decarbonise is to become more energy independent and self-sufficient in a world where tariffs and wars can interrupt supplies at any time.

“It makes no sense to risk our economic security by depending on Russia or Saudi Arabia when we live in one of the windiest countries in the world.”

It is worth bearing in mind that not all money raised by the State is used by Government Departments.

Last year the annual interest bill on the €229bn national debt was €3bn or more than the entire cost of the highly controversial National Children’s Hosptial.

The body which manages those borrowings, the National Treasury Management Agency, says that bill will rise in the coming years.

That is because the State borrowed when interest rates were close to zero, now investors are demanding 3%.