The government will use some of its expected €10bn budget surplus this year for tax cuts, welfare hikes and infrastructure spending, the Taoiseach has pledged.

But Leo Varadkar said he would also set aside a portion of the windfall corporation taxes in what he called an “anti-austerity fund”.

“Yes, we will reduce income taxes, yes, there will be a welfare package in the budget to help people with the cost of living – particularly pensioners and people on social welfare – and yes, we will be able to invest more in capital and infrastructure,” he told the Bloomberg New Economy Gateway event in Wicklow.

“But it’s also important we set aside some of that windfall gain and we pay down the debt. Sooner or later it will come to pass that revenues fall.

“I don’t want a future government to be in the position that we were back in 2011 when my party came to office […] and the IMF were in town.

"What we’re not building up is a rainy day fund. What we’re building up is an anti-austerity fund, so that when that day comes – when revenues fall off – we won’t have to cut pensions, we won’t have to increase income tax, we won’t have to cut back on investment.”

He said the Government will invest some of the estimated €12bn in windfall corporation tax receipts this year in a reserve fund to pay for future pensions and healthcare.

He said some money would also be used to increase investment in housing, hospitals and education, to reduce the cost of childcare and permanently cut the cost of public transport.

He said energy supports for households and firms would not be reduced “too quickly”.

The Irish Independent reported today that Housing Minister Darragh O’Brien is mulling subsidies of up to €750m for developers of cost rental homes.

Mr Varadkar said Ireland’s debt was very high and that he was not only thinking about the next election.

“Yes, the next election is important,” he told Bloomberg economics editor Stephanie Flanders. “But future generations judge you too. Nobody is going to thank a government in six, seven, 10 years that could have prevented another boom-bust cycle.”

Mr Varadkar said Ireland’s corporation tax windfall, which is largely responsible for generating the double-digit surplus, would eventually disappear – even though it seems like every time the country changes corporation tax rules “more money comes in”.

“We’re not a tax haven. We don’t want to be perceived as one,” he said.

On Ireland’s military neutrality, Mr Varadkar said that while he had “no intention or plan to apply to join Nato or any military alliance”, he would be spending more money on defence and would cooperate more with European-led peace missions.

“When the election does come, European policy, for the first time, will be an issue.”

On Northern Ireland, he said he and UK premier Rishi Sunak are looking to “stand up” the power-sharing institutions and that they are “working towards a window after the local elections” in May.

He said he hoped the Democratic Unionist Party would “do what’s right for Northern Ireland, Ireland and the UK, not just what’s right for them”.

He also said he hoped a future British government would “seek a closer relationship with the EU again”.

“They might not be rejoining. That’s a remote prospect. But it might involve a renegotiation of the trade and cooperation agreement to have a closer relationship. That’s something the door will always be open to.”