Robert Troy
Ceist:86. Deputy Robert Troy asked the Minister for Finance the key messages of his Department’s recent publication: Future-proofing the Public Finances – the Next Steps. [30039/23]
Amharc ar fhreagraThursday, 22 June 2023
Ceisteanna (86, 89)
Michael Moynihan
Ceist:89. Deputy Michael Moynihan asked the Minister for Finance for an update on his proposals for a long-term savings fund. [30036/23]
Amharc ar fhreagraFreagraí ó Béal (7 píosaí cainte)
I heard the Minister speak some time ago about the need to consider providing for future budgetary demands apart from the annual budgetary cycle. We all know that international events can impact very adversely and quickly on the economic health of a country. Not long ago, we all thought we would not have a war in Europe again. We know the devastating impact and loss of life the savage war inflicted on Ukraine by the Russian regime has had. We have also had the Covid-19 pandemic in the past few years. Does the Minister have a particular timeframe to progress the work on the establishment of a long-term public savings fund?
I propose to take Questions Nos. 86 and 89 together.
I thank Deputy Smith for his question. On 10 May, my Department published a scoping paper titled Future Proofing the Public Finances – the Next Steps, which outlines some of the merits of establishing a long-term public savings vehicle in Ireland. The paper highlights that corporation tax receipts have effectively doubled since just before the pandemic, with the evidence suggesting that much of this is windfall in nature. My Department estimates these windfalls reached almost €11 billion last year and similar windfalls are projected in the coming years. At the same time, demographic-related pressures on the public finances are building. By 2030, age-related expenditure is expected to be between €7 billion and €8 billion higher than it was at the start of the decade and these costs are set to increase exponentially thereafter.
In addition, other structural changes will also require a budgetary response, including financing the digital and climate transitions. Therefore, the key message from the paper is that the benefits establishing a long-term public savings vehicle would be twofold. First, it would help to ensure that potentially windfall corporation tax receipts are not used to fund permanent expenditure increases or tax reductions. Second, such a fund could contribute to meeting known future budgetary pressures. However, it is worth acknowledging that under almost all of the scenarios presented in the paper, drawdowns from such a long-term public savings vehicle would not be sufficient to cover the increase in ageing-related costs. This suggests other reforms to the pension system will be required. Work on proposals for establishing such a long-term savings vehicle is ongoing and will take into account the analysis contained in the Department paper, Future-proofing the Public Finances – the Next Steps.
I assure the Deputy the work is ongoing. I am examining the role windfall receipts are playing in the projected surpluses for the next number of years. How can we meet the needs of our economy and our society into the future, with respect to both demographic costs and climate costs, but also from an investment and infrastructure point of view in the short, medium and long term? I am also looking at the profile of the national debt to see what we can do to ensure our overall fiscal position is sustainable into the future. I welcome the contributions of the Deputy and others across the House to what are important issues for the future of Ireland.
I thank the Minister for his response. We are of course all very glad to have healthy public finances and long may that continue. I am glad the Minister referred to demographics and also infrastructure, especially in his remarks of a moment ago. We hear about the pressure from a demographic point of view due to people growing older, which is always welcome. When delivering public services, we do not ever seem to take into account how we are fortunate to have an increasing population throughout the country of all ages.
The last census recorded a population increase in every county for the first time in a long time. Our population is now in excess of 5 million people and that is a welcome development. The best way to strengthen our economy and the public finances in the long term is to ensure we have modern, up-to-date infrastructure. That is especially important in rural Ireland, where we do not have the road network we need, nor the water supplies or the work space at enterprise centres that can help to create jobs. The more jobs we can create, the more competitive we can help our enterprises and businesses to be. They would then be contributing big-time to the public finances. Let this debate consider demographics, but let it also consider the positive aspects of demographics from the point of view of the need to improve infrastructure in more rural areas in particular.
As Cathaoirleach of the Committee on Disability Matters, people with disabilities must be considered here. We have had a number of meetings and the building of capacity for people with disabilities across the country is hugely important. Over the last number of years the same level of investment has not been there and this area has been slow to get investment because of different regulations and hoops people must go through. We have surplus funding and that is welcome. Moving into Ireland’s future it is hugely beneficial, but we should also use it to ensure we are providing for the most vulnerable in society, including people with disabilities. We have seen many cases with respite and residential units. They must be prioritised as well and funding earmarked.
Following on from Deputy Smith’s point about infrastructure, how are we going to use this funding to future-proof our country? It is important we invest in all regions of the country and especially in roads like the Cork-Limerick road and others that are going to allow investment and ensure economic activity can continue to grow. We must make sure there is public funding into the future.
I thank the Deputies. They made some very valid points. They highlighted that there are many needs today. There are definite needs in the future. The demographic costs are real with respect to pensions, home care, nursing home care and so on. Those costs are real, we need to provide for them in the future and my colleagues have acknowledged that. We already have a significant national development plan, a public capital programme with a budget this year of over €12 billion. We also have the strategic investment fund, which has up to €4 billion available for investments in Ireland on a commercial basis. That offers some scope as well.
I am conscious that in the past when we have entered more difficult economic periods, suffered a shock or entered a downturn, the victim on the budgetary side has often been capital expenditure. We need to examine ways we can ensure we have funding there to ensure capital spending does not collapse in the event of a future economic shock.
I acknowledge the points the Deputies have made. Deputy Moynihan made the case for investment in disabilities and the need for more capacity there. Deputy Smith made the case for more investment in rural Ireland. I am signalling there is a willingness to do more on public capital investment. The Minister, Deputy Donohoe, is working closely with his colleagues across Government in the context of the public capital spending profiles and the national development plan. It will be a consideration in what we do overall as a Government with the projected surplus over the next number of years. The whole issue of capital investment is an important part of that mix overall.
I thank the Minister for his further response. He will recall that in our parliamentary party’s discussions on infrastructure the point has often been made that delayed investment frequently costs the State far more, so when the public finances are in a position to provide capacity to do more as a State then that is the time we should be doing it.
The road network is of critical importance from the point of view of everyday living. It is of critical importance from the point of view of jobs and enterprise. In County Cavan alone, 93% of the roads are non-national. By and large, our large and small enterprises are sited along regional and local roads. These are indigenous companies that are providing very valuable employment. Every day they have a truck delayed along a poor road it is costing them money. I remember arguing with others for the advancement of the M3. I got some of the major companies in Cavan to do a survey of the delays experienced by their vehicles on the old N3. The cost delays on roads were causing to business was frightening. The argument is well made that we need additional investment in out road network.
I thank the Deputy and acknowledge he has been consistently making the case for more investment in road infrastructure, and not just new infrastructure but maintenance of our local and regional road networks. As he knows, there have been underspends in a number of Departments in recent years. We have engaged with the Minister for Transport, Deputy Ryan, on the opportunity presented over the summer months for additional maintenance and restoration work to be done on our road network around the country. The Department is actively examining that issue and we hope there will be some positive word on that shortly. I acknowledge the Deputy's overall point on the need for continued investment. We are in a good position in terms of running budget surpluses. Looking over the next number of years, we need to make the most of the opportunity we have to make the finances safer for the future so we can avoid decisions that would otherwise need to be made in the coming years. There may well still be difficult decisions, but we must balance that with what more we can do in the short to medium term to improve infrastructure all over Ireland.