‘Hard political choices’ needed if economy to recover, warns spending watchdog

Incoming head of Fiscal Advisory Council says severe austerity can be avoided

Fianna Fáil leader Micheál Martin and Fine Gael leader Leo Varadkar. Photographs: Nick Bradshaw

Fianna Fáil leader Micheál Martin and Fine Gael leader Leo Varadkar. Photographs: Nick Bradshaw

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The incoming head of the Fiscal Advisory Council has warned that “hard political choices” will be needed to meet the Herculean task of recovering from the Covid-19 emergency.

Sebastian Barnes said that while the robust state of the economy pre-crisis will make it possible for the State to avoid the severe austerity experienced a decade ago, the ability to address key goals such as Sláintecare, housing, and climate change will have financial limits.

Writing in The Irish Times, Mr Barnes said efficiencies would be needed in State spending, or the tax burden would need to increase, if those goals were to be achieved. “Someone will need to pay,” he has stated.

He pointed to longer-term challenges such as climate change, the over-reliance on corporation tax, and an increasing pension bill because of the State’s ageing population.

“There is no reason why Ireland cannot repeat this [the recovery from the last rcession] and emerge stronger and more cohesive from these difficult times. However, this will require hard political choices today, tomorrow and further ahead.”

New government

Over the weekend, Fianna Fáil leader Micheál Martin publicly committed to lowering the age at which people receive a pension from the current 66 to 65, and to effectively abandon plans to increase the pension age to 67.

It comes as Fianna Fáil and Fine Gael continued working on their joint response to a Green Party document, which set out 17 preconditions for negotiation on government formation. The primary “red line” identified by party leader Eamon Ryan is an annual 7 per cent reduction in carbon emissions.

“We are putting a lot of work into responding properly to the 17 questions,” said a senior Fianna Fáil figure close to the process. “We are willing to try and scale up our ambition.”

The response is expected to be completed on Tuesday at the earliest.

Senator Pauline O’Reilly, who chaired the parliamentary party process, said while there were different views within the Green Party on going into government, there was strong consensus behind the document. She said the Greens would examine the response of the two larger parties to assess the seriousness of their intent and willingness to engage.

“It is premature to say this is a negotiating document. We will have to wait and see the response,” she said.

“Everybody who goes forward for election goes with the intention to govern. There are different views on government but our members do want to see significant change and they know it has to happen quickly.”

Chair of the State’s Climate Advisory Council, Professor John FitzGerald said achieving a 7 per cent reduction in annual emissions would be extremely difficult but added: “If you do the groundwork and do a lot of different things you could get to it in the second half of the decade.”

He said there were a number of critical changes that would need to happen, including the closure of power stations using peat and coal, which he said would happen rapidly. Dr FitzGerald also said the Bus Connects project, as well as the Metro needed to be completed.

He described rewetting peatlands as a terrific idea and also said there were many measures that could work in agriculture without sudden and immediate actions such as herd culls.

“Drastic action does not make sense in agriculture areas and will be very difficult to achieve. You want a steady reduction and [a long-term] plan,” he said.

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