The Irish Times view on securing the future of the public finances: clear decisions needed

Minister for Finance Michael McGrath is due to bring proposals to Cabinet in the autumn about the establishment of a new fund into which significant sums from current strong tax receipts will be paid. It is an important concept, indeed an essential one given the danger of using transient revenues to pay for ongoing commitments.

The issue was discussed at the Department of Finance’s annual policy conference yesterday where McGrath underlined the future costs facing the public finances in areas like the ageing population – and the risks of a fall-off in corporate tax. One of the central ideas is to use the latter to pay some of the bills of the former.

Politically, however, this is difficult and the outcome at Cabinet may not be straightforward. There is pressure on two fronts. The first is in terms of how much is spent in Budget 2024, to be presented in October. The two budget Ministers, McGrath and Paschal Donohoe, have tied down their Cabinet colleagues by agreeing outline figures in their Summer Economic Statement, but further battles remain ahead.

The second issue is how the new fund will be structured and, in particular, how much will be aimed at underpinning investment in areas like housing and infrastructure in the years ahead and how much will go into a longer-term vehicle to pay future bills in areas like pensions. The indications are that the Government will try to hit both targets.

The Pillowman review: Martin McDonagh’s early play gets a pin-sharp, meticulously controlled staging from Lyric and Prime Cut

---

Election campaigns well under way as Ming pips the first televised debate

---

‘It’s nice to have Europe on your doorstep but rent is absolutely ridiculous here’

---

A Wee Poem

---

Careful scoping of the possibilities are needed here – the potentially transient revenues from the multinational sector offer an opportunity to underpin the public finances, but will only go so far. Choices will be needed on priorities.

Given the huge infrastructural deficit facing the country, it is likely – and surely appropriate – that some of the money goes in this direction, though the familiar challenges of delivery remain, as well as the short-term risks of economic overheating. In previous economic cycles, capital spending has been cut as growth slowed, with dire long-term consequences. A new fund could help safeguard longer-term capital spending by having cash in reserve if needed.

Part of the political challenge, too, is to get across to the public that this period of plenty in the public finances is unlikely to last. Even if corporate tax revenues remain strong, the cost of the ageing population and the climate transition on the exchequer will be considerable – “monumental” was the word used by the Fiscal Advisory Council. Ways will need to be found to pay these bills, either through additional taxation or lower spending elsewhere.

Current political debate is driven largely by the prospect that spending can be increased and the tax burden cut at the same time. At some stage, this equation will change.