The Daily Star Ireland
The state could incur costs of up to €20 billion if it fails to reduce carbon emissions by 2030, according to a recent evaluation by the fiscal watchdog. This estimate significantly exceeds the Climate Change Advisory Council’s previous figure of approximately €8 billion.
In its latest report, the Irish Fiscal Advisory Council indicated that lower estimates were based on the assumption that Ireland would implement certain measures, which now appear increasingly unlikely. Consequently, the state could face compliance costs potentially reaching €20 billion.
Economic Outlook
The council forecasted steady economic growth, substantial tax revenues, and record employment levels to persist. However, it reiterated concerns about the over-reliance on soaring corporation tax receipts, noting that 40% of this revenue comes from just three multinational companies in Ireland. The council warned that continuing to depend heavily on these taxes could lead to significant financial challenges if the revenues were to decline.
The council praised the government’s decision to establish two long-term savings funds for windfall tax receipts but criticized the allocation, highlighting that only a third of the excess funds were being saved. It pointed out that Norway sets aside all its windfall from oil revenues as a prudent financial practice.
Government Spending
The council expressed concerns about the rapid growth in government expenditure, which is projected to increase by 8% this year and next. It also criticized persistent spending overruns, which are expected to reach €3.8 billion this year, making budget forecasts appear “not credible.”
The council urged the next government to implement a spending rule that it will adhere to, to prevent unnecessary job losses during future recessions. It also called for a comprehensive review of health expenditure to establish realistic spending limits that account for predictable cost pressures.
Long-Term Budgeting
Seamus Coffey, Chair of the Fiscal Advisory Council, emphasized the need for realistic plans to address infrastructure deficits, aging population pressures, and climate needs while ensuring economic growth. Speaking on RTÉ’s Morning Ireland, Coffey advocated for a shift to medium-term budgeting over three to five years, rather than the current annual approach.
He explained that the new government would need to submit a five-year fiscal plan to the European Commission, outlining spending increases for each year. This shift aims to move away from the short-term, annual budgeting cycle, allowing departments to plan for the next several years rather than just the next 12 months.
