The Committee on Budgetary Oversight met the Minister for Finance, Paschal Donohoe TD, last Thursday, 23 September as part of its pre-Budget 2022 scrutiny process. With Ireland’s public debt equivalent to €50,000 per person, among the highest in the developed world, the Minister discussed the need to be aware of obligations towards future generations. An expenditure ceiling of €88.2 billion has been set for next year with €500 million in tax focused measures to be outlined on Budget Day.
The Minister stressed the challenges ahead in his opening speech to the Committee. The Minister confirmed that the Government will continue to borrow for capital investment from 2023 onwards. He detailed:
“Borrowing to fund investment that raises long-term productivity which changes our future is the right thing to do, but borrowing for day-to-day expenditure is not. The latter runs the risk of changing the living standards of future generations, who have to pay for it. We are determined to minimise the debt-service burden on our children. However, the next generation will and must benefit from an improved stock of infrastructure.”
In light of the expected fall off in corporate tax receipts over time on foot of international tax reform and the potential impact to the rate of growth, the Minister discussed the need to “reduce our reliance on borrowing to fund day-to-day spending and get to a point where the taxes we are collecting are paying for the public services we have at the moment.” Despite the challenges expected within corporate tax revenues, the Minister noted, “I remain confident that the Irish economy will be competitive, resilient and able to retain and grow jobs into the future.”
In relation to COVID-19 supports the Minister recognised that some businesses and employees will continue to need support but noted that the temporary supports are being phased out in a careful way, and others will come to a natural end.
The Minister emphasised the trade offs involved in managing the public finances. He noted only three options available for new expenditures: “raising taxes, increasing borrowing and reducing expenditure in other areas”. He noted that Budget 2022 aims to strike the right balance between these choices but that difficult decisions will need to be made, and decisions would be made against the background of improving economic health.
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