Alice-Mary Higgins (Independent) | Oireachtas source

There are a number of issues I want to focus on, including the overlap between the medium-term challenges and climate and the report on wages produced by IFAC in May. The report on wages raises a question on the approach of using tax measures as opposed to other measures. There is also the need for an increase in the minimum wage to living wage levels because of inflation. This has been highlighted by Social Justice Ireland and others. The IFAC report highlighted that incomes in the top five sectors have been increasing while we have had static incomes in lower sectors. The report states there has been a long-standing divergence between the higher paid sectors and other sectors in terms of the hourly wage. By contrast, hourly wages in the lowest-paid sectors have barely increased in cash terms. In real terms this is a decline when we have inflation, including inflation in basic costs such as the cost of food.

Will the witnesses comment on the need for fiscal measures that do not just address the cost of living in a general sense but are very much targeted to addressing lower incomes? A few years ago, there was an International Monetary Fund, IMF, report that was compiled over 30 years across a number of economies. It highlighted that when the incomes of the bottom 10% increase, it has a positive impact on the economy whereas increases in the incomes of the top 10% do not have the same effect in the economy and can have a negative effect. I say this in the context mentioned by Mr. Barnes, namely, that while Covid had a negative impact on many, there are some whose wealth increased. A report by Oxfam states that the wealth of just nine billionaires in Ireland increased by €16 billion during the Covid period. In this context, the concern is that tax measures, even if they are about shifting the index point, would benefit those in the higher bracket but we are still not having a conversation about a potential third tier of higher tax or measures to address the widening of the wealth gap and the income gap.

I have questions on two of the three medium-term challenges identified. I might follow up on them later. There is another shorter-term issue I want to highlight. We know the fiscal rules have been suspended at EU level. One of the reasons this is important is because it allows for front-loading, not only for day-to-day spending but also for investment. Mr. Barnes mentioned that investment needs to be treated differently. With regard to front-loading, what is long-term investment with potential long-term rental returns, I am concerned that a narrow approach to annual spending ends up costing us. With the very rigid application of the fiscal rules in the decade since 2008 the EU and individual states lost a lot of time and opportunities to invest in public services and public service infrastructure. Now we see gaps in public services, and these have been highlighted. We have also lost time for the transition needed for climate change.

A specific area where fiscal reticence on spending may be driving inflation is housing. We know the fiscal rules were cited, and continue to be cited even though they no longer apply at EU level, as a reason Ireland has adopted a leasing approach rather than a direct build and purchase approach for social housing. The guarantee of leases with a profit margin, which are subsidised by State for investment funds, has incentivised investment funds to compete in the purchase of housing. This has also had an inflationary impact on the cost of housing more generally. This is an example of how not having public spending and creating a reliance on a market structure has driven up the cost of housing. Will Mr. Barnes comment on these points? I will then ask questions on the medium-term challenges he identified.