Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I propose to take Questions Nos. 86 and 89 together.

I thank Deputy Smith for his question. On 10 May, my Department published a scoping paper titled Future Proofing the Public Finances – the Next Steps, which outlines some of the merits of establishing a long-term public savings vehicle in Ireland. The paper highlights that corporation tax receipts have effectively doubled since just before the pandemic, with the evidence suggesting that much of this is windfall in nature. My Department estimates these windfalls reached almost €11 billion last year and similar windfalls are projected in the coming years. At the same time, demographic-related pressures on the public finances are building. By 2030, age-related expenditure is expected to be between €7 billion and €8 billion higher than it was at the start of the decade and these costs are set to increase exponentially thereafter.

In addition, other structural changes will also require a budgetary response, including financing the digital and climate transitions. Therefore, the key message from the paper is that the benefits establishing a long-term public savings vehicle would be twofold. First, it would help to ensure that potentially windfall corporation tax receipts are not used to fund permanent expenditure increases or tax reductions. Second, such a fund could contribute to meeting known future budgetary pressures. However, it is worth acknowledging that under almost all of the scenarios presented in the paper, drawdowns from such a long-term public savings vehicle would not be sufficient to cover the increase in ageing-related costs. This suggests other reforms to the pension system will be required. Work on proposals for establishing such a long-term savings vehicle is ongoing and will take into account the analysis contained in the Department paper, Future-proofing the Public Finances – the Next Steps.

I assure the Deputy the work is ongoing. I am examining the role windfall receipts are playing in the projected surpluses for the next number of years. How can we meet the needs of our economy and our society into the future, with respect to both demographic costs and climate costs, but also from an investment and infrastructure point of view in the short, medium and long term? I am also looking at the profile of the national debt to see what we can do to ensure our overall fiscal position is sustainable into the future. I welcome the contributions of the Deputy and others across the House to what are important issues for the future of Ireland.

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