The incoming coalition’s programme for government contains a lot of reheated economic measures carried over from the outgoing administration.
For instance, the promise to build 300,000 housing units over the next five years remains as does the pledge to “build up the two long term savings funds” for future fiscal challenges. Yet there are several new or relatively new elements. Here are five of the more noteworthy ones.
300,000 new jobs by 2030
The Irish economy has created more than 400,000 jobs since 2019, the fastest rate of jobs growth in Europe. So the incoming coalition’s promise to create 300,000 new jobs between now and 2030 would, if it materialises, be a continuation of the same.
This is perhaps optimistic given the Irish economy is projected to grow at a more moderate rate in the coming years. There is also the increasingly uncertain geopolitical backdrop manifested most obviously by the incoming US administration’s protectionist pivot and the prospect of a tit-for-tat tariff war between Brussels and Washington.
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The global context for Ireland’s evidently successful economic model has changed and so may have the jobs-rich growth.
Dedicated State infrastructural unit
Fine Gael had pushed for a new department solely dedicated to the delivery of big infrastructural projects, now seen as vital for the State’s future development. The compromise was a new division within a revamped Department of Public Expenditure and Reform (DPER).
The unit will be tasked to “work with stakeholders to advise Government on strategic project selection and prioritisation, aligned with national priorities and making maximum use of resources”.
The incoming government also plans to establish a new “Unit for Future Planning” to forecast demographic changes and “ensure accurate estimates of the demand for essential services and employment”.
Not unrelated is the promise of an early review of the National Development Plan to be completed in July this year, one which is likely to add the Apple tax money to the pot.
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Extending the Help to Buy and First Home schemes
By far the most controversial aspect of the Government’s housing policy are its two affordability initiatives, the Help to Buy and First Home schemes, which offer first-time buyers tax rebates and other financial supports to help them get on the property ladder.
Critics, however, claim the schemes are inflationary particularly in a supply-constrained market. Sinn Féin had pledged to abolish the schemes if elected. The programme for government promises to extend each scheme until 2030. It also pledges to “work with the banks to expand the First Home Scheme to first time buyers of second-hand homes”.
The document also talks about achieving a “stable and predictable” housing policy to attract and retain private investment while lifting the annual build rate to 60,000 units a year by 2030.
A 9% VAT rate for food-led hospitality
Hospitality has become a major pressure point in the Irish economy with a spate of high-profile restaurants forced to close because of higher running costs.
The incoming administration has promised to “bring forward measures to support SMEs, in particular the retail and hospitality sectors, acknowledging the increased cost pressures on these sectors and this will entail changes to VAT, PRSI and other measures.”
While a return to the reduced 9 per cent VAT rate for food-led hospitality businesses is not mentioned, it is understood there was political agreement for the measure in the next budget. Department of Finance officials have previously described such a move as “unjustified” and too costly.
Maintain a broad tax base
Perhaps the most perplexing of all the promises made in the document was a pledge “to maintain a broad tax base.” It is perhaps a response to warnings that the State’s tax base has become too narrow and relies too heavily on income and corporation tax, with the latter concentrated around a small number of foreign multinationals that could easily exit the jurisdiction.
The Commission for Taxation and Welfare warned the Government in 2022 that the balance of taxation must shift away from taxes on labour and towards taxes on capital, wealth, and consumption. Nonetheless the coalition’s document pledges to “maintain a broad tax base to guard against the need for countercyclical fiscal policy in the event of a downturn and to prepare for future budgetary challenges relating to population ageing”.
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