Three alarm bells for budget watchdog

The Irish Fiscal Advisory Council’s latest missive to Government about the public finances centres on three potential flashpoints.

One, the Government isn’t adequately forecasting the likely increase in spending next year and beyond and, according to the watchdog, using “fiscal gimmickry” to make it look like it is being more adherent to its 5 per cent spending rule – the Government’s pledge to try to keep the annual hike in spending within a 5 per cent ceiling.

Ifac highlights that there are strong risks of spending overruns this year in the areas of health, children and social protection, while noting “medium-term fiscal challenges remain to be addressed, including the costs of population ageing, climate change and the costs of implementing health reforms”.

The second potential risk area relates to the impact of the Government’s spending plans on the economy, which is already operating at or above capacity. They come with overheating risks, the council warns.

The third area relates to the concentration risk at the heart of the State’s corporation tax base, which Ifac warns is perhaps worse than we initially thought with just three firms responsible for 43 per cent of receipts in 2022. Income tax is also heavily concentrated, it warns. In other words, it wouldn’t take much to cause a sudden shift in our tax base and our public finances.

“Given the strength of the economy, choices need to be made. This is not a time for the ‘everything now’ approach of cutting taxes, increasing current and capital spending and doing this all at once,” Ifac acting chairman Prof Michael McMahon said.

Ifac’s warnings are nothing new but they come ahead of a tricky financial budget and a possible snap election (it is expected to take place immediately before a general election). The temptation to spend more or cut taxes before going to the electorate will be big.

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Revenue update on warehoused debt

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World of Work

Active learning is the watchword in the modern workplace

The 2024 Leaving Cert is in full swing and for thousands of students this is a significant qualification that will play a big part in determining how they join the world of work. So far, their educational pathway has been clear and known. What’s much less certain is the shape of the learning that has still to come as their careers unfold.

Executive education and professional and job-specific training have always been part of the employment picture. However, in most cases, there came a point at which the heavy lifting around qualifications stopped. Now, the speed of workplace change is turning this on its head. Those keen to stay in employment up to retirement age will have to upskill like never before if they want to hold on to their jobs.

This sounds pretty stark but it’s a reality that has already hit home to one worker in the financial services sector. In his 40s (with a good primary degree but no further qualifications), he's out of a job because his back-office role has been erased over the last year by technology and, specifically, AI.

Just how fast things are changing is reflected in one statistic from the latest dive into the future of lifelong learning by higher education consultants, Carrington Crisp, which works with third-level institutions around the world including TCD, UCC, University of Ulster and the Atlantic Technological University in Ireland. It shows that the skills employees need for a given position have shifted by about 25 per cent since 2015 and this is expected to double by 2027, raising questions about the value of traditional linear qualifications.

Click to read the full article

In Other News

Minister's dismissal of migration rule concerns in referendum flew in face of officials' concerns

Officials warned that the family and care referendums risked creating prolonged “legal uncertainty” over migration rules before Minister for Integration Roderic O'Gorman claimed the proposals had “no legal impact” on immigration law, newly-released records show. In files casting new light on the Government’s failed referendum campaign, Department of Justice officials said the proposals raised the prospect of increased migration applications, more litigation and rising legal costs.

“Immigration service delivery may be left in legal uncertainty in various areas for several years while waiting for legal precedents to be established, which will create yet more delays and backlogs,” said Department of Justice officials. The disclosure comes despite repeated Government claims that there were no immigration implications from the referendums.

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Inside Business podcast

Cliff Taylor stands in for Ciarán Hancock on this week's Inside Business where he talks to Irish Fiscal Advisory Council chief economist Niall Conroy about the budget watchdog's latest report that accuses the Government of "fiscal gimmickry". He is also joined by Laura Slattery and head of employment law at Addleshaw Goddard, Maura Connolly, on new Revenue guidance on employment status of "freelance" staff.

Highlights this week

• Work Q&A : Asked to move out of their comfort zone to a different area at work for what they were told was a permanent move that then became a 12-month project only to be abruptly sent back to their old role at a day's notice, a reader wants to know if she is being overly sensitive or was she fundamentally mistreated by HR?
• Personal Finance: People looking to plan for their future by putting in place an enduring power of attorney are hitting an impasse due to a row between the Law Society and the Decision Support Service, which is in charge of a new regime designed to empower older and vulnerable people to secure support they need and make it easier for them to plan for the future.
• Commercial Property: A consortium of former Ireland rugby internationals led by publican Noel Anderson is understood to have agreed to purchase McSorley’s pub in Ranelagh for €5.5 million from its long-standing owner, the Murray family.
• Technology: As the summer holidays approach, people are looking forward to a bit of time off to relax. But holidays can also make us vulnerable to scams . According to industry initiative FraudSmart, more than €100 million was swiped from consumers in various frauds and scams last year. Ciara O'Brien has some advice on the steps to take to ensure your dream holiday doesn't turn into a nightmare.

One to Watch

The outlook for ECB interest rates, housing and the mortgage market will be among the topics for discussion at the Banking & Payments Federation Ireland national banking conference on Tuesday with a line-up featuring, among others, Minister for Finance Michael McGrath, ECB chief economist Philip Lane, Colm Kincaid, who is director of consumer protection at the Central Bank, developer Michael O'Flynn and Dr Frances Ruane, chairwoman of the National Competitiveness Council of Ireland.

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