The main theme to emerge from yesterday’s meeting of the Oireachtas Budgetary Oversight Committee was both the dependence on, and the precariousness of, what were several times referred to as the “windfall revenues” from overseas corporations based in Ireland.
The six members, including Chairperson Barry Cowan TD, of the 15 who bothered to turn up either in person or online, heard separate presentations from officials of the Central Bank and the Economic and Social Research Institute (ESRI).
Dr. Robert Kelly of the Central Bank outlined that while the public finances are healthy, that they are under potential pressure from rising inflation and the “high degree of sensitivity” to external factors given the dependence on foreign capital. He referred to the consequent “distortions to GDP figures.”
These are a consequence not only of the potentially volatile nature of the corporate tax revenues, but also to what we have previously highlighted as the massive chunk of wealth – effectively one quarter of the wealth produced here measured as part of GDP, $121.6 billion in 2021 – that is taken out of the country in corporate profits after tax.
It was important therefore, as he and his colleagues stressed, and which was echoed by Professor Kieran McQuinn of the ESRI, that most of the “windfall” is kept as part of a reserve fund, presumably for when the corporations start to have a bad day.
That may indeed be “prudent” as was constantly pointed out, but surely the Sinn Féin TD for Mayo, Rose Conway Walsh, was right to point out that perhaps working people on lower incomes might expect to see some benefit? Especially given that the economy was described as at more or less full capacity.
Interestingly, in response to Conway Walsh, Dr. Claire Keane of the ESRI attributed the pressures on income for those within the lower wage bands to a “drop in working hours and months” as the cause of what she described as a “fall in employment earnings” for people in certain categories. She specifically mentioned those in retail and hospitality and wondered whether that was not perhaps a legacy of the Covid recession or was a “continuing trend.”
Evidence would suggest that it is a long term trend and that while the Covid restrictions undoubtedly exacerbated it, that there are growing sections of the economy in which increasing numbers of people no longer know from one week to the next, or even from one day to the next, how many hours they can expect to be working and therefore what their earnings might be.
There was also some discussion of the housing situation with Kelly mentioning the fact that the Central Bank forecast of 27,500 house completions for the year was lower than the 29,000 government target. Immigration, the elephant in the room for politicians, was referred to in this context by both Kelly and McQuinn.
McQuinn recognised that it is a significant factor in housing and later that one of the reasons why it is important to top up the reserve fund from current revenues is to meet future challenges, including those posed by migration. McQuinn mentioned “demographic pressures” as one of the reasons why it might be needed to fund extra capital spending through a revised National Development Programme. A programme which as Gript has previously pointed out is based on population projections that are now well out of kilter with reality.
Kelly referred several times to the “demographic shift” consequent on current and presumably continued high levels of immigration. He mentioned this as one of the reasons behind the housing deficit and then made a somewhat surreal formulation about how building more houses was needed in order to house more people from overseas who would then build more houses to house others coming here from overseas.
You would really seriously wonder at times if the Irish state is not just some sort of convenience for interests which have increasingly little to do with those of Irish citizens themselves, or the long term “sustainability” of the Irish state in any meaningful sense of the word. Especially when even Richard Boyd Barrett referred to the fact that teachers are leaving the country because they cannot afford to live here.
The paper for best performer must go to Rose Conway Walsh, who was the sole TD apart from Cowan in the Chair to stay in the Committee Room for the duration, and who asked a number of pertinent questions. Her observation that an effective subsidy of €1 billion to landlords through the Housing Assistance Payment (HAP) might be better invested in actually building houses is not only sensible but would mark a return to what was a successful state housing policy over several generations which effectively combined the public and private sectors.
McQuinn appeared to concur with Conway Walsh and perhaps because she had reminded him of what used to be the bedrock of Fianna Fáil policy, Barry Cowan interrupted to make her recognise that this might constitute a sin against “prudence.” And therefore a sinful frittering away of “windfall revenues” that will be needed for the next time our pals in Brussels might ask us to pick up the tab in the interests of “Europe.”