The Ukraine war has created new uncertainties over the economic outlook. One of the hardest things to predict is how many Ukrainian refugees will arrive here – and, crucially, how long they will stay. Driven out by war, the flood of refugees is spreading across Europe and beyond, often parts of families broken up by circumstances. Many hope to return as soon as possible to Ukraine. But who knows when – or if – this will be possible. Irish policymakers need to assume that many will be here for some time – and that significant numbers will choose to set up a new life in Ireland.
Ireland has the financial resources to deal with this, even if the sudden arrival of so many people is bound to create challenges. We are a member of the better-off group of EU countries and have resources and – importantly – a working public services infrastructure which has responded well in the initial days.
New departmental budgets will be needed to account for the cost of housing refugees, as well as the additional costs in areas such as welfare supports, education and healthcare
How much the influx of refugees might cost in budgetary terms is an open question. Minister for Public Expenditure Michael McGrath has spoken of a bill of “hundreds of millions” of euro for housing those arriving. If forecasts that up to 200,000 Ukrainians could arrive here are realised this will rise, probably to more than €1 billion this year, when additional costs in areas such as education and health are added in.
As of recent days there seems to be have some tailing off of numbers arriving after the initial surge, but with the likelihood of more refugees arriving directly or via less well-off countries such as Moldova – which does not have the capacity to cope – the total could quickly rise again. For now hotels are taking many arrivals, but as numbers rise centres such as Citywest will be used, at least as temporary shelter. All these involve additional Government spending and people who take refugees into their homes for a period will require some level of financial support.
The short-term cost of this to the State is affordable – and Ireland must step up and do the right thing, along with other countries. As Minister for Finance Paschal Donohoe has warned, the resources are there to deal with this, but it means a bit less to spend elsewhere. So be it.
There is leeway in the budget sums. A €4 billion contingency fund was set aside to deal with Covid-19 this year, with the fear that more restrictions would be needed. So the cost of dealing with the influx of refugees is not, on its own, likely to lead to Government spending bursting through the ceiling of €87.6 billion set for this year. However, it is not quite as simple as raiding the Covid contingency fund. New departmental budgets will be needed to account for the cost of housing refugees, as well as the additional costs in areas such as welfare supports, education and healthcare. At a time when the big-spending departments such as health and education are already at odds with the Department of Public Expenditure and Reform over whether “temporary” Covid-19 spending can be held on to, there will be sorting out to be done.
The wider impact of the war will, of course, require the budget sums to be redone. Fortunately, tax revenues are buoyant so far – the exchequer will get a short-term boost from higher VAT receipts as fuel prices rise, though there may be cuts here to come. The impact of any war-related slowdown later in the year and into 2023 will be a concern.
On the spending side, as well as the cost of dealing with the arriving refugees, the Government may well have to step in to support less well-off households and businesses. Drawing up the revised exchequer forecasts to be submitted to Brussels in April – the stability programme update – will be an exercise in guesstimation.
At the heart of the uncertainty is how long this terrible war will go on, and what happens afterwards. Ukrainians arriving here – or elsewhere – have fled for their own safety, many leaving family members behind. They may hope to return but the prospect of a long conflict is real, many cities are being destroyed and who knows what a peace might look like. The odds must be high that many will be here for some time, or decide to start new lives here.
Again the perspective needed here is that Ireland is a relatively well-off country. Indeed there are thousands of jobs openings in businesses across the country should the people arriving here decide to stay for a while and seek work. Their arrival is, of course, of a different nature to the tens of thousands of eastern Europeans who arrived here to work during the Celtic Tiger years of the early 2000s. One was voluntary, the other forced.
Ireland needs to start thinking about the possibility that it will be a long time before many of the Ukrainians landing here are able to return home
But we have seen how these groups who came earlier became part of Ireland, making a valuable social and economic contribution. Over the next few years, on current forecasts, labour shortages are one of the key constraints on our economy and like the Celtic Tiger years there will be plenty of opportunities for immigrants in all kinds of different jobs. In fact, they will be needed.
The priority must be to support a traumatised people fleeing from war and hope that broken families can be reunited. But it is also worth thinking about how to help those who may stay here for an extended period, or for the long term. Language or some skills training will open up opportunities for many. Education will be vital for children and young adults. Housing, of course, will be a big challenge, given the existing shortages.
Ireland needs to start thinking about the possibility – perhaps the likelihood – that it will be a long time before many of the Ukrainians landing here are able to return home. Some will be temporary visitors, but many will be here to stay.