The Coalition is coming under pressure from Government TDs over plans to put aside large sums of money in a multibillion-euro fund designed to protect the economy from future shocks.
Minister for Finance Michael McGrath has announced plans to channel part of an expected €65 billion budget surplus into a longer-term public sector savings vehicle.
According to an options paper drawn up for the Government, up to €90 billion in windfall corporate tax revenues could be put into the new fund by 2030, although the Government has yet to decide exactly how much to set aside. There is resistance growing among backbench TDs, however, who feel there should be more of a focus on assisting households struggling with cost of living pressures at present.
In the options paper, Mr McGrath said that “in headline terms, it is fair to say that our public finances are currently in a sweet spot. A large budgetary surplus was recorded last year and, assuming no major shock to the economy, my department is projecting an expansion of this surplus in the years ahead.”
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However, the Government said that financial vulnerabilities are building up at a time when corporate tax receipts cannot be fully relied upon.
Fianna Fáil TD for Cork North-Central Pádraig O’Sullivan said he would be “on the side of using the resources that we have accrued through responsible fiscal policy to help alleviate the pressure currently being experienced by households”.
He added: “That said, I do think we need to be cognisant of challenges coming down the road in relation to pensions and debt.”
Fine Gael TD for Mayo Alan Dillon said that he believes a “high proportion” of the pending windfall tax should be used “to support those in need” which he said would be “a reasonable and socially responsible approach”.
“By combining this tax with corporation tax receipts, the Government can effectively deliver on its commitments within the NDP [National Development Plan] and future capital projects. This is especially important during times of economic hardship, when many people are struggling with the cost of living. It is understandable that some may resist this plan, but ultimately, prioritising the needs of the most vulnerable members of society is essential for promoting greater equity and stability in our economy.”
Green Party TD Neasa Hourigan, who lost the party whip earlier this year, said: “You simply cannot herald outsize tax receipts and a buoyant economy while assigning the entire excess to policy decisions that do not address the cost-of-living crisis in the short term.”
While she agreed with the principle of a sovereign wealth fund, she said “to have so much money and not repeat some of the one-off measures seems obtuse. I would not advocate for the dumpster fire that is Sinn Féin’s mortgage relief, for example, but we could double welfare payments again coming to the next term and it would ease the burden on a lot of people.”
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Fianna Fáil TD Cathal Crowe said that struggling families needed financial assistance.
“There needs to be a balanced approach, in that this is not a regular surplus that we will see year after year. I do think there should be a package that targets individuals and struggling families. There also needs to be more of a focus on infrastructure; for example, the Limerick-to-Cork motorway has been kicked up and down for years but such an investment would actually stimulate the economy.”
At a press conference on Wednesday, Mr McGrath said there will still be room from recurring tax receipts for a “significant budget package” and there will be tax and welfare measures in this autumn’s budget as well as improvements in public services and an increase in the public capital programme.
