Spending pressures related to demographics set to balloon in the coming decades, Department of Finance’s chief economist warns via IrishTimesBiz
Minister for Finance Michael McGrath faces a challenge in managing expectations and windfall tax revenues without building up trouble in the economy. Photograph: Sasko Lazarov/RollingNews.ieThe State’s rapidly ageing population will cost the exchequer an additional €17 billion a year in “standstill costs” by 2050, the Department of Finance’s chief economist has warned.
Speaking at the department’s annual policy conference under the theme “Future-Proofing the Public Finances”, John McCarthy said spending pressures related to demographics such as increased pension costs were set to balloon in the coming decades. When combined with the cost of the so-called green and digital transitions, this would add approximately €17 billion a year in costs to the exchequer.
The window for dealing with these issues was “closing rapidly”, Mr McCarthy said. It was also the primary reason why budgetary policy now “must be calibrated to permanent rather than transitory” sources of revenue. The Government has been repeatedly warned that using potentially temporary receipts from corporate tax could backfire up the line and risked repeating the mistakes of the 2000s when a cyclical upturn in property-related tax revenue was used to fund upticks in current spending.
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