David Quinn: As ministers spend billions to mollify lobby groups, who is making the case for the taxpayer?
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Irish Times
an hour ago
- Irish Times
Ireland economically closer to ‘Boston than Berlin', driven by its young population, notes Ifac report
Ireland is a relatively low-tax, low-spend country compared to its European peers, making it economically closer to Boston than Berlin , but this is driven not by ideology, but by demographics. That's according to a new report by the Irish Fiscal Advisory Council (Ifac). It showed that general Government spending as a share of national income was about 40 per cent in the Republic compared to a European average of 49 per cent and a US average of just 38 per cent. However, Ifac noted that 'if Ireland had similar demographics to other high-income European countries, spending on health and old-age social protection would be higher'. READ MORE Ireland has a relatively young population, with fewer people aged 65 and over, which means the Government here spends less on pensions and healthcare than it otherwise would. 'As Ireland's population ages, spending in these areas is expected to rise. This demographic shift will gradually bring Ireland's Government spending more in line with levels seen in other European countries,' it said. The State was also found to have one of the lowest levels of Government tax revenue as a percentage of national income in Europe. The Government here, on average, collects €2,600 less in tax per person than the European average, it said. When excess corporation tax is excluded, this gap increases to €4,700 per person. Did the EU have its hands tied before striking a trade deal with the US? Listen | 23:32 This again aligns the State with other low-tax jurisdictions while making it something of an outlier in Europe. 'At first glance, Ireland appears to be a low-tax, low-spend country relative to other high-income European countries,' Ifac's report said. 'However, this is largely driven by Ireland's relatively young population and strong economic growth. One area where Ireland is already a relatively high spender is healthcare. 'As the population ages, this is likely to rise further, making Ireland even more of an outlier compared to other countries. Education is another area of interest. Ireland spends less than the European average but delivers above-average results. This suggests strong efficiency in education spending,' it said. Ifac noted that the recently introduced savings funds – the Future Ireland Fund and Infrastructure, Climate and Nature Fund – were a step in the right direction and could help 'offset some of these future costs'. 'However, these funds alone will not be able to cover all future spending pressure,' it warned. Central Bank of Ireland governor Gabriel Makhlouf recently warned that Government spending would need to increase by about €265 billion over the next 25 years to pay for an ageing population, more housing and cutting emissions. Separately, the Organisation for Economic Co-operation and Development (OECD) has warned that weaker levels of business investment in advanced countries is now a big threat to global growth. OECD statistics showed that Ireland was one of a host of countries where investment is still, as of 2024, below the trend seen in the pre-financial crisis and pre-pandemic periods. The figures showed the State recorded the steepest drop-off in investment following the pandemic of any OECD country. If corporate spending on new projects and facilities does not pick up, countries will 'not be able to sustain growth', Álvaro Pereira, outgoing chief economist at the Paris-based organisation, told the Financial Times.
Irish Times
7 hours ago
- Irish Times
Donohoe delayed approving sale of State's final shares in AIB
Minister for Finance Minister Paschal Donohoe asked for a three-week postponement on the final sale of the State's stake in AIB so he could consult government about the bank's exit from 'crisis relationships'. Senior officials had sought permission to carry out a 'clean-up share disposal' on May 23rd to finally end state ownership in the bank after the financial crash. However, the Minister looked for extra time as officials said the sale would 'inevitably refocus the discussion around the topic of remuneration' and the salary cap for bankers. In a note on the submission, Mr Donohoe wrote: 'I am absolutely committed to the return of AIB to private ownership. However, I want to exit from crisis relationships with [the] bank at same time. READ MORE 'I will need to engage with government on this and will not have this complete by end of this week. Ask department to consider execution of same plan but in second half of June.' [ How AIB went from boom to bust and back again Opens in new window ] In mid-June, officials submitted a second submission on the sale saying it would 'trigger an opportunity re: salary cap.' It said the State was looking to offload nearly 44 million shares and hoped to bring in around €310 million through the sale. The submission said: 'The implication of this trade is that it will trigger an expectation to begin unwinding the crisis-era remuneration restrictions that remain in place (in particular the removal of the salary cap).' Officials wrote that AIB was one of the best performing banks in Europe and that strong momentum had continued since the last time the State sold some of its shareholding. It said the final sale would represent a 'natural point' to normalise the relationship between AIB and the State. The submission also cautioned that if pay restrictions from AIB were removed, it should also apply to PTSB . 'Absent of that happening, it would put PTSB at a severe disadvantage,' said the document. 'Such a scenario is not in taxpayers' interests.' In a note, Mr Donohoe wrote: 'I agreed to this process via phone yesterday. This is to indicate that approval was given and to conclude official documentation.' A separate presentation on the State's post-crash investment in banks said the taxpayer had invested €29.4 billion in AIB, Bank of Ireland, and PTSB. From that, around €28.7 billion had been recovered although this was over an extended period of a decade and a half. The presentation said as well as implications for the salary cap, other restrictions on how AIB operates would change. One slide said: 'These restrictions include monthly meetings with senior management, access to board papers, [and] various reporting/consent/consultation requirements. 'Since the State's exit from BOI ( Bank of Ireland ), that bank is no longer subject to these conditions. We recommend putting AIB on an equal footing with BOI in this context.' On pay caps, another slide said all restrictions were eliminated for Bank of Ireland apart from bonus payments exceeding €20,000 per year. 'While restrictions around variable pay up to €20,000 and fringe benefits were also removed for AIB and PTSB, both banks continue to abide by the total compensation cap of €500,000 per annum that is currently in place,' it said. This additional restriction relative to Bank of Ireland was 'anti-competitive and unsustainable'.
Irish Examiner
11 hours ago
- Irish Examiner
Government's own housing development finance company grows approvals to €3bn
Home Building Finance Ireland (HBFI), the Government vehicle set up to provide loans for housing developments, has seen its loan approvals grow by €336m during the first six months of the year. The company's total loan approvals stands at just over €3bn since it commenced operations at the start of 2019. Of that total, €2.25bn has been drawn down for 135 developments, supporting 12,251 homes where construction is in progress or has completed. HBFI typically expects a time lag of between three and six months between a loan being approved and its first drawdown. As of the end of June, HBFI had approved funding for a total of 15,186 new homes in 206 developments, across 25 counties. A total of 5,514 HBFI-funded units have already been sold, with a further 3,338 contracted for sale or sale-agreed as at the end of June 2025. The size of the average development approved is 74 units The value of individual loans range from €1m to €113m, with an average size of €14.6m. HBFI chief executive Dara Deering said the steady growth in loan approvals reflects the 'ongoing appetite among small, medium and large housebuilding companies for finance to help meet the demand for new homes'. Of the total number of homes funded by the HBFI, 48% are for owner-occupiers, 39% are social/affordable housing, while 8% are for renters. The remaining 5% are set aside for local authorities to acquire. The HBFI said the results showed a strong demand from small- and medium-sized housebuilders, with 83% of the loan amounts approved to date valued at €20m or less. Additionally, 88% of loans approved to date by HBFI provide more than 65% of the project costs, showing 'this demand for funding reflects the continued equity constraints facing many housebuilders', the company said. HBFI is a private company with its own board operating on a commercial basis, but wholly owned by the minister for finance. Finance minister Paschal Donohoe said he remained 'satisfied that HBFI continues to fulfil its functions and remains a necessary part of the debt-funding market'.
