Now we’re going to have to work until we reach 70
Budget tax cuts risk overheating economy, government warned
THE pension age should be raised to 70 and Budget Day tax cuts postponed, a State-supported think tank says in a stark warning on an overheating economy.
The Economic and Social Research Institute (ESRI) says any moves to further stimulate economic activity could lead to “the same overheating experienced prior to the 2007/08 financial crash”.
It will today warn Finance Minister Paschal Donohoe that a “neutral Budget” is needed to maintain the progress of recent years.
It advises the Government to considering raising the pension age from 66 to 70, plan for a very sudden impact from Brexit, invest in social housing, and introduce a vacant site tax. In a presentation seen by the Irish Independent, the ESRI warns that planning needs to get under way for dealing with an older population.
The ESRI believes “the costs of population ageing could be offset fully by extending the pension age to 70”.
THE pension age should be raised to 70 and Budget Day tax cuts postponed, a think tank will say today.
In a warning to Finance Minister Paschal Donohoe, the Economic and Social Research Institute (ESRI) says moves to further stimulate economic activity could lead to “the same overheating difficulty experienced prior to the 2007/08 financial crash”.
The body will tell a Dáil committee that a “neutral budget” is needed to maintain the progress of recent years. It advises the Government to: Consider raising the pension age from 66 to 70;
Plan for a very sudden impact from Brexit;
Invest considerable resources in social housing; Introduce a vacant site tax. In a presentation seen by the
Irish Independent, the ESRI warns that planning needs to get under way for dealing with an older population.
“While this is to be celebrated, there will be costs associated,” the Oireachtas Budgetary Committee will be told.
The ESRI believes “the costs of population ageing could be offset fully by extending the pension age to 70”.
The qualifying age is already set to rise to 67 in 2021 and then to 68 in 2028.
Acknowledging a further rise might not be popular, but the body suggests the Government should at least consider “a mix of increased contributions, delayed payments and extended working lives”.
In relation to next month’s Budget, the ESRI says it does not believe the economy is overheating, but adds: “We believe budgetary policy should be neutral, in that it should not seek to actively stimulate or contract the economy.” Mr Donohoe has indicated he intends to introduce some tax cuts which would be seen as an economic stimulant. Speaking yesterday he said workers deserved some payback after “a period of shock and awe in relation to personal taxation”. He has committed to bring forward a “broadly balanced budget” which will prioritise the self-employed. “And in relation to personal taxation I believe the issues relating to the standard rate cut off point and levels of USC for people on low and middle income are areas where we have to make steady progress,” he said. The minister is expected to begin the process of merging the USC with PRSI, something the ESRI says “might present an opportunity for an innovative approach” to tackling the potential pension crisis.
The ESRI will also warn the impact of Brexit could be felt “very suddenly in a short space of time” if the UK and EU cannot agree a transition period.
“On the other hand, any potential benefits such as an increase in FDI are likely to take much longer to become apparent.”
The Irish Fiscal Advisory Council (IFAC) will also appear before the cross-party committee chaired by Fine Gael’s Josepha Madigan today.
In his opening statement, IFAC chairman Seamus Coffey (inset) will state the housing crisis needs to be carefully managed because “were a sharper-than-expected recovery in housing construction to take hold and overshoot regular annual requirements for housing completions … overhearing could materialise in future years”.
The council also sees risks from a harder-than-expected Brexit and potential changes to US tax policy.