Saturday, 10 October 2015

Ireland's economic recovery - are we not missing something here ?

Recovery is underway in earnest, of that there is no doubt. Many more people are at work than when the crisis was at its worst. But it is as well to recognise that the public finances remain constrained. Huge debts assumed to fund large budget deficits and rescue the banks must be repaid. This is the backdrop against which all fiscal promises must be assessed during the election - Irish Times, 8th October 2015.

But, apart from the obvious large debt, isn't there another more pressing problem facing Ireland in the coming years. Minister for Jobs and Enterprise, Richard Bruton, spelled it out back in February, but nobody in the media seemed to pick up on it :

“Unfortunately, due to a cost base which is significantly out of line with competitor countries, it appears likely that the company will proceed [with re-locating to Poland],” he said in a statement today.

Costs for business are far too high in Ireland, and energy costs are contributing to this. As ESB and economist Colm McCarthy have pointed out, the Irish government are locking the country into high energy costs for decades. We have a situation where the design of the electricity grid has to be completely overhauled to facilitate large amounts of intermittent wind (with the cost picked up by the consumer not the wind industry) and where low gas prices cannot be passed on to the consumer. 

Moreover, the Exchequer is more heavily reliant these days on income tax receipts than previously. This imposes its own limitations, although universal social charge cuts will be centrepiece of the budget next Tuesday and further cuts to come will be signalled. Take note, however, that fiscal projections underpinning the 2016 plan assume another 47,000 jobs will be created on top of some 53,000 new jobs this year.

Low costs for business are essential for job creation and indeed preventing job losses. If the jobs cant be created or even worse, if more industry moves out, then the fiscal projections underpinning economic recovery fall asunder. Income tax receipts fall, welfare costs go up - add in the debt and we will be in dire straits.

Don't be surprised if in the coming months you see shocked politicians expressing their sympathy to those made redundant and shocked media reports examining how and why such a large company could leave Ireland during its "recovery".

1 comment:

  1. If this link does not work, Google Lord Nigel Lawson, trouble with climate change, you tube.,d.bGQ