The September budget is fast approaching and the Government is facing difficult choices as the Irish Fiscal Advisory Council warns everyone ‘cannot be fully compensated.’
The Watchdog published its pre-budget assessment and said Ireland can expect to see a continuous upward trend with the cost of living as pressure continues to mount on Irish households.
Energy and food prices are likely to exceed what was initially forecast at the beginning of this year and the government simply cannot help everyone with the available funds.
The Irish Fiscal Advisory Council’s chairman Sebastian Barnes said: “Between May and August, there was a massive increase in the price of gas as concerns about Russian supply increased.
“This implies that gas prices will remain at a very high level this winter, but also in the years to come, and will eventually fall. But that’s a long way down the line.”
The council said: “The Government cannot fully compensate everyone for the impact of higher energy prices.”
Another area of focus is coping with “the aging costs, over-reliance on corporation tax, the costs of reducing emissions to reduce climate change, and Slaintecare healthcare,” Mr. Barnes said.
The council suggests that young workers - in their 20s, 30s, and 40s - will potentially be faced with much higher tax costs in order to cover the bill for Ireland’s rise in retirees.
Should it increase by the estimated 50 percent by 2040, people earning an annual salary of €35,000 will pay an extra €2,000 a year in PRSI payments to fund the appropriate pension scheme for this increase.
The mounting pensions bill is “by far the largest challenge to the public finances in the coming years and decades”, the IFAC warns.
Can the pensions add up?
Mr. Barnes explained to Newstalk Breakfast, "People are living longer, but also we have this big baby boom retiring. And that means a lot more people are going to be reaching retirement age. You take those two things together, and there's a massive cost to pay.
"If you look between now and 2030, the cost of providing pensions will probably go up by 4 to 5 billion over that whole period. It's a lot of extra money we have to find, next year it's about 500 million.
"So we really need to be thinking about these choices. Otherwise younger people - and it's not just the really young, it's people in their 40s, maybe even into their 50s - are going to be facing much higher taxes.
"That might be a choice people want to make, but they need to understand what the consequences are".
Budget 2023 is to be announced on September 27 as the Government finalised all measures to tackle this cost of living crisis.