A ‘painful’ Autumn statement and a ‘bright’ Irish budget

The Irish Fiscal Advisory Council, an independent budget watchdog, said that while large headline surpluses are forecast for the coming years, these are “driven entirely by extraordinary corporation tax receipts”.

It has used Department of Finance estimates of how much of this tax is a “windfall” to calculate that underlying budget deficits over the period 2024-2030 will add up to €50bn.

The government has acknowledged that this tax bonanza could one day end and has begun setting up a sovereign wealth fund which will invest some of the windfall corporation tax proceeds.

The consultation document for that wealth fund involved a glance across the Irish Sea.

It noted that when the UK struck oil in the North Sea no long-term savings vehicle was established, instead income tax and corporation tax rates were lowered over successive years during the 1980s.

“In effect, therefore, at least part the windfall receipts were used to fund reductions in direct taxation.”

It also looked at Norway, which used its oil money to establish one of the world’s largest wealth funds, and concluded that “the contrasting approaches of two mature, advanced economies that recorded major windfall gains offers important lessons.”