Health and pension spend will push up debt: OECD

Spending on health and continuing to fund the State pension age at 65 will inevitably add a significant amount to Ireland’s debt, the Organisation for Economic Co-operation and Development (OECD) has said.

In a major report on the Irish economy, the Paris-based organisation effectively laid down challenges to any potential new left-leaning Sinn Féin government by saying it wants regular assessments of the local property tax to take account of changes in house prices and by urging further carbon tax hikes for the country to hit its climate obligations.

The recommendations of the OECD come after an election campaign marked by pledges by most political parties to keep the State retirement age at 65 and to invest significant amounts in healthcare.

The report also urges careful monitoring of the rising inequality caused by the disparity in economic clout between Dublin and other regions.

Launching the report, OECD chief economist Laurence Boone said if there were no changes to current policies on healthcare and the retirement age that the government’s debt level would rise significantly in the coming decades.

She said that Ireland is spending significant amounts compared with other OECD countries in funding healthcare and its hospitals, but is getting poor outcomes in terms of better health provision in return.

Ireland is the only western European country without universal healthcare and the health of its people is suffering as a result, said the report.

On ways to boost the building of new homes, Ms Boone said the OECD favours incentives such as rezoning publicly owned land for residential homes and providing public transport for residential sites but not other measures that would only increase demand.

Asked about the political uncertainty and the OECD’s views on the potential of a high-spending, left-leaning government coming to power, Ms Boone said the report was about addressing structural issues in Ireland and ways in which the country can continue to thrive by broadening its reliance on tax revenues beyond the multinational companies.

The chief economist reiterated that successive Irish budgets had benefitted from windfall corporate tax receipts, of which the bulk is collected from multinationals.

This matters as any setback to world trade that affects foreign-owned firms could harm Irish government revenues, said Ms Boone.

The OECD Economic Survey of Ireland runs to 118 pages and details scores of recommendations for an incoming government.