SUCCESSIVE governments in recent years have not always – from a political viewpoint – liked the regular doses of reality that the Irish Fiscal Advisory Council (IFAC) has prescribed and its latest commentary won’t best please them either. IFAC points out that, unless the qualifying age for the State old age pension continues to be increased, the economy will not be able to afford to pay out the pensions due as, under current policies, government spending would outstrip revenues from 2025 as pensions and health costs increase.
Promises were made by various political parties during the general election campaign at the start of this year to stop the pension qualifying age from increasing from 66 to 67 on January 1st, 2021 and, under the current programme for government, a review has been commissioned. However, as things stand in law, the increase of the qualifying age to 67 is going ahead at the start of next year unless it is otherwise legislated in the meantime.
Of course, these political promises were made prior to the current economic difficulties caused by the Covid-19 pandemic, making it more difficult for them to be delivered on. Although political promises being broken is not uncommon, there is always a fear of payback by voters come the next election, so it will be interesting to see what the government does in this regard.
The pensions issue was prominent in the Fiscal Council’s first ever ‘Long-Term Sustainability Report,’ which assesses the long-term sustainability of the public finances in Ireland to 2050, reflecting population ageing and future economic growth. The outlook is not great and the fiscal watchdog recommends strengthening the public finances earlier or making reforms sooner to reduce the scale of adjustment needed.
It is clear that a credible plan to address long-term pressures needs to be developed and implemented as soon as possible.
