Ticking clock Ireland's €31bn welfare bill, including €13bn for pensions, with low unemployment
By Google News Personal Finance ·
IT HARDLY NEEDS restating that the economy is going gangbusters. We might be hitting a ceiling of what the multinational sector can do for Irish jobs, but the headline figures are almost preposterously good: never in the history of the State have so many people been at work.
Nor has the unemployment rate been so persistently low: not since December 2021, in the days of the omicron wave of Covid-19, has it been above 5.0%.
Opinions differ as to what exactly amounts to ‘zero unemployment’. There will always be adults who are incapable of participating in the labour force, and the official figures do not discern between those who could work and those who cannot. Helpfully, however, the CSO does publish a version of the rate that excludes those aged 15 to 24.
With those excluded, the rate has been below 4% for four-and-a-half unbroken years. Long may it last.
But in this Dáil recess week it may be worth reflecting on how, at a time of unprecedented bounty, we’ve still never spent more on Social Protection.
The department now run by Dara Calleary has traditionally been the biggest spender in the country, irrespective of how the economy is doing and how many people might be out of work. This year its budget runs to just under €31 billion, its highest ever. Of every seven euro put into everyday spending in 2027, Social Protection takes two.
We don’t have a line-by-line breakdown of how the Department intends to spend every single bit of its 2027 Budget – that doesn’t come until the ‘revised estimates’ are published, usually in the days before Christmas – but the allocations for 2026 are a good indicator. The combined spend on Jobseekers’ Allowance and Benefit, the two main categories of payment to those without work, comes to about €2 billion.
That in itself should be a reminder of how a Department we sometimes innately label as being ‘the one that pays the Dole’ is much more than that. In fact, the biggest single cost for the Department is for those whose working days are behind them: the cost of the State Pension next year is a mammoth €13 billion.
There are three reasons why any careful analysis of Ireland’s spending should pause on this figure for a moment. Firstly, spending on the state pension is one-eighth of the entire current budget, and over one-tenth of the entire public spend for next year including infrastructure. Secondly, it highlights the fiscal cost of the political urge to chase the grey vote.
As every politician knows, older citizens are the most persistent voters – but keeping them sweet means far less cash for other measures.
And thirdly, the fact that this bill is unlikely ever to get any smaller. People are living longer, and Ireland’s growing population is getting proportionately older. Many European countries are further along this curve already, with declining birth rates meaning a higher proportion of pensioners to workers.
Ireland will face the same demographic shift in future years, which is precisely why the government’s building up a giant savings pot to address it – even if it’s now borrowing for the purpose.
On the flip side, there might be a small trimming of another major payment. Child Benefit will cost a touch over €3 billion next year, but declining birth rates – and the fact that rates have been unchanged for over a decade – means we can expect the cost of those fixed payments to start declining. But factor in plans for a second means-tested tier of child benefit, as a direct response to…
Originally published by Google News Personal Finance
