Is Ireland underspending on education, R&D and infrastructure?

27 Jun 2017

Image: Mathias Richter/Shutterstock

As Brexit storm clouds gather, NERI warns that Ireland could be doing more to prepare the nation.

Ireland is underspending in critical areas such as education, infrastructure and R&D, by between €2.5bn and €3bn per annum, according to the latest quarterly report from the Nevin Economic Research Institute (NERI).

NERI reported that real GDP will grow by 4.4pc in 2017 on the back of strong employment growth. The organisation is also predicting, however, that growth will slow to 3.3pc in 2018 and 3.2pc in 2019, respectively.

Significantly, it forecasts that the unemployment rate will fall below 6pc at some point in early 2018.

However, the fog of war is descending and the institute said that it is difficult to predict the scale of the potential damage that Brexit will cause post-2018.

Preparing for a post-Brexit world

For these reasons, it is critical that Ireland is prepared to weather any storm. However, when it comes to investing in critical game-changers such as education, R&D and infrastructure, Ireland has been found wanting in comparison to international peers.

If policy doesn’t change, Ireland will have the lowest public spending-to-GDP ratio in the EU by 2021.

The nation was compared to similarly high-income EU countries across a number of critical areas.

Is Ireland underspending on education, R&D and infrastructure?

Infographic: NERI

“We estimate that the Irish State underspends on a per capita basis compared to these countries, in a number of areas fundamental to long-run economic growth.

“The cumulative underspend on education per pupil, infrastructure and R&D, when scaled up to the population, is in the order of €2.5bn to €3bn.

“In this context, we argue that long-run economic growth, employment and equity goals can best be achieved by prioritising use of the available fiscal space to increase public capital investment levels, increase spending on education, and increase direct spending and subsidies for R&D.”

NERI said fiscal space in Ireland in 2018 would be just €350m.

“This has implications for the needed direction for tax reforms,” it warned.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years