Ireland’s water infrastructure is now one of the main constraints on the economy, limiting the supply of housing and other infrastructure, the Oireachtas Committee on Budgetary Oversight was told on Tuesday.
“Ireland is a very heavy user of water and that’s why we’re struggling to keep up,” Irish Fiscal Advisory Council’s (Ifac) chief economist Niall Conroy told the committee.
Members of Ifac appeared before the committee on Tuesday to discuss the economy and other issues.
“When we looked at how Ireland’s infrastructure compares to other countries in Europe, we actually found that Ireland, for water, was about average, which we were surprised at,” he said.
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The problem lies more with demand, he said, noting the State’s pharma, data centre and tech industries were big users of water.
Uisce Éireann, formerly Irish Water, has already stated that it will not be able to support much more than 35,000 new house completions a year “in terms of connecting them up” without additional funding, he said.
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Ifac chairman Seamus Coffey said there was capacity within the economy to ramp up the production of the water infrastructure “but it is certainly a bottleneck that is slowing down the economy”.
In his opening address to the committee, Mr Coffey said Ireland’s infrastructure was about 25 per cent behind its peers.
“Regardless of what happens to the international environment, these infrastructure deficits need to be addressed,” he said.
“If the economy weathers the changing environment, it will have high levels of employment and high demand for infrastructure,” Mr Coffey said.
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“If there is some form of downturn, then having adequate infrastructure would be key to restoring low unemployment and a prosperous society,” he said.
Mr Coffey said the Government needed to ensure budgetary policy reduces the ups and downs of the economic cycle.
“This means showing restraint when the economy is strong and being more generous when the economy is struggling,” he said.
Mr Coffey warned that overruns in day-to-day public spending are likely to top €2 billion this year.
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“The Government needs to improve how it forecasts spending. When formulating Budget 2025, the department didn’t account for the money they were going to overspend in 2024 when planning for 2025,” he said.
“This created unrealistic budget figures from the beginning – a problem that keeps recurring. To avoid repeating this mistake, Budget 2026 and future medium-term plans must start with accurate baseline figures that includes all likely overspends in 2025,” he said.
“Otherwise, spending projections will be wrong from the outset,” he said.
Ifac has previously criticised the Government for pursuing what it describes as an “everything now” approach to spending by simultaneously presiding over tax cuts, higher day-to-day spending, a continued ramp-up in capital investment and for fuelling domestic price pressures by providing across-the-board cost-of-living supports.
Mr Coffey also said Ireland currently had no effective framework for fiscal policy.
“The European fiscal rules don’t work well for Ireland. They rely on GDP [gross domestic product] and ignore the risks linked to corporation tax,” he said.
“As a result, Ireland is unlikely to face external scrutiny at an EU level,” he said.
