CIOB Ireland responds to Budget 2023

The CIOB has responded to Ireland’s Budget 2023 package announced yesterday, Tuesday 27 September 2022. The package includes €85.9 billion for core expenditure and €4.5 billion in non-core expenditure to address externally driven temporary challenges.

Last updated: 28th September 2022

The elevated inflationary environment and the ongoing cost of living crisis is the overarching fiscal context for this budget. Nevertheless, as a result of the strong growth and resilience of the multinational sector Ireland’s economy is expected to grow by 10% this year. Growth is expected to continue in 2023, with the economy expected to expand by 4.7%. This year it is projected that there will be a general government surplus of €0.97 billion in 2022 and a surplus of €6.17 billion in 2023.

The built environment sector accounts for 37% of Ireland’s carbon emissions, so the CIOB welcomes the announcement of €337 million to fund over 37,000 home energy upgrades. Given the discrepancy between the Climate Action Plan's targets and uptake of residential retrofit, the CIOB has called for the Government to fund more measures to incentivise effective consumer demand. We are therefore encouraged to see the introduction of a new low-cost loan scheme for residential retrofit, although the scale of the challenge suggests that additional measures are required. In this context we encourage the Government to consider the tax treatment of retrofit activities in the construction sector.

The CIOB has been closely monitoring and reviewing the issue of building materials and building safety, as a matter of public interest and one that is clearly relevant across the construction industry. Thousands of people all over Ireland are living in accommodation that is potentially unsafe and, in many instances, faced with the prospect of a financial commitment to rectify something over which they had no influence or control.  Earlier this year the government agreed a redress scheme for those homeowners who have been affected by the issue of defective products used in the building of their homes. The budget has introduced a levy on concrete blocks, pouring concrete and certain other concrete products. The levy is expected to raise €80 million annually and will be applied from the 3rd of April 2023 at a rate of 10 per cent.

While we are encouraged that measures are being put in place to remedy building defects, we urge the Government to be mindful of the impact that this will have on the construction sector, particularly SMEs, as the price of materials continues to rise. In addition to paying for the redress scheme, this levy could encourage firms to begin using less carbon intensive materials. However, appropriate funding for businesses will be required to facilitate this transition, and a sector already struggling with spiralling costs cannot simply be left to bear an additional financial burden. We are encouraged by Minister for Public Expenditure and Reform Michael McGrath’s comments that his department will continue to engage with the construction sector to increase digital adoption and establish cleaner, greener, and more modern methods of construction.

We welcome the additional funding for housing, which will increase to €6.2bn in 2023, but we are concerned that a lot of the spending will continue to be channelled to demand side measures such as Help to Buy. As the construction sector’s biggest client, the Government can play a direct role in arresting the cyclicality that has plagued construction in Ireland by smoothing out spending on publicly delivered housing projects. Investing in a clear, long-term pipeline of construction projects in the local authority delivered housing sector will create this pipeline. We urge the Government to ensure that the significant financial outlay delivers a counter cyclical pipeline of housing projects that will give the sector the certainty on which it thrives.

Joseph Kilroy, Policy and Public Affairs Manager for Ireland, Scotland & Wales said

'The CIOB frequently emphasises the importance of a clear pipeline of projects to encourage the growth of the construction sector, to attract new entrants, and to mitigate the sector's economic cyclicality. Government, as a client, can subdue volatility in the construction sector by smoothing out public spending on construction projects. We are therefore encouraged to see continued funding for the National Development Plan, with big ticket transport infrastructure projects such as Metrolink, BusConnects, and Dart+ receiving continued spending commitments. We urge the Government to extend this ambitious public delivery mechanism into housing, which would greatly benefit from additional supply side measures to complement budget 2023’s measures to incentivise demand’.

We also encourage the Government to continue to engage with the construction sector as it transitions to more sustainable work practices. We are heartened by the continued emphasis on residential retrofit but would like to see additional supports for firms to transition to more sustainable building materials, particularly in light of today’s levy on concrete.’