Ireland budget announcement 2025: CIOB responds

[edit] Budget and income In brief

The Chartered Institute of Building has reacted to the Irish budget announcement; 1 October 2024. There was a €10.5 million total budget package announced for Budget 2025, made up of €6.9 billion in spending, €1.4 billion in taxation measures, and a €2.2 billion cost of living package. Other sources of public income in play for the year include more than €14.1 billion from the Apple tax judgement; €3.1 billion from the sale of AIB shares; and €1.5 billion of surpluses from the National Training Fund.

[edit] Infrastructure

From a construction sector perspective, the CIOB welcomes the significant sums Minister for Finance, Jack Chambers TD, has earmarked for the built environment.

As a small island nation with a growing population, a housing affordability and supply crisis, and a prosperous economy characterised by a booming urban jobs market, Ireland’s spatial development should be based on compact growth and regional connectivity, all of which should benefit from the infrastructure funding announced yesterday.

In this context, CIOB welcomes the announcement of a framework for the investment of €14 billion of the Apple money, prioritising housing, energy and water.

However, CIOB urge the government to accompany this spending on infrastructure with a resourcing plan for local authorities and public bodies that play a role in delivering infrastructure. Local planning authorities, utility providers such as Irish Water, and procurement bodies each require a significant uplift in resourcing to allow this €3 billion in funding to be operationalised into demonstrable infrastructural improvements.

[edit] Housing

CIOB commend Budget 2025’s provision of €7.8 billion to the Department of Housing – including €2 billion for the construction of 10,000 social homes. However, in policy terms, it does not support the extension of the Help to Buy scheme to 2029.

Demand-side measures of this sort, particularly in the context of constrained supply, have an inflationary impact on house prices. The CIOB has repeatedly made the case to government that policy intervention should focus on the early stages of the development process, specifically land acquisition and preparation.

Help to Buy does nothing to address a dysfunctional land market in which developers are forced to bid inflated prices for land, and make up for this inflated outlay by driving down costs – typically on quality, design, and tenure - later in the building process. They urge the Government to focus policy intervention on the land market, rather than downstream demand-side measures like Help to Buy.

[edit] Sustainability

While CIOB recognises Budget 2025’s focus on sustainability and commend the Government on its €3 billion package to be set aside for climate transition between 2026 and 2030, it is disappointed at the level of funding made available for retrofit. The Climate Action Plan envisages this scaling up to over 50,000 annually from 2024, to achieve a target of retrofitting 500,000 buildings to a B rating or above by 2030. This is triple the amount of B2 retrofits achieved in 2023. While half of the €951 million raised by the carbon tax is a welcome boost, it is simply not sufficient to deliver the scale of retrofit required.

The reduction of VAT on heat pump installation to 9 per cent is sensible. However there is concern another opportunity to bring the tax system into line with Ireland’s climate targets as outlined in the Climate Act has been missed. Rather than incentivising sustainable construction practices, Ireland’s VAT structure places demolition and rebuild on parity with renovation and retrofit by charging both at the reduced rate of VAT – 13.5 per cent.

This VAT structure is facilitating a culture of demolish and rebuild, rather than add, transform, and reuse in the construction sector; and this is reflected in the increasing rates of embodied carbon emitted by the construction sector. The CIOB is calling for a reform of VAT, such that the carbon-hungry activity of demolition is disincentivised, and the sustainable option of reuse and retrofit is incentivised.

[edit] Education/Skills

The construction sector faces a shrinking pool of labour, so the deployment of a €1.5 billion surplus from the National Training Fund over six years is good news. CIOB also welcomes the government’s intention to bridge the core funding gap in universities, facilitate a €600 million capital investment programme for the third level, and continue funding upskilling programmes for workers. Higher and further education plays a central role in ensuring Ireland has the people and skills to deliver on its significant housing and infrastructure ambitions, and funding arrangements should continue to reflect that.

Perpetual volatility in demand for construction has led firms, particularly SMEs, to curb capital investment; spending on research and development (R&D) brings high fixed costs that are difficult to cut in an economic downturn. The lack of available finance is a major stumbling block for SMEs investing in tools that could improve productivity. The announcement of a review of the research and development tax credit, the interim increase of the R&D tax credit threshold from €50,000 to €75,000 is a step in the right direction on this front.

[edit] Comment

Joseph Kilroy, CIOB’s Policy and Public Affairs Manager Ireland, Scotland and Wales, said: “We welcome the government’s ongoing financial commitment to the construction sector and the wider built environment. We urge the Government to ensure arrangements and resourcing plans are in place at local authority and agency level so funding can be efficiently converted into improvements in Ireland’s infrastructure and housing.

“We also commend Budget 2025’s commitment to climate and sustainability. However, in our view, the budget does not do enough to address the scale of the retrofit challenge facing Ireland, or the growing embodied carbon footprint of the construction sector.

“Ireland needs to triple the amount of annual retrofits to meet its targets, and the funding announced, while welcome, does not reflect the gravity of the situation.”

We welcome the government’s ongoing financial commitment to the construction sector and the wider built environment.

Joseph Kilroy, Policy and Public Affairs Manager Ireland, Scotland and Wales.

This article appears on the CIOB news and blogsite as 'CIOB responds to Ireland’s 2025 budget announcement' dated 2 October, 2024.

--CIOB

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