THE GOVERNMENT HAS said it has the “firepower” to support the economy throughout 2021 despite the Department of Finance reporting an overall deficit of €19 billion for 2020.
The deficit is compared to a pre-pandemic predicted surplus for the year of €2.5 billion and is largely due to the government’s spending on Covid-19 supports.
Overall government spending last year increased by €13.7 billion, or 25%, with health and social protection the biggest areas of expenditure.
Tax revenues overall were down by €2.1 billion, or 3.6%, on 2019.
VAT receipts were down by 18% on 2019 as public health restrictions impacted consumer spending with corporation tax the only major tax to record an increase.
Finance Minister Paschal Donohoe said however that the rate of increase in corporate taxes would “begin to decline” throughout this year.
The government had previously outlined that its budgetary plans would be based on the assumption of no deal Brexit and Donohoe said today that the Brexit deal would help with financial planning.
“If you look at where we are overall, we have avoided the worst challenges in relation to Brexit, so that is a very important improvement on the outlook for the year,” he said.
It’s clear of course that we continue to have really great challenges in dealing with the disease but if you look at the two funds in their entirety, and if you look at how we’ve been able to support the economy in 2020, I do believe that initiatives that we announced on budget day will be sufficient to support the economy through to recovery in 2021.
Minister for Public Expenditure and Reform Michael McGrath said there are sufficient financial resources available for this year.
“If you look at the amount of we have actually allocated to departments, through the votes in terms of Covid, it’s of the order of €6.5 billion and then when you add the contingency fund of €2 billion and recovery fund of €3.4 billion there is provision there as such for exceptional type spending of the order of €12 billion.”
“I would agree with Minister Donohoe that we believe at this point that the envelope we have provided gives us the firepower to support the economy over the course of 2021.”
Speaking to reporters, the ministers also said the current PUP rates and the wage subsidy scheme won’t change in the near term and that a review would not take place until the current Level 5 restrictions are eased.
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