Budget 2021 will support public services while coping with fallout from Covid-19

Maintaining existing services will be a priority, as will health, housing and climate change. Picture: Brian Lawless/PA Wire

Budget 2021 will focus on supporting the economy while prioritising crisis management as the fallout of the Covid-19 pandemic continues.

Yesterday, the Government met to confirm its strategy. They worked on the assumption that Ireland will be living with Covid-19 into next year and the bilateral trade between the UK and the EU will be on the World Trade Organization terms. 

Owing to the uncertainty of the pandemic 'normal' budgetary adjustments will be not prioritised and budgetary projections will be short-term. Instead, medium-term projections will be addressed in the Stability Programme Update which will be published in spring of next year. 

Maintaining existing services will be a priority, as will health, housing and climate change, in accordance with the programme for government. 

The Budget will provide further clarity on the recovery fund that was also set out in the programme and no change will be made to income tax credits or bands.

The objective is to ensure that Ireland’s deficit position remains within average euro area levels, in other words, that Ireland is not an outlier in terms of borrowing.

Commenting on the strategy, Minister for Finance Paschal Donohoe said "Budget 2021 is being formulated against the background of continued economic, financial and wider societal fallout from the Covid-19 pandemic and against the threat of a disorderly ending of the transition period which governs bilateral trade between the EU and UK. With limited resources available, the priority of the forthcoming Budget must be to provide support to those areas most in need."

He said the budget deficit will be approximately 4.5%-5.5%, which equates to cash borrowing "in the region of €15-19bn for next year".

Minister Micheal McGrath said the Government has prioritised public services including education, training and skills development. He said: "It is expected that gross voted expenditure will be more than €86bn this year, an increase of approximately €16bn on the level of expenditure set out last year."

He also said additional funding will be needed to cope with a disorderly Brexit, if that arises. 

"While directing resources to these areas, we will also ensure that existing services are preserved and that the increases in capital investment set out in the National Development Plan are implemented in order to support the recovery in the economy. This would see core gross voted capital expenditure of €9.1 billion next year," he said.