There will be no €5 increase in the old-age pension or any return to the top €350-a-week pandemic unemployment payment (PUP) in next month’s budget, senior ministers have warned.
Cabinet sources from across the Coalition have said there is just €900m in unallocated spending for ministers to fight for, meaning very few new initiatives will be approved.
Theunderstands that public expenditure minister Michael McGrath is taking a “zero tolerance” attitude to kite-flying from ministers and made clear there is “little flexibility for solo runs”.
With 13 days until the budget, while many decisions remain to be finalised, the central pillars have been agreed.
It is understood that:
- there will be no across-the-board welfare increases, ruling out the traditional €5 increase to the weekly old-age pension;
- while many within the Coalition are in favour, the top €350 rate of the PUP will not be reinstated under insistence from the Department of Finance;
- up to €9bn in Covid-specific spending will be earmarked for 2021 to deal primarily with increased health and social welfare costs;
- the additional €2bn in health spending made available during Covid-19 will be “added to the base,” pushing the overall health budget for 2021 above the €20bn mark;
- the Christmas bonus, worth 100% of a recipient's normal weekly social welfare payment, is not yet provided for, but “will be paid”;
- while income taxes will not be increased, carbon taxes will rise from €26 to €32 per tonne, raising a further €90m;
- a huge emphasis will be placed on helping the struggling arts, culture, and hospitality sectors by way of increased reliefs and grants.
At a private meeting of its parliamentary party last night, Taoiseach Micheál Martin said the budget will respond to the twin threats of Covid and Brexit.
He told party colleagues that housing, climate, and broadband will be given priority in terms of capital spending.
Mr Martin also singled out the hospitality sector as one which is likely to get targeted supports in the budget.
Finance minister Paschal Donohoe said yesterday that the macroeconomic projections underpinning the budget are based on two key assumptions: firstly, from the beginning of next year, bilateral trade between the UK and the EU will be on World Trade Organisation terms; and secondly, a widespread vaccination for Covid-19 vaccine will not be available.
The Department of Finance has revised its outlook for the economy this year significantly upwards. The department has forecast that the economy, as measured by GDP, will shrink by 2.5% this year, compared to a forecast by the department in April that projected a 10.5% fall in GDP.
Meanwhile, the unwinding of the PUP and the temporary wage supports is likely to reduce the demand for housing, a report by the Economic and Social Research Institute (ESRI) has found.
The authors of the report said the immediate impact on incomes during the crisis has been "largely offset" by the pandemic unemployment payment and the temporary Covid-19 wage subsidy scheme, but these are set to be unwound over the next year.
The report said this could reduce the demand for housing.
"The longer the virus persists and uncertainty about the future opening of the economy continues, the greater the adverse impact on housing demand," it stated.
The report also outlines how the phenomenon of working from home may require a rethink in how housing is provided, as people may not want or require to live close to offices they no longer need to attend.
Assessing the impacts of Covid-19 on the Irish property market, the study outlines a number of possible scenarios, but said the impact of the pandemic on the labour market is already "unprecedented", and the effect on the housing market is "likely to be profound".
- No return of the €350 per week top rate of pandemic unemployment payment;
- No across-the-board social welfare increases likely, including no €5 increase in the old age pension;
- Just €900m in unallocated funds to divide among ministers;
- Carbon taxes and ‘old reliables’ to increase spending pot;
- Christmas bonus not budgeted for, but “will be paid”;
- Reliefs and further grants for arts and hospitality sector;
- Additional training and college places to be announced.