Economic collapse leads to €19bn hike in Government spending

Mr McGrath will tell TDs that the overall budget strategy will focus on prioritising crisis management measures to address the challenges posed by Covid-19 and Brexit. Photo:Gareth Chaney/Collins

The economic collapse caused by Covid-19 will see government spending running at €19 billion higher than was forecast on Budget day last year, TDs will hear tomorrow.

Public Expenditure Minister Michael McGrath will tell the Budget Oversight Committee that €9 billion in additional social welfare funding has been extended to fund the Pandemic Unemployment Payments (PUP) and the Wage Subsidy Scheme.

Mr McGrath will tell the committee that the Revised Estimate for Health approved by the Dáil in July included a €2 billion increase relative to the Health allocation set out in the estimate published in December last year. 

Further funding has also been agreed, for example, to extend the scope of the influenza vaccination and to provide for the 2020/2021 Winter Initiative. While work is ongoing at finalising the funding requirement for this year, it is estimated that the overall increase relative to the December estimates could be up to €3 billion, he will say.

Mr McGrath will tell TDs that the overall budget strategy will focus on prioritising crisis management measures to address the challenges posed by Covid-19 and Brexit while preserving and maintaining existing levels of service within core expenditure programmes.

The Cork South-Central TD will say that at this stage it is planned that the Budget Estimates for 2021 will include an increase of approximately €3 billion in this core expenditure, comprising €2 billion in current expenditure and €1 billion in capital expenditure.

“Of the €2 billion in current expenditure it is estimated that there are pre-commitments of €1.1 billion to be funded in relation to demographics, and to meet the carryover costs of prior year measures and of public service pay deals,” he will say.

“In relation to capital expenditure, we will also ensure that the increase in capital investment set out in the National Development Plan is implemented in order to support the recovery in the economy. This would see core gross voted capital expenditure of almost €9.2 billion next year, an increase of almost €1 billion on the gross voted expenditure amount set out for this year in the 2020 estimates,” he will add.

TDs will be told that with the additional funding required for Health and Social Protection amounting to over €12 billion in aggregate this year, as we continue to live with the virus and manage any resurgences through 2021, the funding required for our health service and for income and employment supports will remain significant next year and also subject to a degree of uncertainty that would need to be reflected in the estimated expenditure amounts for next year. 

Meanwhile, the Government is developing plans to extend Covid job supports beyond next April should they be required as part of next week’s Budget.

Social Protection Minister Heather Humphreys has indicated that Covid unemployment supports may run beyond April next year.

She said the State has already spent over €3.6 billion on the payment to over 800,000 people. The scheme is expected to cost more than €5.2 billion by April 2021.
When asked in the Dáil why the government would not restore the payment to the level it amounted to before it was cut in September, Ms Humphreys said: “It may well be that the payment will be needed beyond next April which is all the more reason why the Government must ensure that it is set at a level which can be sustained for the longer term."