Winding down of Covid supports will be well-flagged, minister says 

Minister for Public Expenditure Michael McGrath said that although some of his colleagues may advocate for similar public spending after Covid for certain services, they will have to be wound down

Public Expenditure Minister Michael McGrath: 'We will have to revert to more normal levels of spending over time in line with the evolving public health situation.' Picture: Damien Storan

The winding down of Covid supports will be "granular" and flagged well beforehand, Michael McGrath has said.

The Minister for Public Expenditure was speaking to the Institute of International & European Affairs conference on Ireland's recovery in the context of Europe.

Mr McGrath said that although some of his colleagues may advocate for similar public spending after Covid for certain services, they will have to be wound down.

"We will have to revert to more normal levels of spending over time in line with the evolving public health situation," he said.

"I think the way that we have structured the budgets, and the way that those additional expenditures have been conveyed to stakeholders to the recipients or beneficiaries, does make that ultimate separation easier, but not easy nonetheless.

"So that is going to be a job into the future and it's too early for that right now because we're still in the pandemic, but we do have an overall envelope this year of €88bn, if you consider going into last year, the expected expenditure was €70bn and then it gives you just an overall sense of the impact of Covid.

"There are a number of supports relating to the Covid response that are reflected in departmental estimates, – these costs amounted to €6.5bn, including €3.2bn in social protection payments and €1.9bn to support the health service in response to Covid.

In addition, there is also over €5bn in contingency funding, which we have prudently set aside and which we're going to need over the next number of months to meet the further expenditure commitments as they arise in the context of Covid."

By the end of this year, the Department of Public Expenditure estimates the State will have incurred up to €28bn in direct Covid-related expenditure over 2020 and 2021.

As a result of these measures, the general Government deficit of €19bn, or nearly 5.5% of GDP, is estimated as the final outturn for 2020.

A €21bn swing from 2019, a deficit of a similar size is expected, again, in 2021.

"It is entirely appropriate that we have acted to support the economy the circumstances," Mr McGrath added.

"This has been greatly assisted by the approach taken by the European Central Bank in its response to the pandemic, in sharp contrast to the initial response to the global financial crisis of over a decade ago.

"We are committed to restoring the public finances to a sustainable trajectory and ensuring that Ireland does not become an outlier, as we emerge from the pandemic period."