Daniel McConnell: 'It is the biggest giveaway budget in the history of the State'

Michael McGrath, Minister for Public Expenditure and Reform putting the finishing touches to budget 2021 at department offices in Dublin yesterday. Photograph Moya Nolan

It has been 40 years since a Cork man has taken to his feet on Budget day to deliver the details of public spending for the year ahead.

In January 1981, a somewhat inexperienced Fianna Fáil TD for Cork South Central and surprise choice Finance Minister Gene Fitzgerald stated that the deficit for 1981 would be £515m, or 5% of Gross National Product (GNP).

At the start of an economically dismal decade for this country, Fitzgerald and his leader Charlie Haughey would have little time to grapple with the economy as they were booted out of office months later.

As reported at the time, the Government was already under heavy attack for allowing the public finances to get out of order in 1980 and therefore Gene FitzGerald was defensive about the strategy being adopted in the 1981 budget, primarily about the failure to take more decisive action about the problem at the time.

Today, another Cork South-Central Fianna Fáil TD, Michael McGrath, will take to his feet to deliver the details of Budget 2021.

As Public Expenditure Minister, McGrath along with Finance Minister Paschal Donohoe will lay out the Government’s planned response for next year to deal with the ongoing chaos caused by Covid-19 and the looming threat of a no-trade deal Brexit.

While the government announced a July Stimulus package totalling €8bn, much more is needed to offset the impact of lockdowns and the total shutdown of some industries for seven months.

Today, we will see more than €5 billion in new spending measures announced, excluding matters relating to Covid-19. Such spending to allow the State to cope with the virus into next year will top €8.5bn, government sources are telling me.

In addition to this, a National Recovery pot of more than €5bn will be held in reserve in case more is needed by April or May of next year.

By any standard, this is an extraordinary splurge in government spending compared to last year.

In truth, it is the biggest giveaway budget in the history of the State.

Michael Mc Grath putting the finishing touches to budget 2021 yesterday. Photograph Moya Nolan

It needs to be. Another 24,000 people signed on to the Pandemic Unemployment Payment (PUP) last week since the move to Level 3 restrictions nationally.

Amid calls from Opposition TDs to restore the previous top PUP rate of €350-a-week, the government has recognised the principle that the greater the level of lockdown, the greater the level of supports are needed.

So, what they will do is allow people on the PUP, including self-employed people, earn up to €480 a month in freelance work and keep their full payment.

This measure will apply until April 1, 2021, we are told when people will revert back to the normal €203-a-week jobseekers, if all goes to plan.

It’s a pretty big if.

One of the big inflexibilities of the PUP to date is that people have turned down freelance or infrequent work for fear of being struck off the payment.

The thinking behind allowing a maximum of €480 a month as opposed to having it on a per-week basis is a recognition of the sporadic nature of such work.

“This allows someone work three or four days on a project in a row without the fear of getting kicked off the payment,” explained a source.

The other big change will be the decision by Donohoe to reduce the VAT rate for the hospitality sector back down to 9% from 13.5%.

He shipped considerable criticism when he moved the VAT rate back up from the 9% rate given the hotel sector in Dublin especially was booming, but in light of the pandemic, there was an inevitability to the cut.

Health, meanwhile, will see a major increase in spending in 2021, up a whopping €4bn.

By all accounts, the Department of Health came in with a huge shopping list, many times that.

The Department of Housing, which is getting €700 million for new Social and Affordable housing was the department which went “closest to the wire”.

Arts Minister Catherine Martin also was said to “tenacious” in her fight to win tens of millions in funding for small and medium venues to cope with Covid.

Overall, while this budget is a giveaway splurge unseen previously, much of it is for economic firefighting and even with the massive increase in spending, plenty of people are set to be left disappointed.