Irish Examiner view: Pandemic will define Budget 2021 outcomes

Wed, 14 Oct, 2020 - 10:24

Finance Minister Paschal Donohoe concluded his budget speech yesterday in a way few, if any, of his predecessors felt obliged to, probably because none of them faced as many troubling known knowns or indeed inevitable unknown unknowns as we do today.

He invoked the comforting wisdom and perspective of Seamus Heaney. “If we winter this one out, we can summer anywhere,” offered Mr Donohoe.

He was quoting a line from an interview Heaney gave in 1972 as the escalating Troubles changed that Ireland forever, just as the pandemic is doing again today. It must be hoped though it does not take as long — almost 30 years — to recover from the pandemic as it did to agree a peace on this island.

Today’s “daunting” environment meant a budget package of almost €18bn. Some €3.4bn of that for a recovery fund. Two major assumptions were stitched into the process.

#Budget2021: The Government announced the largest budget in the history of the State on Tuesday.

But how will the budget affect you? Here, we break down some of the scenarios:https://t.co/JShIizQawi
— Irish Examiner (@irishexaminer) October 13, 2020

One is that there will be no Brexit deal, and the second is that Covid-19 will persist until at least next year. Covid, our “invisible enemy”, was the dominant influence.

So too was the recognition that the overarching purpose of yesterday’s exercise, to generate optimism and momentum, far outweighed the details of how that might be achieved. Covid had an impact on everything from spending on education to the hospitality sector.

Some €270m for up to 20 higher education building projects and some 145 school building projects were promised while hospitality sector Vat will be cut from 13.5% to 9% until December 2021. A variant of the employment wage subsidy scheme and support for businesses closed because of Covid, up to €5,000 a week, will help that and many other sectors too.

The Mick Clifford Podcast: #Budget2021 a budget like no other

Carbon tax will be increased by €7.50 to €33.50 per tonne of CO2. That tax will rise annually to reach €100 per tonne by 2030.

Taxes applied to cars will be revised to reflect new international standards made necessary by the emissions scandals. The Greens will undoubtedly but unfairly bear the brunt of the criticisms for these vital measures, measures that might have been far more demanding had we the infrastructure to support wider use of electric vehicles.

As was anticipated, health will get an extra €4bn but Covid-19 will eat a large slice of that new allocation. The construction of 9,500 social housing units in 2021 is part of a €5.2bn housing package, a €773m increase over 2020, though details of how we might resolve our housing crisis are still being finalised in discussions with the banks.

As in every budget, the details — everything from an increase in direct provision funding to a warning on corporation taxes — are myriad but one or two stand out as they signal a change of heart if not intent.

Mr McGrath’s declaration that the pension age will not rise to 67 in January is welcome as is the promised pensions commission. The inequities in our current systems and changing demographics offer that commission huge challenges and social justice opportunities.

The wisdom of yesterday’s budget will be, whether we like it or not, defined by the trajectory of Covid. Our behaviour will influence that so our obligations to public health measures take on far greater urgency if Budget 2022 is to be creative rather than another defensive, over-wintering strategy.

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