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Huge costs Costs of State’s Covid supports running at around €1bn a month, latest data shows

On a rolling 12 month basis government spending is running €12.285bn ahead of income

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Chartered Accountants Ireland has published a guide for companies overseas on Northern Ireland’s attractiveness following Brexit. Credit: Elena Elisseeva

Chartered Accountants Ireland has published a guide for companies overseas on Northern Ireland’s attractiveness following Brexit. Credit: Elena Elisseeva

Chartered Accountants Ireland has published a guide for companies overseas on Northern Ireland’s attractiveness following Brexit. Credit: Elena Elisseeva

The ongoing costs of the State’s Covid supports are running at around €1bn a month, the latest Exchequer data shows.

The gap between the State’s income and spending stood at €5.3bn at the end of the first half of the year as Covid supports continued to pile pressure on the government finances.

The most recent estimates for a full year deficit in 2021 of €18bn are due to be updated as part of the pre-budget process over the coming weeks. It will ultimately depend on how long significant parts of the economy remain closed, including crucially big employers like the hospitality sector.

The deficit is almost entirely down to increased spending to cope with the ongoing Covid crisis including the huge monthly costs pandemic unemployment payments and other wage supports. 

On a rolling 12 month basis government spending is running €12.285bn ahead of income. Government spending over the same 12 months of €88bn was around €12bn more than pre-Covid budgets had allowed. The deficit would have been larger but the amount of tax being paid is running ahead of target, despite the hit to swathes of the economy caused by Covid. 

Almost all of the main tax headings are running ahead of forecast in the first half of this year, including each of the State big three income generators – income tax, Vat and corporation tax.

The most recent corporate tax data for June shows a handful of big multinationals  are continuing to drive higher than anticipated income for the state, but with the global tax environment changing rapidly the Government has long conceded that a big share of those receipts will be lost in future as companies are forced to pay more of their taxes in countries where they have large numbers of customers.

Officials said the main driver of the deficit is spending by the Department of Social Protection on wage supports including the pandemic unemployment payment and employer supports was the big driver of the deficit in the first half of the year.

With reopening of the economy on hold for now pending greater clarity in the public health hit from the delta variant those wage supports will continue at elevated levels for at least the time being.

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