BUDGET 2021 Record €18bn gamble as Paschal Donohoe bids to spend his way past Covid
The Government is gambling on a massive Budget spending spree to save the country from the twin threats of the Covid-19 pandemic and Brexit.
Finance Minister Paschal Donohoe yesterday unveiled his €18bn Budget – the biggest in the history of the State – as he warned of “the invisible enemy” seeking to wreak havoc on our lives.
In a move aimed at encouraging people to dig into their savings to help restore the economy, Mr Donohoe pointed to the “significant” rise in household savings during lockdown as he justified plans for massive State borrowing next year.
He said the first ever Budget jointly compiled by Fianna Fáil and Fine Gael is “unprecedented in both size and scale in the history of the Irish State”.
“We have faced numerous difficulties since Independence, but never one like Covid-19,” he added.
The €18bn package includes a €3.4bn recovery fund aimed at helping the economy get over the Covid shock and a possible no-deal Brexit.
Another €1.6bn has been set aside for capital projects including new homes, schools and roads.
Business leaders welcomed a string of measures aimed at propping up industries over the winter months and into 2021, including payments of up to €5,000 a week for companies in tourism, hospitality and entertainment hit by Covid restrictions.
It also includes the biggest welfare package ever announced by an Irish Government and included increases in several supports for older and vulnerable people and those living in poverty.
The fuel allowance, the living alone allowance and qualified child payments are to rise.
Most of those on the Pandemic Unemployment Payment and people in receipt of other welfare payments will get the Christmas bonus.
But there were no increases in the weekly rate for the State pension, jobseeker’s allowance or disability payments and plans to reduce to Pandemic Unemployment Payment to €203 next year are still going ahead.
There were no significant income tax cuts in the Budget, but people on lower incomes will see small reductions in the amount of USC they pay.
There were also small tax cuts for the self-employed.
The most significant tax cut was the reduction of the 13.5pc Vat rate to 9pc for the hospitality and tourism sector.
The Green Party claimed credit for an extra €1bn being assigned to public transport, a major retrofitting scheme and privately claimed responsibility for major increases in welfare supports.
However, the Government faced strong criticisms from the Opposition for what was described as a “Dublin Budget” by rural TDs who were infuriated by the rise in carbon and motor taxes.
Some drivers of highly polluting cars will see their motor tax rise by €50, while VRT on new high emission vehicles is also to rise.
Carbon tax will add about €1.20 to the cost of a tank of petrol for a typical car, and €1.50 if it is diesel. The carbon tax on gas, coal, and home-heating oil will be held off to next May, as happened last year.
A 20 pack of cigarettes will rise by 50c to €14 for some of the most popular brands.
Record-breaking capital funding was allocated to the health service with major commitments made to pay for around 2,600 hospital and community beds, along with a promise to hire 16,000 new staff in the sector.
A Department of Health source admitted the figures were “ambitious” but added: “We have to get this done and the HSE has said it can do it.”
Another source said new education commitments and HSE employment frameworks will ensure the targets are met.
However, last night one Government minister said: “The HSE will spend it alright, but probably not on what it is intended for”.
Similarly, €5.2bn was allocated to housing along with a promise to build 9,000 social housing units.
Housing Minister Darragh O’Brien’s long-promised affordable housing rental and purchase scheme was allocated €110m funding, but there was not detail of how it will work or when it will begin.
Speaking to the Herald, Public Expenditure Minister Michael McGrath said Mr O’Brien is still “working on a scheme” but said affordable housing will be delivered through other initiatives in interim.
“The scheme will be in place and affordable homes will be available next year,” he added.
In his Budget speech, Mr McGrath said the “day will come” when Brexit and Covid are “behind us”.
“The task of our Government is to guide our country through one of the most difficult periods in our history,” he said.
“We won’t get it right but our sole motivation at all times will be to act in the best interests of the people we are privileged to serve.”
He announced €10bn in capital spending for critical projects across all regions.
It includes road projects such as the N56 in Donegal, the N4 in Sligo, the N5 in Mayo and the N22 and Dunkettle Interchange in Cork. 41 intercity rail carriages will be bought and there are plans to sign contracts for up to 600 electric carriages as part of the Dart+ project in the capital.