Government will ‘consider’ social welfare increases in budget – McGrath

Minister for Public Expenditure and Reform Michael McGrath said the Government would consider the issue of core social welfare rates in Budget 2022, “conscious” that there had been no increases in the past two budgets and that households were grappling with inflation.

However, the Minister declined in an RTÉ Radio interview on Sunday to comment on reports that hikes of €3-€5 in core welfare rates and old age pension would be on the cards when the budget is unveiled next month.

Mr McGrath said he was “facing the realty of limited resources” following a spike in Government borrowing since the onset of the Covid-19 crisis and that he had “in the region of €1 billion” to make new budget decisions in the upcoming budget.

“We are at the point in the next three weeks where specific decisions have to be made,” he said.

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The Minister said a key objective in framing the budget would be on getting certain public services “to resume functions in as normal a way as possible” after the pandemic, particularly in in the healthcare sector, where there has been an increase in waiting lists.

He said there would also be a focus on “securing economic recovery”, following a rebound in activity as Covid-19 restrictions ease.

“We need to see that transition into a sustainable recovery, because when I look at all of the challenges that I have to try to manage on the expenditure side of the budget – in childcare, in healthcare, in education, in housing, in transport, on capital spending – I’m in a position to meet many of those needs if we have a strong economy that has delivered the type of revenues that we need to meet the legitimate expectations that people have,” he said.

Repairing finances

The Minister said the Government was also now entering a period where it needed to commence the repairing of the public finances.

“We had, understandably, a very large [budget] deficit last year and we’ll have a very large deficit this year. But we’ll need to start reducing it. We will do that by, over time, carefully and gradually tapering the pandemic-related emergency expenditures and managing our core expenditures in a sustainable and responsible way,” he said.

The Irish Fiscal Advisory Council said last week that stronger tax receipts and lower spending on wage supports would result in a smaller-than-expected budget deficit this year, but was critical of the Government's revised budgetary strategy, outlined in its recent summer economic statement. This envisages higher spending and bigger budget deficits to 2025, facilitated by an additional €18.8 billion in borrowing.