Cabinet to be warned public spending levels are unsustainable

Pandemic supports burning through cash quicker than anticipated

Minister for Finance Paschal Donohoe:  “Our public debt is approaching a quarter of a trillion euros.” Photograph: Julien Behal

Minister for Finance Paschal Donohoe: “Our public debt is approaching a quarter of a trillion euros.” Photograph: Julien Behal

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The Cabinet will be warned today that current levels of public spending are unsustainable at Ireland’s existing tax base.

However, fearing a political backlash, Ministers and senior officials have played down reports of troika-style austerity being introduced as the pandemic recedes and the economy recovers.

As Covid-19 bills mount, Government departments will bring a series of memos to this morning’s Cabinet meeting examining spending in several departments, while also making provision for extra spending in others.

Pandemic supports are burning through cash at a greater than anticipated rate due to the extended lockdown. But the Government will extend borrowing rather than impose cuts to existing budgets if these supports have to be extended beyond the summer.

Spending review

Ministers will hear reports from the departments of social protection, education, housing, higher education and justice as part of a new quarterly spending review instituted by Minister for Public Expenditure Michael McGrath.

Ministers from departments with significant budgets, either capital or current, have been asked to submit the quarterly reports.

The Department of Housing, the Cabinet will hear, has lost €160 million over revenue foregone due to the commercial rates waiver it granted local authorities.

Despite curtailed opportunities to work on direct building programmes for social housing, due to the shutdown of the construction sector, about €170 million has been spent elsewhere, including on property acquisitions, a voids programme and other programmes.

Minister for Social Protection Heather Humphreys will bring a memo detailing how €7 billion has been spent on the pandemic unemployment payments, as well as the level of spending on other supports.

Current spending

Minister for Education Norma Foley will tell colleagues that current spending is slightly under profile, due to school closures and savings on items such as substitute teachers.

Later today Minister for Finance Paschal Donohoe will reiterate to the Dáil’s Budgetary Oversight Committee that there will be no “cliff-edge” ending of Covid-19 supports when economic and social life begins to reopen. “Our public debt is approaching a quarter of a trillion euros,” Mr Donohoe will say, adding that the pandemic unemployment payment and supports for businesses and workers have cost about €13.5 billion.

Meanwhile, Taoiseach Micheál Martin is expected to tell the Oireachtas Finance Committee that the impact of the pandemic on the economy and public finance has been “severe”.

However, he will argue that the “enormous scale” of the Government intervention has prevented even larger falls in economic activity and higher rates of unemployment and he hopes this has “laid the foundations for a swifter recovery”.

Mr McGrath said yesterday that Government departments have been instructed to clearly identify Covid-19 spending from day-to-day public spending so that it can be carefully unwound over a period of time. The Covid-19 supports which are scheduled to conclude at the end of June, will not be brought to an abrupt end, he said. “It’s about making sensible decisions.”

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