Covid-19 public spending unsustainable without vaccine – Donohoe
Annual cost of Covid supports estimated to be about €16bn
Minister for Finance Paschal Donohoe and, left, Minister for Public Expenditure Michael McGrath. Photograph: Julien Behal/PA Wire
A viable vaccine for Covid-19 is needed for the State’s budgetary sustainability, the Government’s two key financial Ministers have said.
With expanded and enhanced support schemes set to cost the exchequer about €150 million a week on top of the sums allocated in the budget for the next six weeks, both Minister for Public Expenditure Michael McGrath and Minister for Finance Paschal Donohoe said on Tuesday that such levels of expenditure were not permanently sustainable.
“We do need a vaccine for the sustainability of what we’re doing from a budgetary point of view,” Mr Donohoe said.
Mr McGrath added that the annual cost of Covid supports would be about €16 billion. “You’re not going to be in a position to maintain schemes of this nature and of this scale for ever, but it is the right thing to do now to provide those supports to the economy and to households and to businesses.”
While the budget for 2021 is predicated on the assumption that there will be no widely available or effective vaccine next year, Mr McGrath said the reality was that one would be needed. “In order to get our economy back to a position that it’s generating the type of employment it was in the past, we do need a vaccine,” he said.
The total amount to be spent across support schemes in the next six weeks will be about €2 billion, Mr McGrath said. This will drive the budget deficit from €21.5 billion, or 6.2 per cent of GDP, to €23 billion, or 6.5 per cent of GDP. Mr Donohoe said the Government had now committed €24.5 billion of support to households, firms and the health sector as it stepped in to “fill the gap left by the continuing decline in private-sector demand as a result of the public health measures that are necessary to protect our country”.
On Monday night, Government signalled significant expansion to two of its flagship schemes to support the economy – the employment wage subsidy scheme and the pandemic unemployment payment. The former scheme has been expanded to include new and higher rates of payment up to €350, while the latter’s top rate of €350 has been reinstated for those who earned more than €400 a week prior to availing of the support.
The wage subsidy will now cost in the region of €105 million per week, and the unemployment payment will cost €135 million. Payments made under the business-focused Covid restrictions support scheme will cost €80 million per week. Minister for Social Protection Heather Humphreys said on Tuesday that “these are unprecedented levels of spending but they are the right thing to do to ensure citizens are protected through the worst of the pandemic and do not suffer a severe income shock”.
Asked about his reported resistance to the move to Level 5 measures, Mr Donohoe said he had put many questions to Nphet about the move and there had been “an awful lot of engagement” on the topic, but that ultimately the decisive factor were the risk to the State and the health of citizens if the restrictions were not tightened.
Asked about payment breaks for mortgages, he said it was appropriate lenders engaged and decided on breaks on a case-by-case basis.