Lower than expected deficit will not prompt ‘splurge’, says McGrath

Target is ‘package that seeks to support people and improve living standards’, he says

The Government will resist the temptation to go on a “splurge” in the budget driven by a lower-than-expected deficit, Michael McGrath has said.

Speaking in advance of the publication of Budget 2022 on Tuesday, the Minister for Public Expenditure said the confirmation on Friday that the deficit will be some €7 billion less than anticipated during the summer was "quite dramatic" and welcome.

“That is because the economy has rebounded very strongly and I think that the extent of the support the government provided… has been a direct contributory factor,” he said.

However, pointing to ongoing uncertainty in many areas, McGrath said the "easiest thing for Minister Donohoe and I to do would be to say we are going to go on a splurge, and we're going to spend that improved deficit outturn. But it's still a deficit of over €13 billion," he said.

“We have to think of our children, have to think of our future generations, but we are really satisfied the overall package of €4.7 billion will allow us to make really significant progress in housing, in healthcare, in childcare, in tackling climate action and addressing the very real cost of living pressures that people are facing at this time.”

Speaking on this Sunday’s edition of RTÉ’s The Week in Politics Mr McGrath did signal, however, that there could be interventions based on leftover money that had been allocated for this year but has gone unspent.

Asked if the unspent billions gave him more room for manoeuvre, he said: “It does, potentially, within the current year. If you look at what we did last year, we did identify some particular areas where we provided additional money within the year, including to our hospices… and the disability sector.”

Acknowledging the potential impact of hikes to the carbon tax which are already built into the budgetary process, he signalled not all changes would come in after the budget.

“They will proceed but they don’t all happen immediately on budget night. In relation to home heating oil, and solid fuel changes, there are no changes on fuel until May of next year,” he said, adding that an additional challenge this year was an increase in the market price of many energy products, driven by what the coalition hopes is a transitory hike in gas prices.

“Obviously we’re faced with a new set of challenges now, which we hope will be temporary. We can’t predict what international energy prices (will be), how they will develop over the period ahead but we will have a very comprehensive package to support people what we hope will be a temporary period of escalating prices,” he said.

He said the Government is committed to ongoing funding of a “step change” in healthcare provision which began last year.

“The investment we made last year, not in respect of Covid, but in the reform and the strengthening of our public health service, was the largest ever in the history of the State. It was a step change in investment in a public health service designed to dramatically increase the capacity,” he said.

“By any measure that is an enormous intervention and a warranted and needed intervention by the State to improve our public health service, and what we want to see now over the course of next year is the continued implementation and the delivery of that.”

Mr McGrath gave a firm indication that core social welfare rates will be increased, as has been anticipated for several weeks now.

“There are lots of demands and lots of challenges right across the system and we do acknowledge that people on core weekly social welfare rates haven’t benefitted from an increase in their weekly rates in the last couple of budgets.”

“We’ll see on Tuesday what progress we can make and we are conscious there are really pressing cost of living measures facing people at this time and we will do all we can as a Government to bring forward an overall package that seeks to support people and improve living standards.”