‘Truly exciting times ahead’ for Ireland, ‘optimist’ Donohoe says

Ireland will recover from the pandemic, public services and living standards will be restored and "we will repair our public finances" in the wake of the Covid-19 pandemic, Minister for Finance Paschal Donohoe declared as he opened his giveaway Budget 2022 speech.

He warned that overall national debt will stand at just under €240 billion, the equivalent of €50,000 for every man, woman and child in the State.

But as he and Minister for Public Expenditure Michael McGrath confirmed that public spending next year will reach €87.6 billion, Mr Donohoe cut the deficit forecast by 40 per cent from the €34.5 billion announced in the summer economic statement to €21.5 billion.

He announced a total budgetary package of €4.7 billion, in line with the summer statement and unchanged despite improved exchequer returns in recent months including expenditure measures of €4.2 billion and tax measures of €500 million.

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Both Ministers highlighted the impact of the Covid-19 pandemic and Mr Donohoe said while the State had known about and prepared well for Brexit it could not have predicted the devastation “the worst global pandemic in a century” left in its wake.

He said he was optimistic by nature and “as we move out from under the dark clouds of the pandemic there are truly exciting times ahead for this country and its people”.

Mr McGrath stressed that “our priorities will be increasing the supply of new homes, improving access to healthcare and making a generational shift in the delivery of quality childcare”.

He said “it is about the State being there for people when they most need it” and they would deliver this through investment in key public services, additional staff and “delivering the largest capital investment programme in the history of the State”.

Mr McGrath said he was providing €7 billion in Covid funding which would be made available as required to fund public-health measures, including testing and tracing, the vaccination booster campaign and income supports through the employment wage subsidy scheme.

The two Ministers will hold about €4 billion as a contingency reserve “so that we can adapt if faced with the unexpected”, a move Mr McGrath described as a “prudent approach”.

Brexit and the pandemic “demonstrated the need for us to always prepare for the worst, while still striving for the best” the Minister for Finance said adding that “many lives were lost and many livelihoods suddenly were ruined”.

He said, however, that solidarity and common purpose save lives and allowed society and the economy to reopen. “Our country now reaches for a better and brighter future.”

Domestic demand

Modified domestic demand, the “best measure” of the domestic economy, grew by almost 8.35 per cent in the second quarter and is expected to grow by 5.25 per cent overall this year and by 6.5 per cent next year.

Those on the pandemic unemployment payment (PUP) are now under 100,000, down from almost 500,000 in February with unemployment forecast at just over 9 per cent by year end and at 6.5 per cent by the end of next year, still higher than the pre-pandemic rate of about 5 per cent. Mr McGrath said that 115,000 people who came off the PUP had moved to a different sector.

On the “historic” global tax agreement raising corporation tax to 15 per cent Mr Donohoe said: “I strongly believe our national interest is now best served by joining this agreement”, which was “balanced and represents a fair compromise”.

Mr Donohoe said housing was a core issue with housing expenditure more than 40 per cent above peak levels of 2008. A tax on vacant land zoned for development will be introduced while Mr McGrath will allocate a record €6 billion in exchequer funding, 15.6 per cent more than last year.

On climate change he said: “The science is unambiguous.The world is burning and the continuation of the annual incremental increase of €7.50 in carbon tax”, “the single most effective climate policy which can be pursued by Government”.

But he said the money raised through this tax “will be invested in targeted social welfare initiatives to prevent fuel poverty and ensure a just transition”.