Pandemic leaves €8.3bn hole in Irish public finances

Some Ministers privately voice concern at endangered pubs and handling of pandemic

Some Ministers have questioned the messaging coming from the Department of the Taoiseach. Photograph: Paul Faith/AFP via Getty

Some Ministers have questioned the messaging coming from the Department of the Taoiseach. Photograph: Paul Faith/AFP via Getty

 

The heavy toll Covid-19 has taken on Ireland’s economy is revealed by the latest exchequer figures, which show it has punched an €8.3 billion hole in the public finances.

The Government’s budget deficit – the difference between what it spends and what it takes in in taxes – swelled to €7.4 billion in July as VAT receipts crashed and spending on income supports related to the pandemic soared.

This compared with a surplus of €900 million this time last year.

The headline deficit was driven by a large increase in Government spending, which was 30 per cent up on last year at €38 billion, reflecting increased spending in the Department of Health and the Department of Social Protection.

Social protection spending was 83 per cent, or €5.3 billion, above profile as a result of the Government’s two wage support schemes for workers affected by the lockdown.

With consumer activity severely restricted in April and May, VAT receipts also took a battering – down 22.7 per cent, or €2.2 billion, on the same period last year.

Minister for Finance Paschal Donohoe said that although the figures were stark, the total tax performance was “very much in line with what we were expecting”.

“While the figure is big, the percentage change is a ‘better than hoped for’ performance,” he said at a media conference.

Blow to pubs

In what will be seen as a blow to the pub industry, Mr Donohoe would not give a commitment to explore a specific compensation package for publicans who will have to keep their premises closed until September at least.

“My first priority is to implement the July jobs plan and that has many measures that will help,” said Mr Donohoe. He said he would engage with other Ministers to look at “further measures that will be needed for some parts our our country and other parts of our economy”.

His comments will bring little comfort to publicans who now say they are in a “full-blown crisis”.

Dozens of regional TDs from across the political spectrum expressed concern on Wednesday about the ongoing feasibility of rural pubs that have been shuttered since March. Some have written to the Taoiseach demanding compensation for small publicans, who they contend have been treated unfairly.

Some Ministers have privately expressed concern about the Cabinet’s response to the Covid-19 pandemic and have specifically questioned the messaging coming from the Department of the Taoiseach.

A number of Ministers singled out the decision not to reopen pubs and said a plan should have been devised to support the sector that should have been announced simultaneously.