The coronavirus pandemic has been the greatest challenge to face the country since it gained independence, Minister for Finance Paschal Donohoe said as he unveiled Budget 2021.
“We have never experienced a challenge like this, but equally Ireland has never delivered such a strong response,” Mr Donohoe said, as he delivered his budget speech to a Dáil sitting in the Convention Centre just after 1pm.
He described the nearly €18 billion (€17.75 billion) budget package as “unprecedented in both size and scale in the history of the Irish State.”
The budget had been drawn up based on the assumption of “the continued presence of the virus in our country next year, and the absence of a broadly available vaccine,” he said.
Alongside Covid-19 and the threat of a no-deal Brexit, the Government also had to make progress on issues such as housing, improving healthcare and climate change, he said.
“From the ashes of the pandemic, together we will build a stronger and more resilient Ireland,” he said.
The Cabinet signed off on the budget at a meeting on Tuesday morning, with little disagreement between the three Coalition partners.
Department of Finance officials had forecast total job losses from the pandemic to reach 320,000 in 2020, with young people particularly affected, he said.
Mr Donohoe said the budget was “exclusively focused on the rest of this year and next year.”
The budget will include a €3.4 billion recovery fund targeted at stimulating the economy and employment in the aftermath of Covid-19 and Brexit, as well as a €1.6 billion spend on capital programmes. These measures are to be the “cornerstone” of the Government’s budget, Mr Donohoe said.
The wage subsidy scheme supporting businesses will be continued in some form beyond next March for the duration of 2021, he said. Businesses closed by Covid-19 rules are to get a weekly payment of up to €5,000.
The Government has projected the expansive spending will lead to a €20.5 billion deficit next year, down just €1 billion from this year.
The rate of VAT for the hospitality and tourism sector is to be cut from 13.5 to nine per cent, mirroring a similar cut during the last financial crash. The cut will come into effect from from November 1st and remain in place until December 2021, Mr Donohoe said.
The Minister also announced an increase of 50 cent in the price of a packet of 20 cigarettes.
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Other measures
Prior to Mr Donohoe’s speech, the follow measures were expected:
An extra €4 billion for the Department of Health, €500 million extra for social housing as well as funding to hire more doctors, gardaí, teachers and special needs assistants.
The budget will include a massive package of State supports for individuals and businesses, as well as more funding for public services, with overall borrowing to reach up to €19 billion.
Minister for Education Norma Foley is aiming to bring down pupil-teacher ratios to 25:1 with the creation of 600 new positions.
Minister for Housing Darragh O’Brien’s housing affordability programme will cost €468 million and will include €110 million to be split between affordable purchase measures, and scheduled delivery of cost rental in 2021.
The affordable purchase measures will be constituted as a shared-equity scheme and will account for €75 million. The details of this are still being worked out and will be announced in the coming weeks.
However, it is understood the department is in talks with the pillar banks to put in matching funding, bringing the total to €150 million. This will also need State aid approval. Some €35 million is being put aside for cost rental. The remaining €358 million is being split between existing schemes such as the serviced sites fund, the local infrastructure housing activation fund, rebuilding Ireland home loans and the Land Development Agency.
One of the last measures to be finalised late on Monday night was to enable the vast majority of people receiving the pandemic unemployment payment to get the social welfare Christmas bonus this year.
Minister for Public Expenditure Michael McGrath will follow his colleague with a speech at around 1.45pm.
‘
Hope and confidence’
After the Government speeches, Sinn Féin’s finance spokesman, Pearse Doherty, will deliver his party’s response to the budget, its first as the largest Opposition party.
Speaking before the Cabinet met, Mr Donohoe said the Government was “keenly aware of the concerns, the anxiety that many have regarding the future, we understand the air of uncertainty that we have now at the moment”.
“What we are doing in this budget is laying out the way in which we’re going to support our health service, we’re going to aim to support employers, and we’re also going to deal with the concerns that those who have lost a job in circumstances that they didn’t think possible, that we as a country didn’t think possible,” he said.
On his way into Cabinet, Mr McGrath described Budget 2021 as a “hope and confidence” budget.
“Hope that we will come through this very difficult period. Confidence in the fact that we are hopefully providing a record level of public expenditure, investment and support, we hope that will help to sustain the high level of social solidarity at this period,” he said.
Speaking on Tuesday, Minister for Health Stephen Donnelly said the “biggest health budget in history” would build “permanent capacity” across the system.
“It’s a large investment in acute care, in beds and doctors, in nurses, in allied health professionals – it is a very large investment in community-based care,” he said.
‘Time to stimulate’
Green Party leader and Minister for the Environment Eamon Ryan said the large spending increases were the “correct thing to do” given current circumstances.
“We have to get the country through a very difficult period and I think the economic strategy is the correct one, this is not a time to cut,this is a time to stimulate the economy,” he said.
Further budget measures include an extra €5.5m illionfor the hot school meals programme, and an extra €2,000 for applicants of the widowed and surviving civil partner grant.
There will also be a new €50million fund to provide a once-off financial assistance to full time third level students, likely to be worth €250 to each of them.
There will also be a €120million package for reskilling and retraining including an extension of the apprenticeship scheme. Minister for Higher Education Simon Harris has also secured €30million for research including for all-island research.
There will be a large package of climate action measures, including a home retrofitting scheme.
Vehicle registration tax and motor tax will be reformed to incentivise electric and low-emission cars, and penalise polluters, with about 10 per cent of motorists facing higher bills.
The total cost of the social welfare Christmas bonus this year is now expected to be in the region of €350 million, far in excess of the €279 million paid out last year.
As an exceptional once-off measure, those on jobseekers’ payments will also receive the bonus this year if they have been on the scheme for four months instead of the regular 15 months.
In health there will be a spending boost of €4 billion. It was also agreed on Monday that some €50 million would be put aside to fund new drugs for thousands of patients.
Gardaí funding
Separately, Minister for Justice Helen McEntee has secured funding for an extra 600 gardaí and another 500 civilian staff, and funds to replace 70 temporary Garda vehicles that have been used through the pandemic.
In housing, some €500 million will be allocated in new funding, with much of this directed towards the construction of social housing by local authorities and approved housing bodies on public lands.
In education, it is expected there will be increased funding to bring down the pupil/teacher ratio in small schools, and an increased allocation to disadvantaged schools under the Deis programme.
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