Budget 2021: Taoiseach defends record spend in response to Covid crisis

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Tomas Doherty
Taoiseach Micheál Martin has defended the Government’s "unprecedented" €17.75bn expenditure in Budget 2021.

Speaking on RTÉ’s Nine O’ Clock News on Tuesday night, Micheál Martin said the budget would position Ireland well for the future and that this was the type of investment that was needed.

Mr Martin rejected that the Government was burdening future generations with unsustainable debt levels.

“What we’re endeavouring to do is to sustain the economy, to get enterprise through Covid-19, because beyond Covid-19 we’ve to think of our society,” he said.

The Fianna Fáil leader said the Government needed to invest strongly in public services, adding that a fundamental shift was needed towards a strong, modern, reformed health service, a strong education service and towards a green economy.

“All three pillars: enterprise, green economy and investment in public services are being dealt with in this budget, which I think positions us well for the future and will help future generations,” he added.

Minister for Finance Paschal Donohoe said that the coronavirus pandemic had been the greatest challenge to face the country since it gained independence, 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 in his budget speech to a Dáil sitting in the National Convention Centre in Dublin.

A total budgetary package of almost €18 billion was announced, with capital expenditure increasing to over €10 billion for schools, homes and public transport.

The package is “unprecedented both in size and scale in the history of the Irish state”, Mr Donohoe said.

He confirmed that €8.5 billion will be committed to public services to deal with the effects of Covid-19 pandemic, including €2.1 billion in contingency funding.

Another €3.8 billion will be spent on existing services and a recovery fund to stimulate demand and employment will be established at a value of €3.4 billion.

Spending on health will be increased by €4 billion to meet the ongoing costs of dealing with Covid-19 and to build up capacity in the health service.

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Mr Donohoe announced a reduced VAT rate for the hospitality and tourism sector from 13.5 per cent to 9 per cent with effect from November 1st this year until December 2021.

Main points:€8.5 billion has been committed to public services to address the challenges of Covid-19. No major changes to income tax credits or bands, with the ceiling of second USC band rising to €20,687 and the weekly threshold for the higher rate of employers PRSI rising €4 to €398.Rise in the pension age to 67 on January 1st has been scrapped.Cigarettes will go up by 50 cent, bringing the average cost of a packet to €14.There will be no change to the price of alcohol.The changes to carbon tax will add €1.51 to a 60-litre fill of diesel and €1.30 to a 60-litre fill of petrol. These apply from midnight on Tuesday night.The help-to-buy scheme for housing will be extended until the end of 2021.

Opposition response

Sinn Féin’s finance spokesman Pearse Doherty said the Government’s budget lacked the ambition that the unprecedented situation demanded.

It had failed to tackle unaffordable childcare costs, the underfunding of disability services, a dysfunctional housing market and the lack of capacity in the health service, he said.

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In the party’s first speech responding to the budget as the largest opposition party, Mr Doherty said “the risk is not that we do too much, that we do too little”.

“Our health system needed far more, our patients and healthcare staff needed far more. Today was the day to turn fine words and applause into action,” he said.

Those with disabilities were “the forgotten people of this pandemic,” and while he welcomed an extra €100 million in funding for the disability sector Mr Doherty said the Government “could have done a lot more”.

Describing the Government as “out of touch” with people who had lost their jobs during Covid-19, Mr Doherty criticised the failure to restore the Pandemic Unemployment Payment (PUP) to the full €350 rate.

Labour's finance spokesman Ged Nash criticised the budget for reinforcing what he called Ireland's two tier economy: “We have two Irelands here today, billions of euros extra in supports for businesses, but cuts for workers on the PUP.”

He said the plans were “distinctly unambitious” and that the “time has come to reimagine the State”.

The leaders of the Social Democrats and People Before Profit said spending on intensive care units is far below what is required.

Roisin Shortall and Richard Boyd Barrett criticised the Government, saying it did not go far enough in allocating sufficient resources to ICUs in Irish hospitals as part of the €4 billion health spend.

Deputy Shortall said: “The bulk of that health spend will be Covid-related and will go to PPE and testing and tracing.

“A large part of the remainder of that will be capital spending, which is well needed but, there isn’t much spending on ICUs.”

Deputy Boyd Barrett said: “ICU investment is still nowhere near what the HSE said was needed pre-pandemic.

“Not enough has gone in there. Not enough has gone into tracking and tracing, either.”

Paul Murphy TD said a “hike” in carbon tax represented “eco-austerity”.

He said: “Failure to restore PUP means more poverty and homelessness, especially for young people.

“This budget fails to learn the lessons from Covid and provide long-term investment in public services.”

Hospitality and business

Adrian Cummins, chief executive of the Restaurants Association of Ireland, described the budget as “a life-line” for the restaurant and hospitality industry.

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“We welcome the reduction of the VAT rate from 13.5 per cent to 9 per cent,” he said.

“While these new measures announced today won’t fix everything, there is now hope for many restaurant businesses who are struggling.”

Commenting on the change to VAT, managing director of The Armada Hotel in Co Clare, John Burke, said: “It’s a small change in the right direction. Hospitality venues across the country are under huge strain so the VAT cut is a welcomed change that will hopefully help businesses to bring in more customers and achieve at least median occupancy."

Ibec, the business lobby, also welcomed the scale of the package and supports announced to help business deal with both Covid and Brexit.

“Today’s announcement of a planned increase in capital spending is a positive move given the scale of the deficit in both social and physical infrastructure,” said chief executive Danny McCoy.

He said the Covid Restrictions Support Scheme, reduction in VAT in the hospitality sector and the extension of the Employer Wage Subsidy Scheme were “important first steps” in getting the economy back on its feet and saving businesses.

Housing

The Construction Industry Federation welcomed housing and infrastructure measures in the budget but warned that embedded inefficiencies in the State’s planning and procurement systems could dampen positive economic benefits and delay delivery.

CIF director general Tom Parlon said: “The IMF has recently advised countries to increasing investment in infrastructure to drive economic recovery.

“Our Government has heeded this advice and increased investment into the public infrastructure by €1.6 billion to over €10 billion. This will have huge positive impacts in the short term and the long-term".

The Irish Council for Social Housing said the investment in public housing was a positive response to the scale of the housing crisis and sends a clear signal to approved housing bodies and local authorities to boost the delivery of permanent social housing. – Additional reporting: PA

Further coverage on Budget 2021:Full details of an 'unprecedented' €17bn budget to support business, jobs and healthKey points at a glanceWhat this year's budget means for the average workerChanges to PUP brings little comfort to recipients

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