In response to a Parliamentary Question from Aontú Leader & Meath West TD Peadar Tóibín, the Minister for Finance has admitted the cost of Covid-19 increases the longer lockdown is in place – as the Budget deficit looks likely to grow larger in 2021.
An Teachta Tóibín:
“While this direct link is obvious there has been very little political debate about it and the long term costs to Irish society. There is a human and economic cost to the near 200 days of Lockdown our country has been in over the past year. Our non-Covid Healthcare has been decimated , with Cancer Services not to fully resume until the end of 2021. 10,000 homes have not been built this year due to restrictions. Restrictions on funerals are inhumane. Businesses are being culled by a Lockdown that is European record. Millions of people have gone 38 weeks without a religious services”.
“This is without even delving into the financial impact of Covid-19. In response to my PQ on the economic cost of the government’s lockdown measures, the Minister responded: “The cost of the three main income and business support schemes in 2021 is over €1 billion per month. The ultimate cost of the current phase of restrictions will depend on the speed at which restrictions can be lifted and the economy opens up. However, a deficit of at least as large as in 2020 is expected again in 2021.”
“The Minister then submits that overall Ireland’s economy grew by 3.5% last year using GDP growth before admitting that GDP figures “mask as severe hit to the domestic economy.” Yet GDP figures were the exact measurement used to reduce Ireland’s share of the EU Covid-19 recovery fund. Our nation’s National Debt is spiralling out of control whilst the cost of financing the government’s record lockdown measures worsens with every passing month. All the while the government’s management of the Covid-19 Vaccine programme has lost all credibility with the people. Each billion that this government borrows now will be taken out of future investment in Housing, Health and education.”
For Written Answer on : 31/03/2021
Question Number(s): 326 Question Reference(s): 16581/21
Asked by: Peadar Tóibín T.D.
To ask the Minister for Finance the daily cost of the lockdown measures to the economy; and the cost of lockdown measures to the economy in 2020.
A general government deficit of around €19 billion is estimated in 2020— a €21 billion swing from 2019. The year-on-year deterioration was primarily due to increases in voted expenditure with total net voted expenditure in 2020 amounting to €67,849 million. This was €13,703 million, or 25.3%, ahead of the same period in 2019. This rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in the areas of health and social protection.
In terms of revenue, tax receipts of €57,165 million collected in 2020 were down by 3.6% or €2,149 million on the previous year, with corporation tax growth as well as resilient income tax receipts combining to compensate for steep declines in the other tax heads, in particular in VAT and excise duties.
The cost of the three main income and business support schemes in 2021 is over €1 billion per month. The ultimate cost of the current phase of restrictions will depend on the speed at which restrictions can be lifted and the economy opens up. However, a deficit of at least as large as in 2020 is expected again in 2021.
Costs to the Economy
Although Ireland entered the Covid-19 induced crisis from a position of strength, with robust growth, balanced public finances and a labour market close to full employment, the outbreak of the pandemic turned the economy on its head in the space of a few weeks. Restrictions were introduced which resulted in a sharp contraction in economic activity. However, the strong performance of the multinational sector last year, of pharmaceuticals and ICT in particular, meant that the Irish economy grew last year, with GDP growth of almost 3 ½ per cent recorded for 2020 as a whole.
GDP figures however mask a severe hit to the domestic economy. Modified domestic demand, which provides a better measure of domestic activity, declined by 5.4 per cent in 2020, with domestic-facing sectors, such as hospitality, leisure and education, bearing the brunt of the economic impact. These are labour-intensive sectors and so it follows that the pandemic had a significant impact on the labour market, with an unemployment rate of about 19 per cent recorded in 2020.
Covid-19 restrictions continue to weigh on the domestic economy. Indeed, the impact of the current restrictions is already evident, with many additional people relying on state income supports as a result. The number of recipients of the Pandemic Unemployment Payment stood at approximately 450,000 as of 22nd March, an increase of around 172,000 from the beginning of Level 5 restrictions in December, but remaining well below the peak of 600,000 recorded in May last year. Crucially, however, the vaccine programme is now underway and there is light at the end of the tunnel. While this process will undoubtedly take time and restrictions will be required in the near term, as the vaccine programme picks up speed and the public health situation improves these restrictions will gradually be eased and an economic recovery will take hold.