Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Chair and members of the committee for the invitation to meet in advance of budget 2021, which I will present to Dáil Éireann next Tuesday with the Minister for Finance, Deputy Paschal Donohoe.

The economic and fiscal situation has changed dramatically in the past several months as the Covid-19 pandemic has had a severe impact on the economy, public finances, and the lives of our citizens. To respond to the crisis, Government has introduced a series of measures to support our key public services and to cushion the impact of the pandemic on households and enterprises. The scale of the additional supports introduced is estimated at €16 billion this year, which would bring gross Voted expenditure for the year to €86.5 billion. This represents an increase of more than €19 billion, or 30%, on expenditure in 2019.

The impact on workers and businesses has been devastating. From a position where at the start of the year we were at close to full employment, the Covid-adjusted measure of unemployment at the end of September stood at almost 15%. To respond to this crisis, Government has allocated more than €9 billion in additional funding to the Department of Employment Affairs and Social Protection, bringing total expenditure to more than €30 billion, to provide in particular for the pandemic unemployment payment, PUP, and the wage subsidy scheme. As of last Monday, there are just over 200,000 people in receipt of the PUP and approximately 38,000 businesses have registered for the employment wage subsidy scheme, EWSS. While the number of people in receipt of the PUP has significantly reduced since the peak of almost 600,000 in early May, these figures indicate the scale of the challenge still facing businesses and workers. In this context, the extension of these schemes to the start of April next year announced in the July stimulus and the subsequent decision to reopen the PUP to new entrants, provides greater certainty for businesses and workers of the support available over the coming months as we continue to live with the virus.

The provision of funding to enable our health service to respond to Covid-19 has been a crucial element of the Government's response. The Revised Estimate for health approved by the Dáil in July included a €2 billion increase relative to the health allocation set out in the Revised Estimate for public services 2020 published in December last year. This funding has allowed the HSE to put in place public health measures across a number of key areas. Further funding has also been agreed, for example, to extend the scope of the influenza vaccination and to provide for the 2020-2021 winter initiative. While work is continuing at finalising the funding requirement for this year, it is estimated that the overall increase relative to the December Revised Estimate for public services could be up to €3 billion.

Access to education is probably the most important opportunity available to our young people. In this context, to support the safe reopening of our education systems, an aggregate of almost €0.5 billion is being provided to our schools and further and higher education sectors.

The overall budgetary strategy for 2021 will focus on prioritising crisis management measures to address the challenges posed by Covid-19 and Brexit while preserving and maintaining existing levels of service within core expenditure programmes. In regard to core expenditure programmes, €70.4 billion in gross voted expenditure was allocated to Departments in the Revised Estimate for public services 2020 published in December 2019. At this stage it is planned that, before accounting for policy measures in key areas such as health and housing, the budget Estimates for 2021 will include an increase of approximately €3 billion in this core expenditure, comprising €2 billion in current expenditure and €1 billion in capital expenditure.

Of the €2 billion in current expenditure, it is estimated that there are pre-commitments of €1.1 billion to be funded in relation to demographics and to meet the carryover costs of prior year measures and public service pay deal commitments. In relation to capital expenditure, we will also ensure that the increase in capital investment set out in the national development plan is implemented in order to support the recovery in the economy. This would see core gross voted capital expenditure of almost €9.2 billion next year, an increase of almost €1 billion on the gross voted expenditure amount set out for this year in the Revised Estimate for public services 2020.

Ensuring the provision of the necessary funding to support our citizens and public services, in particular the health service, over the next phase of the Covid-19 pandemic will be the key priority in budget 2021. In light of this, work is ongoing in assessing the impact of Covid-19 costs in 2021. Consequently, there is a range of potential expenditure requirements that need to be worked through in detail. Taking into account the level of expenditure arising from Covid-19 this year, these costs will be significant, but are also subject to significant uncertainty. With 38,000 employers registered for the EWSS, the Revenue Commissioners are to make payments this week to 31,700 of these employers in respect of 335,000 employees. In addition, with more than 200,000 recipients of the PUP this week, before the nationwide level 3 restrictions were introduced, this indicates the scale of the challenge faced by workers and their employers. With the additional funding required for health and social protection amounting to more than €12 billion in aggregate this year, as we continue to live with the virus and manage any resurgences through 2021, the funding required for our health service and for income and employment supports will remain significant next year and subject to a degree of uncertainty that would need to be reflected in the estimated expenditure amounts for next year. In particular, given the challenges from Covid-19 that our health service will continue to deal with next year, this will be a key priority area in budget 2021.

As a result, there is extensive engagement with the Department of Health and the HSE as we seek to arrive at a workable, sustainable and comprehensive allocation for the Department of Health that can help build the necessary capacity and resilience into our health system.

Given the complex environment in which budget 2021 is being framed, I will seek to put together an expenditure settlement for next year that will allow Government to respond in an effective manner. This will require an approach that earmarks resources that can be used to respond to the changing environment as the position with regard to Brexit and the virus continues to develop, that ensures we continue to deliver on our core expenditure programmes, and that puts in place the building blocks for delivery of meaningful improvements in key priority areas for the Government, in particular in health and housing.

This approach seeks to ensure incremental improvements in the delivery of core public services across Government while committing the necessary level of resources to support our people and our key public services in living with the virus next year as well as targeting the necessary resources to support economic recovery as we deal with the challenges of Covid-19 and Brexit. I would be delighted to take questions.