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

I will be sharing time with the Ministers of State, Deputies O'Donovan and Ossian Smyth.

I welcome the opportunity to open this debate and to set out from the Government's perspective the very significant response that has been made to the evolving situation regarding Covid-19. As we all know, the onset of this pandemic earlier this year has had an enormous impact on society and on economic activity in this State.

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The rapidly evolving nature of the public health situation required the previous Government and the new Government to act quickly to address the challenges facing our citizens as a result. In light of this, the Government has introduced a series of critical expenditure measures designed to support incomes, employers, jobs and the wider economy from the unprecedented shock of Covid-19 and, of course, to provide the necessary funding to our health service to fight this pandemic.

In July, the Government announced a series of measures designed to save small and medium-sized businesses and to help people to get back to work. There is no doubt the income and business supports that were introduced then continue to have a beneficial impact. As we learn as a society how to live with Covid-19, we will have to continue to extend that support to businesses and households.

Approximately €16 billion in additional Covid-19-related expenditure supports will have been provided this year by the Government, which represents a very substantial investment. It equates to roughly 9% of GNI* and is equivalent to over five times the original increase in gross voted expenditure planned for this year, as set out in the Revised Estimates for Public Services published last December. Looking at the position at the end of August, gross voted expenditure was €10 billion, or 24%, ahead of the same period in 2019. The main drivers of this increase are in the areas of social protection, health and business support. The increase is reflective of the additional Covid-19-related expenditure introduced by the Government to date. All told, it is currently estimated that gross voted expenditure for this year will be over €86 billion, an increase of over €19 billion, or almost 30%, relative to the outturn last year, or 23% higher than was originally budgeted for 2020.

The House will get a sense of the scale of the response from Government and the impact that has had on the overall expenditure profile of our country. The uncertainty that the virus brings makes it an even greater challenge to formulate a budget. In addition, we must assume that the UK and EU will be trading on WTO terms on 1 January 2021. This all means that spending in the upcoming budget will have to be focused on the policies that help the economy to recover, support businesses and get as many people back to work as possible. Having to deal with one of the challenges of Covid-19 or Brexit in the lead-up to a budget would represent a huge challenge, but having to deal with two at the same time makes the task ahead all the more difficult.

As Deputies will know, first and foremost, aiming to safeguard the health and well-being of our citizens is the number one priority for Government. Building a healthcare system that can cope with Covid-19 is no easy task but it is one we must meet. We must further increase capacity in our healthcare system to prepare for the months ahead and we need even quicker turnaround times for Covid testing. These measures will prove critical during the upcoming winter months.

This House approved the additional Covid-19 health expenditure when it voted through a Revised Estimate in July, including a €2 billion increase relative to the health allocation set out in the forecast published in December last year. This funding has allowed the HSE to put in place important and extraordinary public health measures across a number of key areas, including testing and tracing, nursing home supports, special arrangements with GPs and enhanced procurement, with a focus on PPE and the temporary arrangements that were put in place as a precautionary measure with private hospitals in order to ensure that capacity was increased in the system. Also of vital importance, of course, was the funding that enabled a scale-up in intensive care units and hospital bed capacity generally. Those are supports that we must continue with over the period ahead, particularly when we look at the current trajectory of the virus and the latest figures that have been published.

Further resources have recently been agreed to, for example, extend the scope of the flu vaccination to vulnerable categories. Yesterday, the Government approved €600 million for the 2020-2021 winter initiative to ensure our that health service has the capacity and resources needed to deal with what is forecast to be a very challenging period ahead for the State's health services. The details of that winter initiative will be published by the Minister and the HSE in the next number of days.

Looking ahead, officials in my Department are actively engaging with their counterparts in the Department of Health and the HSE in respect of all of these headings and others with a view to allowing us to return to the House next month with a workable, sustainable and comprehensive allocation for the Department of Health in the context of the 2021 Estimates and budget processes. Overall, the additional expenditure in health this year will be somewhere between €2 billion and €3 billion above what was originally envisaged. We have to now establish what will be the requirement to ensure we have a health service that is fit for purpose to deal with the situation that will arise in the winter months and that will be sustained right through 2021 against the assumption we have to make that Covid-19 will be prevalent throughout that period.

Aside from the public health aspect, the labour market has, as we all know, taken the brunt of the restrictions put in place to tackle the virus, and how this impact evolves into next year will have to be monitored very closely. We are already seeing signs of recovery, but that recovery is uneven and the longer-term scarring effects on the labour market will need to be addressed. This is why so many supports over the past six months have focused on household income and employment supports. As the economy has gradually reopened, much of the damage that was done to individual sectors has been revealed and continues to reveal itself. The impact of that scarring is something that will have to be considered very carefully to ensure we provide the supports that are needed.

The pandemic unemployment payment, PUP, for example, has been shown to be an extremely effective support in responding to the economic impact of Covid-19 and in cushioning the population from sudden income shocks. Currently, just over 200,000 people are in receipt of the payment. This represents a drop of nearly two thirds on the almost 600,000 people who were on the payment at the peak in the first week of May. The payment will continue to run until the beginning of April and we have decided, as a Government, that the scheme will remain open for new applicants until the end of the year, albeit at the reduced rates which kick in this week.

In addition, in support of businesses and their efforts to retain existing jobs and create new ones, the new employment wage support scheme has now succeeded the previous temporary wage subsidy scheme. The new scheme will run until April 2021. As part of it, employers whose turnover has fallen by 30% will receive a flat-rate subsidy of up to €203 per week per employee, including for seasonal staff and for new hires - for people who are taken on - which was one of the main issues raised by employers in the feedback they gave on the initial temporary wage subsidy scheme.

Further supports to the business community continue to be rolled out. The restart grant and the restart grant plus, which is currently available, bring total funding of the restart grant to €550 million, with up to €25,000 available to SMEs under the grant scheme. This Government is committed to supporting our businesses through the crisis. I will continue to consider further measures that can help to support SMEs as the economy continues to reopen, and as we respond to the evolving health situation. With the new plan that has been published, there may be a requirement in different parts of the country to move from one level to another, and we have to be adaptable and agile, as a Government, and be in a position to respond and to provide supports as and when, and where, they are needed throughout the period ahead.

As Deputies will be aware, the Minister for Education and Skills, Deputy Foley, published a roadmap for the full return to school on 27 July and, in support of this plan, additional funding at a cost of over €375 million was provided. Further to this, updated guidelines, including in regard to the use of PPE and enhanced hygiene in schools, were published by the Minister.

The roadmap, supported by the additional funding, succeeded in getting almost 1 million students back to school. By and large, it has gone very well. It is not just important for the young people who have returned to school and who have already borne a heavy burden as a result of this pandemic, it has also proven important for parents and society in general in returning to a sense of normality in these new times.

This funding has enabled schools to prepare for reopening, including making adjustments to the physical arrangement and layout of classrooms. In addition, the funding has facilitated the recruitment of additional staff. In this regard, the measures in the roadmap include over 1,000 additional teachers being made available to post-primary schools under the free scheme and enhanced supervision supports. Funding is being provided for additional supervision to support the management of physical distancing in secondary schools. To support the availability of substitute teachers in the primary sector, the Department is extending the current pilot supply panels on a nationwide basis for the school year that has now commenced. This will involve the additional allocation of approximately 200 teaching posts.

The Government also recognises the importance of investing in the higher education sector and the essential role this sector can play in driving recovery across regions and in preparing for the opportunities and challenges of what is now a changing economy. As part of the July stimulus plans, a substantial investment of up to €100 million was allocated to the higher education and further education and training sectors, providing over 35,000 additional places in undergraduate, postgraduate, upskilling and reskilling programmes. The new Department with responsibility for further and higher education received an additional €150 million in Exchequer funding to help reduce the impacts from Covid-19 on the higher education and further education sectors. A few examples include supports for ICT, health and safety, mental health supports and increased student access supports. The Exchequer has also provided for an additional 2,225 places in the higher education sector to address the impact of the new calculated grades model and Central Applications Office, CAO, offers in the higher education sector for this academic year.

The Government recognises the positive impact that investment in capital infrastructure can have on the economy. To this end, as part of the July stimulus programme, an additional €500 million was allocated for capital works projects for the remainder of this year, with about €100 million spilling over into 2021. A commitment was also made to invest over €9 billion in capital expenditure next year. This sends a very positive signal to the construction sector and gives it the certainty it needs to plan ahead for next year. There are companies that will invest in Ireland, keep on workers and hire more workers as a direct consequence of these decisions to back capital investment. In finalising the list of projects to be in receipt of funding from the July stimulus package, particular emphasis was placed on supporting projects that had the maximum jobs impact and contributed to key missions of the Government in the areas of climate change and housing.

Looking forward, the programme for Government committed to a substantive mid-term review of the national development plan, NDP. This review will afford the Government the opportunity of reappraising the NDP and realigning it with the new priorities set out in the programme for Government and to ensure it is consistent with the Project Ireland 2040 plan. We intend to set out an overall capital envelope for the next decade to 2030 and provide individual ceilings for Departments for the next five years. This will give them a high degree of certainty in order that they can plan the delivery of projects under their areas of responsibility for the next number of ears. That is important.

Ensuring the provision of the necessary funding to support our citizens and to protect vital public services over the next phase of the Covid-19 pandemic will be the overarching priority in budget 2021. While directing resources to these areas, we will also ensure that existing services are preserved and that the increases in capital investment set out in the NDP are implemented in order to support the recovery in the economy. Over the next four weeks, the Minister for Finance, Deputy Donohoe, and I will intensify the preparations that are well under way at this stage for budget 2021. We have set out some of the main assumptions underpinning our approach to that budget. The assumption, unfortunately, of there being no trade deal in the context of Brexit is one we all hope will not materialise. There is also the assumption that we will have to deal with Covid-19 through next year. We are determined to be agile and responsive to the needs of the economy next year and that is why we intend to put in place a recovery fund. We will outline the details of that in the Budget Statement. In addition, the Government will publish a new national economic plan in the middle of November which will set out its policies for the next number of years in key areas. I refer, for example, to enterprise policy, the policy on reskilling and policies on the development of a new green economy. We look forward to all that work.

All of this has had a profound impact on the public finances. We are facing a deficit this year in the range of €25 billion to €30 billion. Next year, on the basis of no policy change and looking at the amount of Covid-related expenditure we will have to incur in the health, education and transport systems and in other areas, there will be a need to borrow between €15 billion and €19 billion in cash. That is before we make new decisions about implementing programme for Government commitments and undertaking new policy initiatives. This gives a sense of the scale of the impact on our economy, our budgetary position and the fiscal outlook within which the Government will have to work. We are in a period of unprecedented and extraordinary uncertainty, but the Government is determined to respond to that in the best way it can by supporting our citizens, protecting vital public services and ensuring we provide supports for businesses through next year. We are putting the recovery fund in place to be able to respond to the emerging and evolving needs.

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