Gerald Nash (Louth, Labour)
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71. To ask the Minister for Public Expenditure and Reform his views on the recent Parliamentary Budget Office analytical model (details supplied) which suggests that the State’s debt burden will be on a sustainable path over the next 10 years and that aggressive fiscal consolidation will not be required to ensure that the burden of debt can be sustained taking growth rate forecasts into consideration; and if he will make a statement on the matter. [20246/21]

Gerald Nash (Louth, Labour)
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111. To ask the Minister for Public Expenditure and Reform his views on the recent comments of the ECB president and board members on the crucial need to maintain an ambitious fiscal stance to avoid the risk of delaying economic recovery and amplifying the longer-term scarring effects of the Covid 19 pandemic; and if he will make a statement on the matter. [20244/21]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 71 and 111 together.

Budget 2021 provided for an overall expenditure ceiling €87.8 billion this year. Of this funding, €75¾ billion relates to allocations for core expenditure programmes. In addition to this, up to an additional €12 billion was provided as part of Budget 2021 to enable the Government to respond to the evolving situation regarding Covid-19.

This allocation is in addition to the €16.8 billion allocated to counter the impacts of the virus in 2020. Taken together, over €28 billion has been provided for direct expenditure supports across 2020 and 2021 in response to Covid-19. This is a substantial additional allocation in addition to core public spending, and allows for measures to support our people and businesses and to ensure our economy is strongly positioned to recover from the impacts of the pandemic.

As outlined in the Stability Programme Update (SPU), the scale of the impact on the public finances has been stark with a deficit of approximately €18 billion both last year and this year. Consequently, the additional measures introduced have necessitated borrowing. Indeed, this year’s deficit will bring our overall debt levels to just under €240 billion, or almost 112 per cent of national income (GNI*).

However, the economic projections set out in the Stability Programme Update (SPU), which was published last week, offer grounds for hope that, as the vaccine rollout continues, the economy can recover strongly over the second half of this year.

The SPU was prepared using certain technical assumptions in relation to expenditure. These assumptions included an annual average increase in core expenditure of almost 3½% per annum over the period 2022 and 2025 and an unwinding of the Covid-19 related expenditure. On this technical basis, the SPU outlines that there is a credible path towards a sustainable budgetary position, with the phased unwinding of the temporary Covid-19 related expenditure supporting the better alignment of revenue and expenditure by the mid-part of the decade. Looking at developments in relation to debt, the projections in the SPU show a pathway whereby gross general government debt as a percentage of GNI* declines from an estimated 111.8 per cent in 2021 to 100.1 per cent in 2025, with debt as a percentage of GDP declining from 62.2 per cent to 55.4 per cent over the same period.

The expenditure amounts in the SPU are prepared on a technical basis, specifically reflecting a no-policy change position in relation to key Covid supports, in particular, the Pandemic Unemployment Payment, the Employment Wage Subsidy Scheme and the Covid Restrictions Support Scheme. However, Government has committed that there will be no cliff edge to these measures in order to support recovery from the pandemic.