Budget 2021: White Paper Opening remarks by Minister for Finance, Paschal Donohoe T.D.

9th October, 2020

  • Good afternoon to all and thank you for coming here today.
  • As you know, next Tuesday and Minister McGrath and I will present Budget 2021 to Dáil Éireann

 

  • As we have previously communicated, the Budget will focus on providing continued support to the economy to address the immediate challenges of the Covid-19 pandemic and a disorderly Brexit.  But it will also focus on other core issues facing our people: housing, healthcare, and climate change.

 

  • Today, we are publishing the so-called ‘White Paper on Receipts and Expenditure’: this is a constitutional requirement and it outlines the budgetary position in advance of any new measures being introduced next Tuesday.

 

  • Before I provide an overview of the position, I think it is important to stress the extra-ordinary uncertainty that faces us as a society – I think it’s fair to say that most people have never before experienced this lack of clarity about what the near-term future holds.

 

  • This is, of course, because of the pandemic – our immediate economic prospects are fundamentally intertwined with that of the virus and we simply do not know the pathway it will take.

 

  • To compound matters, we have the very real possibility of a significant change to the trading relationship between ourselves (as members of the EU) and our friends in the UK.  If tariff and non-tariff barriers are a feature of bilateral trade from January, this will have significant and lasting damage to many firms, especially our SMEs. 

 

  • So it is against this backdrop – extremely difficult for so many people on our island – that the Budget for next year is prepared. And it is one that aims to provide comfort to our people that a realistic plan is in place and that will do what is needed to give our country the best chance in meeting these challenges head-on.

 

  • As I mentioned a week or so ago, our economic forecasts have been published and endorsed by the Irish Fiscal Advisory Council. We are projecting that GDP will fall by -2½ per cent this year and increase by just 1½ per cent next year.

 

  • Today, my Department will publish its estimate of the budget balance for this year and next, in advance of next week’s Budget announcement.

 

  • While my officials are still finalising the figures, we anticipate a general government deficit of just over €21 billion for this year.  This would be the equivalent of around 6.1 per cent of GDP or – more accurately – of 10 ½ per cent of modified Gross National Income (GNI*).

 

  • This is before any further measures that may need to be introduced for the remainder of the year are accounted for.

 

  • For next year, we anticipate a pre-Budget deficit of the order €14 ½ billion if there were no policy changes; this is the equivalent to just over 4 per cent of GDP or around 7 per cent of GNI*.

 

  • I want to stress that these projections are subject to an unprecedented amount of uncertainty – any escalation in containment measures due to Covid would impact the deficit numbers.

 

  • Reflecting this, we will publish a ‘scenario’ analysis alongside the Budget on Tuesday.

 

  • In other words, like we did earlier on in the year – in the Stability Programme Update – we will have a baseline scenario but also include an analysis showing how things might evolve if stricter public health measures are needed.

 

  • By any measure, these are extraordinary figures. Even in the absence of Budget 2021, the State will need to borrow roughly an additional €35 ½ billion just to fund existing levels of service, over the next two years. But we are ready and in a good position to do this. Thanks, in no small part, to the progress we have made in recent years in getting the books back in order and our country out of the red.

 

  • During this crisis, it is essential that the State steps up to the plate, supporting incomes, businesses and cushioning the economic blow of the pandemic – that is what we are doing and Budget 2021 will be the next stage in the process.

 

  • With this challenging economic background, budgetary decisions will prioritise management of both the COVID crisis and Brexit – with an overall budgetary strategy to provide counter-cyclical support to the economy that is in line with other comparative EU countries.

 

  • Focus will also be retained on the areas that are impacting our people and that need to be continually addressed. Among the areas to be targeted are the three priorities outlined in the Programme for Government – health, housing and climate change.

 

  • In addition to the planned increase in ‘core’ spending, to provide for the public services that our people want and deserve, the Government will also provide further support to the economy, as per the Programme for Government commitment, via a Recovery Fund. 

 

  • The size and nature of the fund is still to be agreed by Government and I will be working with my colleagues and officials over the weekend to finalise the position.

 

  • We are all experiencing a time we could never, in our wildest dreams have imagined. With that comes anxiety, insecurity and fear. This is normal. Everyone feels it.

 

  • This Government has been working relentlessly to provide appropriate supports for our people, for communities and for businesses across the country, where they are needed most. That will not change.

 

  • This Budget is being crafted to ensure that, where possible, the understandable concerns and worries that you have each day are addressed in a way that gives us a solid and secure path through the end of this year and into the next, as we get to grips with both Covid and Brexit.

 

  • We continue to listen to you, to act in your interest and in the interest of ensuring that the resources that we have available are used in the best possible way.

 

  • Thank you.