End-year Exchequer returns remarks

5th January, 2021

Good afternoon everyone.


The Exchequer returns, which we are publishing today, provide a stark picture of the impact of the Covid-19 pandemic on our public finances.


From a surplus of just under €2 billion in 2019, we now expect a deficit of €19 billion in 2020.


The €21 billion deterioration reflects Government policy to protect incomes, support businesses and invest heavily in our health service.


My colleague Minister McGrath will provide further details on public expenditure, however, I will say that the 25 per cent increase in net voted expenditure is a testament to the Government’s commitment to deploying the full resources of the State to fight this pandemic.


On the tax side, today’s figures show a continuation of the trends that emerged during the summer, with strong corporation tax and better-than-expected income taxes, compensating to some degree for large falls in VAT and excise duties.


Overall, tax revenues in 2020 were down by €2.1 billion, or 3 ½ per cent on 2019.


Renewed Level 5 restrictions

I’d now like to say a few words on the current restrictions.


The next few weeks will be tough. There is no getting around that fact.


Level 5 restrictions are difficult for families, especially those with elderly relatives. They are hard on communities, as normal social and personal interactions cease, or are heavily curtailed.


And of course, they are toughest on those who live alone or who have lost their jobs and also on businesses that have to close.


The Government has never taken the decision to enter level 5 restrictions lightly. I am acutely aware of the difficulties it causes business owners and employees across the country.



In taking the decision to move to level 5, the Government is attempting to protect the public and preserve human life.


In such circumstances, it is only right that Government does whatever it can to support those people and businesses worst affected.


And we know that the pandemic has not impacted everyone in the same way.


Those in service sector ‘face to face’ employment have suffered greatly. Research by the ESRI suggests that women and those originally from Eastern Europe have borne some of the worst of this crisis.


Others, especially those with the ability to work from home, have seen less of a financial impact than could have been expected at the beginning of this pandemic.


The disproportionate impact of the crisis increases the onus on Government to forcefully respond.


This is what we have done.


Support measures

We have spent some €5 billion on Pandemic Unemployment Payments, €4 billion on wage supports, as well as introducing a whole host of business supports aimed at keeping companies in business, maintaining employment links for employees and making it easier for firms to re-open when it is safe to do so.


Today’s figures show the extraordinary impact these supports have had on the public finances.


During this period of further enhanced restrictions, we will continue to use the resources of the State to support those most negatively affected.


As I have said before; we are not afraid of deficits when there is a clear justification to run them.


Support measures are there, and I encourage people and businesses to avail of them.


But there is light at the end of the tunnel.


The vaccine is being rolled out as I speak and — despite the deficit — the underlying trends in our national finances are positive.


Today’s tax figures show that, if we can control the virus for another few months, allowing the vaccination programme to run its course, the economy that is ready to be unleashed thereafter is arguably stronger and more agile than ever before.


Income Tax

Nowhere is this more apparent than in income tax receipts.


Overall, receipts were down a relatively modest €224 million, or 1 per cent on last year.


I have spoken before about the progressivity of the income tax system protecting receipts. A large proportion of those that have unfortunately lost their jobs did not pay income tax or paid just a moderate amount. It has been deliberate policy by successive governments to keep lower paid workers and those in part-time work outside the tax net.


This is something we can be proud of.


But in my view, the robustness in receipts has also been due to the extraordinary resilience of our businesses sector.


Firms have innovated and adapted.


Many cafés, restaurants and bars have switched to a take-away service. There has been a huge shift towards online retailing. Recent An Post data points to half of all parcels coming from domestic firms — a significant increase from pre-pandemic figures and a hugely welcome development.


The move to working from home has been extraordinary. I know how difficult that can be, yet businesses up and down the country have adapted and moved on.


Income tax paid by the self-employed was around the same level as last year. A remarkable outcome given the circumstances.


This points to an enterprise sector with huge underlying strength and an economy with solid fundamentals.


Corporation tax

This strength is also reflected in corporation tax receipts.


Returns increased by €945 million, or nearly 9 per cent to €11.8 billion in 2020.


We continue to sustain hugely successful companies, both foreign and domestic, with the increase in corporation tax receipts testament to our industrial policy over a generation or more.


But we know that such strong revenues will not last beyond the short-term. Whether through international tax reform measures at the OECD, or otherwise, we need to prepare for a reduction in this revenue source.



Other challenges remain, not least the significant increase in debt accumulated to fight this pandemic.


The best way to service this debt is to grow the economy while returning the public finances to a sustainable path. The strength of our economy — exemplified by some of the underlying trends in today’s figures — will help us do that.


The extraordinary measures introduced to fight this pandemic will only be unwound when it is appropriate to do so. This will be done in an incremental and responsible way.


There will be no big cliff-edge to Government support.


In the spring, I will present a fiscal strategy outlining the trajectory of the budgetary position over the medium-term.


By that stage the vaccination programme will be well advanced, the impacts of the UK’s departure from the Single Market better understood and the full effect of Covid-19 on the public finances more complete.


The Stability Programme Update, which will be published in April, will provide an opportunity for us to take stock and chart the path forward.



Today’s figures represent a crucial set of data as we begin that process.


They show that the impact of the pandemic on the public finances has been severe.


But through the strength of our economic model and the resilience of our people, they also show that we should face this current difficult period with optimism.


Restrictions will end.


The pandemic will end.


And when they do, the Irish people, and Irish businesses, are well placed to pick up where we left off, bringing renewed prosperity in a renewed economy.


Thank you