There will be no return to austerity despite the €38bn economic deficit left by the COVID pandemic, the Public Expenditure Minister has told Newstalk Breakfast.

Michael McGrath said the economy will need “careful management” in the coming years but insisted that doesn’t “equate to pain” or another period of austerity.

“We will still have growth in expenditure so it is about managing this sensibly but certainly we can’t maintain the type of spending we have had in the last year and a half,” he said.

“That would not be sustainable and that would get us into trouble very quickly but provided we are cautious and sensible, and we support the economic recovery we believe we can avoid anything like the kind of decisions that were made coming off the crisis a decade ago.”

   

He said the budget deficit this year will be, “in the order of €20bn” following on from last year’s deficit of more than €18bn.

He said Ireland’s exceptional COVID-related expenditure through the pandemic is now over €30bn – with the Government expecting to spend another €7bn or €8bn on COVID-related costs like vaccines and healthcare next year.

He insisted however, that it is “inevitable” that there will be a strong rebound in the economy over the coming months due to pent-up demand.

Pandemic Unemployment Payment

Minister McGrath said the Exchequer has spent around €8.5bn on the Pandemic Unemployment Payment through the pandemic.

He said this spend will be scaled back from next Monday when changes to the scheme come into force.

“I think we have to be honest and recognise that there are a lot of job vacancies around the country,” he said.

“There are businesses who have had to curtail their opening hours because they can’t get staff across a number of sectors. Not just in hospitality, we have staff shortages in construction, in the care industry and in retail – so that is a reality as well.

“We are at a point now where the recovery is gaining momentum; it is really taking hold, those labour pressures have become quite acute in some instances and in a number of sectors and we are now at a point now where we are further easing restrictions.

“I think this is the appropriate time. It does need to be done.”

Arts and entertainment

He said there will be “safety net provisions” on offer for the self-employed and confirmed that a “bespoke scheme for the arts culture and entertainment sector” will soon be announced.

“We have done all that we reasonably could be expected to do to accommodate people but maintaining those levels of rates indefinitely is simply not an option for the economy or the public finances,” he said.

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