The Government’s forecast for economic growth has been revised upwards, with GDP now predicted to increase by 8.75% in 2021
However, the Government’s forecast for economic growth has also been revised upwards, with Gross Domestic Product now predicted to increase by 8.75% in 2021.
The statement also says that continuing resilience in taxation receipts has led to an upward revision of €1.6 billion for tax revenue this year.
Minister for Finance, Paschal Donohoe said: “Thanks to our vaccination programme our economy has turned the corner and we can begin to return to some form of normality.
“The SES provides for a tax package amounting to €500 million per annum in each budget over the period 2022-2025. It also makes a commitment to a social welfare package.”
He added: “The provision of over €40 billion to directly address the public health emergency, shore-up household incomes and provide lifelines to firms during Covid-19 has had an impact on our debt and deficit figures. The SES sets out a plan to return public finances to a more sustainable footing.”
The SES sets out a core budget package for next year of €4.7 billion.
€1.5 billion of that will be available for new measures, with a further €2.8 billion set aside to provide for additional income, business and other supports, if they are required.
Overall, the Government expects core non-Covid related spending in 2022 to reach €80.1 billion, a 5.5% increase.
Provision will also be made for the continuation of some temporary supports, including European Union funding amounting to €8 billion.
As a result, the Government expects the deficit next year to be around 6.2% of modified Gross National Income.
However, it says that in the medium term, it is setting an expenditure rule whereby core spending growth is fixed at the estimated growth rate of the economy.
It is expected that by the middle of the decade, the deficit will be in the region of €7.4 billion, around €6.5 billion more than was projected in the Stability Programme Update.
The statement on the Summer Economic Statement says this reflects the Government’s commitment to resourcing capital investment and meeting the goals of the National Development Plan review.
“Indeed, cumulatively the Government will borrow €18.8 billion more than originally set out; of this, nearly €4 billion is due to higher capital spending,” it states.
“This increase is justified given the critical role that capital investment has to play in delivering on our economic, social and climate priorities. From 2023 onwards, the Government will be borrowing only to finance for capital expenditure.”
The Summer Economic Statement also makes it clear that as we emerge from the pandemic, fiscal trade-offs will re-emerge.
“Resources will be finite and choices will have to be made,” the statement says.
“We will also need to refocus our attention on the longer-term challenges which face us, including an ageing population, and the need to finance the digital and carbon transitions.”
The statement says the trade-off means that there must be a greater focus on how public expenditure is impacting on people’s lives, as well as the effectiveness and efficiency of delivery.
Overall, core public spending is projected to be almost €93 billion by 2025, it states.
NTMA updates guidance on borrowing
The National Treasury Management Agency has updated its guidance on the amount it will raise this year on international debt markets, following the publication of the Summer Economic Statement..
According to a statement, its borrowing range will now be €18-€20bn. This compares with a previous range of €16-€20bn.
The NTMA has already raised €14.75bn this year on behalf of the State at an average yield of 0.13% and an average maturity of 14 years.
Statement fails to set out adequate investment in housing – Sinn Féin
Sinn Féin’s finance spokesperson Pearse Doherty has said the SES fails to set out adequate investment in housing for Budget 2022.
In a statement, the Donegal TD said: “The Summer Economic Statement sets out a budgetary framework for next year that will fail to meet the needs of a recovering economy and which will not solve the housing crisis.
“Just €800 million in additional capital investment has been outlined, with no breakdown of where this money will be spent.” he said.
Mr Doherty said “this is at a time when the ESRI have called for a doubling of capital investment in housing to deliver up to 18,000 homes per year.”
He said the Government have “clearly failed to understand the scale of the crisis in housing”.