A seven billion euro reduction in the deficit will not see the Government “splurge” in Tuesday’s Budget, Public Expenditure Minister Michael McGrath has said.
The projected public finance deficit in the summer economic statement was 20 billion euro, but that has fallen dramatically to 13 billion euro, with the economy bouncing back from the coronavirus pandemic faster than expected.
But Mr McGrath said the deficit remains high and that future generations will have to be considered in spending plans.
“I very much welcome the really significant improvements in the projected deficit for this year – a change of seven billion euro in a short number of months is quite dramatic,” he said.
“The deficit as forecast now, the White Paper, is just over 13 billion versus a figure of over 20 billion euro in the summer economic statement.”
He told RTÉ’s The Week In Politics: “I would make the overall point that there is a lot of uncertainty; the easiest thing for (Finance) Minister (Paschal) Donohoe and I to do would be to say we’re now going to go on to splurge, or we’re going to spend that improved deficit outturn.
“But it’s still a deficit of over 13 billion euro. If we can reduce the deficit faster and faster, and add less money to the national debt, that’s not a bad thing.
“We have to think of our children, we have to think of our future generations.”
Mr McGrath has signalled that the focus of the Budget will be on addressing the rising cost-of-living pressures, as well as housing, childcare and climate action.
Social welfare recipients are in line for an increase of at least five euro across the board.
Mr McGrath said: “There are lots of demands and lots of challenges, right across the system, and we do acknowledge that people on core weekly social welfare rates haven’t benefited from an increase in their weekly rate in the last couple of budgets.”
He added: “We’ll see on Tuesday what progress that we can make. We are very conscious that there are really pressing cost-of-living pressures facing people at this time.
“We will do all that we can as a Government to bring forward an overall package that seeks to support people and improve living standards.
“This really is about working towards economic and social recovery.
“The economic recovery is well under way, but a lot of services came under real pressure over the last 18 months in disability care, mental health, and in a range of other areas.
“So we do want to make substantial progress in all of those areas too.”
But despite energy prices soaring over the last 12 months, the minister said an increase to the carbon tax would go ahead as planned.
He said: “The Oireachtas legislated last year for the increases in the carbon tax, out to 2030, so they will proceed.
“But they don’t all happen immediately on Budget night; in relation to home heating oil, for example, and solid fuel changes, there are no changes there until May of next year.” “Obviously we’re faced with a new set of challenges now, which we hope will be temporary, we can’t predict what international energy prices, how they will develop over the period ahead” he added.
“But we will have, I believe, a very comprehensive package to support people to get through what we hope will be a temporary period of escalating prices.”
But Sinn Fein’s public expenditure spokeswoman Mairead Farrell said the consensus on carbon tax is changing, and that families will be unable to cope with the increases.
She said: “The whole point of the carbon tax, obviously, is to shift households away from carbon consumption.
“But at this very moment in time, we know, first of all, that there’s very few alternatives for households and, second of all, we also know that there’s huge costs, there’s rising costs in terms of energy costs for households.
“We even know that they’re projecting that will be an increase of 500 euro for over a period of 12 months. Families can’t pay that.”