Committee on Budgetary Oversight debate -
Thursday, 1 Oct 2020

Pre-budget Engagement: Minister for Finance

Chairman

I welcome the Minister for Finance, Deputy Donohoe and thank him for making himself available to meet the committee at its first public meeting. The first pre-budget session with the Minister is a welcome opportunity for the committee to discuss budgetary strategy and the important budgetary decisions being made against the backdrop of the Covid-19 pandemic and the United Kingdom's exit from the European Union.

Before we commence formal proceedings, I wish to advise that any witnesses giving evidence from a location outside of the parliamentary precincts to note that the constitutional protections afforded to witnesses attending to give evidence before committees may not extend to them. There is no clear guidance on whether or to what extent the evidence given is covered by absolute privilege of a statutory nature. Persons giving evidence from another jurisdiction should also be mindful of their domestic statutory regime. If witnesses are directed by the committee to cease giving evidence on a particular matter they must respect that direction. I would also like to remind members that the meeting is limited to two hours due to the current Covid-19 guidelines. This is to ensure the safety of members, witnesses and secretarial staff. We have agreed on speaking slots and times and I ask members to remain within these agreed times. I also remind members that other committee members will be attending this room. I ask them to vacate their seats at a reasonable time and use the available wipes to clean their seating area. This will allow the next set of committee members to arrive and take a seat.

Minister for Finance (Deputy Paschal Donohoe)

Before giving my opening statement, I wish to indicate to my colleagues that I can only see myself on this monitor. It would be great to see committee members as I address them and deal with their questions.

I am thankful for the invitation to address the committee today in advance of budget 2021, which I will present to Dáil Éireann alongside my Cabinet colleague, the Minister for Public Expenditure and Reform, Deputy Michael McGrath, on Tuesday, 13 October. I would like to begin by congratulating Deputy Hourigan on her appointment as Chair of this committee and Deputy Mairéad Farrell on her appointment as Vice Chair. I wish both Deputies well in their new roles.

I understand the committee would like to discuss a range of topics, including budget forecasts and priorities, debt sustainability, Brexit, pandemic-related support from the EU-----

Chairman

My apologies to the Minister. The sound quality is poor. I am going to see if we can rectify the situation.

Sitting suspended at 1.10 p.m. and resumed at 1.20 p.m.

Chairman

In light of the suspension of the meeting, I will not make any introductory remarks. I invite the Minister to make his opening statement.

Deputy Paschal Donohoe

I thank the Chair and apologise for that technical difficulty. I issued my statement to the committee yesterday and in light of what has just happened, I do not wish to take up the committee's time. I am quite happy to move to questions and answers if that is acceptable to the Chair.

Chairman

Is that agreed? Agreed.

Deputy John Lahart

I read the Minister's script twice. I thank him for coming to the committee in person. We have a lot of work to catch up on. I know from previous membership of the Committee on Budgetary Oversight that the Minister has always made himself available, and he has not let us down today. I hope the technical issues can be cleared up as time goes by.

The Minister's statement mentioned the level of unemployment, which has thankfully fallen, although I believe it has risen a little in the last week. It would be useful if the Minister could present figures for youth unemployment to the committee. We received briefings from the independent Parliamentary Budget Office earlier this week. The Minister's statement mentioned that support disbursed by the State amounts to €24.5 billion to date. As the Minister says, this is a colossal sum, amounting to 14% of national income. The transitional Government which held office between the previous Government and the formation of the present one bolstered particularly vulnerable sectors of the economy at a time of great national need, and in that sense fulfilled the unwritten social contract that exists between the State and its citizens. As a member of the Committee on Budgetary Oversight, I would like to flag the fact that most of this went unaudited, unsupervised and unquestioned. There was general quiescence from the Opposition regarding this expenditure. It is a huge sum of money, and other committee members and I would like to review that spending in detail. We owe that to taxpayers. I hope I am not misquoting the Parliamentary Budget Office, which indicated that digging down into these figures was difficult. Any assistance the Minister's Department and the Department of Public Expenditure and Reform could give in that regard would be very welcome.

Several medical measures pertaining to GPs, medical cards and other issues were outstanding from budget 2020. They were meant to have been put into effect in July and were not. The Minister might be able to report on them. I accept that these were micro-issues.

I was very taken with the pre-budget submission of the Irish Fiscal Advisory Council, IFAC. It is a conservative group. When Mr. Seamus Coffey was the chairman he used to remind us that the purpose of IFAC was to institutionalise the memory of the crash. We tend to think of that in terms of what went wrong. Today I am minded to think of the impact of the crash on vulnerable people and the pain it caused. As a committee, we should listen to IFAC. If we are to institutionalise the memory of the crash, we should also institutionalise the memory of austerity. I warmly welcome the general thrust of IFAC's submission, which essentially counsels against penny-pinching at this time. The submission refers to three phases and advises the Government to keep those supports going at least until the second phase, when the pandemic begins to disappear, please God. I know that tax and income figures are good and there has been an unexpected bounce.

I have a couple of questions concerning the budget. I received a text from a publican in the city today. It costs him €80,000 a month to remain shut. He has laid off 25 people. The Chawke Group, which includes the Old Orchard Inn and is run by Mr. Charlie Chawke and his son Mr. David Chawke, laid off 300 people yesterday. Delays to Covid-19 payments to staff were a big issue. Some 300 people will now be depending on social protection payments for a period. These delays are not good enough.

The publican to whom I referred contacted me this morning to say he was thinking of investing in weather proofing for the outside of his premises to accommodate a marquee type of set-up. This would cost him €10,000 and he wanted to know whether I thought it was worth doing or if the option to provide an outdoor service would be shut down.

The second issue I want to raise is the fact that Dublin city is dying. The convention centre, where the Dáil sits on some days, is beside the headquarters of PricewaterhouseCoopers. I spoke to someone there recently who told me there used to be 1,500 staff working at their desks in that building but now there are only 100. The Minister will appreciate that the impact of what is happening on local sandwich bars, restaurants and coffee shops is absolutely phenomenal. There were packages of supports from the Government for businesses in counties Laois, Kildare and Offaly but there does not seem to have been any such package for Dublin, particularly for the city centre. I acknowledge the efforts of Dublin City Council in trying to facilitate people coming into the city.

This leads me to the issue of remote working. The Government said something about it during the week and I ask the Minister to flesh out what is proposed to be done to get people back into work. Leinster House has functioned through the crisis. There are 400 or 500 people working here, although some are probably still working remotely. Surely there is a cohort of Dublin city workers who could come back to work safely while others continue to work remotely? What incentives does the Minister intend to offer in that regard to help bolster the economy in the city next year? I make no apologies for trying to champion the cause of the city, because it is dying. We have discovered during the Covid crisis that it is utterly over-reliant on tourism and remote working is adding to the problem. Is there any research being done on people's views on remote working? Everybody thought it was the greatest thing since the sliced pan at the start of the Covid pandemic, but it seems to be the case that some people are no longer as keen on it. Perhaps a blended working arrangement would be the best thing psychologically, if for no other reason.

Deputy Paschal Donohoe

I thank the Deputy for his opening statement and questions. I will make two points about his statement before dealing with each of his questions in turn. First, in regard to youth unemployment, I am of course keenly aware that it is younger workers and students who have suffered the most during this crisis. Those most affected have been young people starting out in work or those hoping to get a job. While I do not have the figures on youth unemployment to hand, I know they are available. If the committee cannot access them quickly, I can get them sent on. We know that the share of young people who are now unemployed because of the impact of this awful disease on our economy is very high. We must endeavour to make further progress in addressing that issue.

Second, in regard to the employment wage subsidy scheme, EWSS, and its predecessor, the temporary wage subsidy scheme, TWSS, I am very confident that the overwhelming majority of employers have used both schemes exactly in the way in which we intended. We can see that by the number of employers on the scheme and the number of employees who are now related to the scheme. As we move into a more mature phase of maintaining the subsidy - we have already given a commitment that it will go up to 31 March next year - issues that have always been very important to the Revenue Commissioners, such as compliance and how employers participate in the scheme, will absolutely continue to be things that we monitor and check. As I pointed out when I brought the legislation to the Dáil to launch the TWSS, the penalties and sanctions are very severe for any employer who uses the scheme differently from what is intended. It will be a really serious matter for any company if it turns out that the way in which it entered or used the scheme is not as the Dáil intended. The amount of money involved in the two schemes is huge and it is intended to look after citizens at a time of great risk.

I will now answer the four questions the Deputy put to me. The first related to IFAC's pre-budget submission. In fairness to IFAC, it has always made the case for having the right budgetary policy in place to reflect what is happening in our economy and with our people at any given time.

IFAC has been broadly supportive of the first phase of supports we introduced and has given us some thoughts for the second and third phases. Those advices are being examined.

The Deputy also spoke about weather and outdoor dining. Much of the advice that is issued is in the hands of the Department of Health and the National Public Health Emergency Team, NPHET. It is worth noting that at level 3, as members will know, some outdoor dining is allowed. I am only too aware of the fact that different local authorities are doing this differently. Some are doing it better than others. I ask all local authorities to use all the flexibility they have to support cafés and restaurants, for which this has been such a tough time, in facilitating dining outside of premises.

Before I make my point about office living and our city centres, I want to give the context that our pre-eminent concern, and the concern of anybody who debates and discusses this issue, is to defeat this disease, keep people safe and keep workers safe. To repeat what I said in the Dáil earlier in the week, I think we gravely underestimate the impact on our citizens of people not being able to go into work. We can view it purely in terms of the indirect effects that office working has on restaurants, cafés and how the city centre looks. The Deputy was beginning to go into that territory in the points he was going to make to me. Equally, having workplaces functioning is at the heart of how we develop skills. It is important from a well-being point of view that there is a workplace to which those who can do so safely can go. That well-being is at the heart of how we develop skills. This is a skills-based economy.

Chairman

I advise the Minister that I will have to call the next speaker in a minute.

Deputy Paschal Donohoe

If we are successful with our current efforts with the disease - we know how difficult this is - I hope that as we move into 2021 we can refocus our efforts on how to ensure employers who are able to make their offices safe are able to facilitate some people working in them some of the time. Today is 1 October, and I am very conscious that this would normally be the time of year when many people would be starting their first job having gone through college. Working in an environment with other people, learning from them and socialising with them is such a critical element of well-being and how we develop productivity for our economy. Clearly, now is not the time for that given where we are with this disease. As our efforts redouble during the rest of this year, I hope this is an issue we can make further progress on next year.

Chairman

I call the first speaker for Sinn Féin, Deputy Mairéad Farrell.

Deputy Mairéad Farrell

Gabhaim buíochas leis an Aire as an méid atá ráite aige inniu. The fact that the summer economic statement was not published this year hampers the scrutiny of the budgetary process by this committee and the Dáil. As I have a number of aspects that I want to discuss, I will launch straight into asking questions. In terms of the wage subsidy scheme, has the Minister figures on how many people across the economy earn less than the €151.50 gross weekly pay? Will he consider Sinn Féin's proposal to introduce wage supports for those low-paid workers and increase wage supports for the more impacted sectors? What consideration has he given to replacing the EWSS post 31 March?

Deputy Paschal Donohoe

The data that I had available to me indicated that around 1% of those who were participating on the TWSS had an income level below what has been indicated by the Deputy.

In terms of the points made, they are not just Sinn Féin proposals. These proposals are being made by every Deputy on this committee as we consider how we can evolve existing supports to support sectors of the economy that are very vulnerable and are being hit very hard at the moment. Of course, I am looking at the options in this regard in advance of budget day.

I have given thought to what will happen beyond 31 March but we are still some way from being able to answer the really critical questions of what will be the level of subsidy that will be needed for our economy in April and May of next year, and what would be the appropriate structure of the wage subsidy scheme at that point.

We are looking at options in that regard, but I do not believe we will have the information available to us to be able to make decisions on the future design of a wage subsidy scheme for some time yet.

Deputy Mairéad Farrell

On the borrowing requirements for 2021, the Department has stated its intention to reach a deficit of between 4.5% and 5.5% of GDP on a no-policy-change basis. I seek clarification on this. What is this deficit range in nominal terms? In saying this is on a no-policy-change basis, does that include the €9 billion in Covid-related expenditure? With regard to funding the borrowing, in 2020 part of the deficit was funded through cash transfers, for example, an Exchequer transfer of €2 billion from the National Asset Management Agency, NAMA. Will a portion of the 2021 deficit be funded through other cash transfers and, if so, what are they? The Minister mentioned, and has previously stated, that we must stay within the pack of EU member states in the context of deficit levels. In announcing his budgetary strategy, he stated that the objective is to ensure that Ireland's deficit position remains within average euro levels. Is he aware of what the deficit levels will be in other EU member states next year?

Deputy Paschal Donohoe

I will answer each of the Deputy's questions in turn. Yes, it includes the €9 billion of Covid-related expenditure. Regarding transfers within the balance sheet for next year, the key one that will be coming through will be further transfers from NAMA. On the nominal value of the different deficit ranges I have outlined, it would equate to between €14 billion and €18 billion to €19 billion, depending on where we end up in that range. The Minister for Public Expenditure and Reform, Deputy Michael McGrath, is working hard to understand where we would be in that range from a no-policy-change perspective.

Deputy Mairéad Farrell

Can the Minister give any extra details on those further transfers from NAMA or is that as much as he can say at present?

Deputy Paschal Donohoe

I cannot give them to the Deputy now, but I can do so in a follow-up note.

Deputy Mairéad Farrell

That would be helpful. Can the Minister provide a breakdown of the €9 billion for Covid-related expenditure?

Deputy Paschal Donohoe

That would normally be a matter for the Minister for Public Expenditure and Reform, but I will see if I can get the details of the breakdown during my appearance at this committee and give them to the Deputy later.

Deputy Mairéad Farrell

That would be great. We have a situation whereby my colleague, Deputy Doherty, submitted a parliamentary question about the €9 billion and did not get an adequate response to it, but later we saw that it was then printed in the Irish Examiner. In that regard, the Minister said in his opening statement that he has announced supports which, to date, amount to €24.5 billion or 14% of national income. Can the Minister clarify what amount of this has been released to date?

Deputy Paschal Donohoe

The Deputy put a question to me about NAMA. While we are unclear about what the exact figure will be, we are anticipating that it will be approximately €1.5 billion. The figure for this year was in the region of €2 billion.

Regarding the deployment of the €9 billion, the vast majority of that has now been released in the way we anticipated because so much of it is driven through the TWSS, the pandemic unemployment payment and the cost involved in the acquisition of items such as personal protective equipment, PPE. That is being spent in the way we anticipated. Obviously, one of the things we will be working to understand, particularly across November and December when Departments look to deliver the expenditure commitments they have committed to, is ensuring that all of the money we made a commitment to spend is spent.

I am particularly aware, given the prevailing economic circumstances, that spending that kind of money may make a big difference to people's lives, their incomes and even their jobs, given the many other existing pressures.

Deputy Mairéad Farrell

I ask the Minister to comment on deficit levels and Ireland remaining within the EU pack.

Deputy Paschal Donohoe

I do not really have information regarding what that will be for now. Many of my colleagues are involved in their own national budgetary processes. While they have given me some indication of where they might end up, I am reluctant to share that information in deference to their parliaments and work in which my colleagues may be involved with their governments. As we move through next week, however, I hope to try to get more of a sense of where our borrowing requirement will be compared with other countries in the eurozone. The key aspect, which the Deputy already recognised in her opening question, concerns the opening figures of our current deficit range. On a no-change policy basis, that will be between 4.5% and 5.5%, so whatever figure we end up with on budget day will be ahead of that.

Deputy Mairéad Farrell

That is fine. I am not asking the Minister to give me the figures for the other countries. He is, though, having discussions on those figures with others in the EU, and it seems that those discussions will provide some direction to the Minister.

Deputy Paschal Donohoe

I want to have an awareness of that situation and ensure that when we complete our budgetary plans that we are in a safe place, one similar to where other countries will be. What is under way now is that the Minister for Public Expenditure and Reform, Deputy Michael McGrath, is working to finalise what exactly will be the deficit position when all our current commitments are met. When we are clear on that aspect, any policy choices to stimulate the economy and the initiation of any new policy measures will follow. Those are the two major pieces of work that we will be engaged in for the next week.

Deputy Mairéad Farrell

I thank the Minister.

Chairman

I will now move on to the first speaker from Fine Gael, who is Deputy O'Donnell.

Deputy Kieran O'Donnell

I thank the Chair and I welcome the Minister. Regarding the budget and the recovery of the Irish economy, how does the Minister see the impact of a vaccine being found for the Covid-19 virus feeding into the budgetary process? Can the economy recover fully before a vaccine is found and what are the implications for budgeting? The Minister might also comment on implications of a no-deal Brexit for budget preparations. The EU has also set aside the fiscal rules for the moment, but for how long does the Minister foresee that being the case? I ask the Minister, therefore, for his overview of the economic landscape for the next three years, including whether the Irish economy can recover before a vaccine is found and the implications of a no-deal Brexit.

Deputy Paschal Donohoe

I thank the Deputy. I begin with the scenario of a no-deal Brexit. Brexit occurring without a trade deal would have a significant impact on how we would have expected our economy to perform next year. I will give two figures to illustrate what that context would look like. In the absence of a trade deal, post-Brexit, we expect the economy to grow by around 1% to 1.5% next year. If a trade deal is agreed in the context of Brexit, our national economic growth could be between 3% and 4%. That is a very big difference, and the biggest difference that will be felt in people's lives will concern where we are with levels of unemployment. We indicated that if we were successful in securing an agreement with the United Kingdom, that unemployment could be approximately 8% for next year.

This would still be very high, but in the absence of that agreement, unemployment would be between 10% and 10.75%. That will make such a big difference to the lives of so many people.

In terms of whether the economy can recover before a vaccine is found, we should distinguish between two things relating to the vaccine. The first is a vaccine being discovered and the second is the vaccine being broadly available. As the Deputy well knows, they are two very different events. Do I believe our economy can recover before a vaccine is discovered? The economy is showing signs already of recovering in terms of how we could measure growth in that it is growing in a very different way from how it grew earlier in the year. Even if we end up having to deal with a no trade deal Brexit, the economy will still be bigger next year than it was this year, and our assumptions are based on there not being a broadly available vaccine for most or any of next year so it can recover.

Then we get into the distinction between a recovering economy and a recovered economy. I believe we will only get to the point where we have a recovered economy if there is medical technology or a vaccine that is broadly available and accepted. That would create an environment of confidence in which we could get back to the levels of employment and income growth we left behind at the start of this year.

With regard to the parts of the economy that are most affected by it, there are two. The first is those parts of our economy that rely on the assembly of people and for whom social and physical distancing has such an impact and, therefore, where we are with hospitality in particular. All of the parts of the hospitality sector are the most adversely affected by this type of technology not being available. The second comprises aviation and tourism, because confidence regarding being able to travel healthily is having a fundamental impact on people's willingness to travel. This in turn is tied up with the availability of a vaccine.

I go back to the point I made earlier on a vaccine being discovered and verified and then becoming broadly available. While I am not by any means an expert in these matters it would appear there will be a period of time between these two things happening.

Deputy Kieran O'Donnell

For how long will the Minister factor into the budgetary process the vaccine being unavailable? Will it be for one, two or three years with regard to proofing a budget? Does the Minister expect a no-deal Brexit at this stage? He is preparing in this way but does he expect it to be the case?

With regard to the sectors, our income tax receipts have held up in the main and our corporation tax receipts are up, but generally it is the multinational sectors and higher end jobs holding it up. How does the Minister believe we can deal with the sectors he mentioned, including the hospitality sector, which are lower paid and aviation with regard to health implications? What measures can we put in place so we do not have a long-term scarring effect on these particular sectors that are so impacted by Covid?

Deputy Paschal Donohoe

I have made the decision not to do an economic budgetary forecast on budget day beyond next year, which is a decision that does not have much precedent because, even in putting together budgets many years ago when things were very unpredictable, it was always possible to put together an outlook regarding what we thought the economy would look like in two years' time. Precisely because of the two issues the Deputy has raised, which is where we stand with Brexit and the availability of a vaccine, we have decided not to do a budgetary forecast beyond next year. On budget day we will update where we are in 2020 and 2021 and we will not go beyond that. We have not assumed the broad availability of a vaccine for almost all of next year because of the need to be careful about the assumptions we are making.

I have touched on some of the sectors that are most adversely affected. We are coming into challenges regarding the trade-offs between universally available schemes that have a big impact on and are a big help to everybody and the fact that not everyone is being impacted equally. Every government and parliament dealing with Covid-19 is now grappling with that. The tools available to deal with that include grants. For example, the Minister, Deputy Catherine Martin, has already done a great deal from a grant point of view to try to support different parts of our society and economy. The choices regarding the temporary wage subsidy scheme and any future wage subsidy scheme are difficult because any effort we make to change the operation of the subsidy scheme for one part of the economy has big impacts on the rest of us. That is difficult for us.

Deputy Kieran O'Donnell

Does the Minister anticipate that additional measures will be put in place in the budget for those particular sectors which, he will appreciate, are hugely adversely affected - I speak particularly about the hospitality and aviation sectors - to ensure they come through the major impact the Covid-19 virus is having on their businesses purely because these businesses involve so much human interaction?

Deputy Paschal Donohoe

It is too early to be able to give the Deputy confirmation of that. The Minister, Deputy Michael McGrath, and I are meeting the Ministers with responsibility for different sectors and I am also meeting representatives of many of these sectors directly. I meet those who work on the front line in the different sectors regularly to hear what it is like working in the various parts of our economy at the moment. I cannot give the Deputy the detail of anything we might be able to do yet for the sectors to which he referred. Clearly, however, in preparing for the budget we are aware that some parts of our economy and country are not recovering at the same speed as the other parts. That is evident to all of us. We are trying to assess what we can do that will be of help to the economy at the moment and that will form a big part of what we will do on budget day.

Chairman

I thank the Minister. As we have moved to the Green Party slot, I will now question the Minister. I have a longer question about the pressure of health expenditure on the budget but I will start with a broader question. Is the Minister currently considering measures to ensure Covid-19 expenditure will not be rolled into the base of Government spending going forward leading to significant permanent expenditure increases?

Deputy Paschal Donohoe

We are looking at the question of what amounts of additional expenditure will not roll over into next year. This always happens on budget day when we have the fabled "one-offs" and must assess whether something that happens in a particular year will continue into the next year. However, the complexity involved in doing that at the moment is significant. Even earlier this year, for example, we thought there would be a one-off policy measure. It turns out there are still things we need to do and that we must maintain as we move into the second half of the year. The Minister, Deputy McGrath, and I are working on that at the moment. The answer, therefore, is "Yes" but being exactly clear on what will not carry over into next year and continue beyond that is a difficult calculation to make.

Chairman

We have seen that the HSE winter plan outlined significant additional spending over the next six months. I am interested in the view being taken on the pressure that health expenditure will bring to bear on the budget and how we are managing that in a dynamic situation where this could be a long-term pressure on the budget. By the very nature of the sudden onset of Covid-19, we have had to expend vast quantities on money without the level of oversight or scrutiny we might otherwise have had.

One of the areas the budgetary oversight committee will be considering more generally in the coming months concerns how to track the level of services being provided in terms of public expenditure. I am interested in hearing what measures are being implemented to audit the return on the expenditure and manage its changing nature. Does the Minister envisage supplementary budgets? What will be the impact on his view on the budget and expenditure in the long run?

Deputy Paschal Donohoe

The management of health expenditure in October, November and December is always a major part of the budgetary jigsaw at this point in the year but we are in a very different position from that of other years because of the possibility and risk of our country having to deal with Covid-19 during the normal flu season. At a time when we are trying to keep our schools open and encourage people to return to safe workplaces, this is a major challenge. The scale of the winter plan reflected that in terms of what is being done with public health experts and through the provision of additional beds.

On the question on how we are going to manage this on an ongoing basis, it goes back to whether we can track what the money is being used for. In many ways, greater clarity is required than in the past because we have to know every day how many beds are available from an ICU perspective, who is in them and whether they are being used. That is not information we can check every month; we have to know the position every day. In one way, the measurement of those indicators is far sharper now than at other times.

The other medium-term challenge we are going to face is trying to assess the resources that need to be permanently available. At present, it is very difficult to be clear on that. We are not seeking to make additional budgetary forecasts beyond next year now because we hope we will be clearer on some of these issues in the first half of next year.

Chairman

To sidestep to a different area, on which we have touched a little already, I am aware that the Minister, with his president of the Eurogroup hat on, is committed to no sudden stop and no policy cliff edge regarding the suspension of the normal application of the EU fiscal rules under the Stability and Growth Pact. The Parliamentary Budget Office made a presentation to this committee this week and mentioned in its submission the possibility of Ireland setting its own domestic fiscal rules, or debt limits, while the Stability and Growth Pact is suspended. Could the Minister comment on whether that is a possibility over and above setting a stated target for this year, for example?

Deputy Paschal Donohoe

It would take great wisdom to be able to say now what we believe fiscal rules are going to be. Fiscal rules, by their nature, are medium-term and try to set out the arrangements for a number of years. It is fine to advise that this be done but to set figures, begin the debate now and try to set targets for the rules would not be appropriate for the economy now or for the encouragement of an economic recovery. That is the view held by many of my colleagues in the European Union and in our European institutions. It is definitely appropriate for Ireland at present. I have given a commitment that, as part of the stability programme update that we will give in the first half of next year, there will be an opportunity to put together a budgetary forecast for a few years and lay out what we believe our targets will be, but I am not in a position to do that now. Trying to set the targets now would not be helpful.

Chairman

What are the plans in the budget for the carbon tax? How will the fund accrued be spent? If the yield deviates from the expected yield, how will the Minister manage that in budgetary terms?

Deputy Paschal Donohoe

The aim of carbon taxation is to implement the programme for Government commitment to another move and change in carbon taxation in this budget. Our objective is to recycle all the additional revenue for very clear purposes.

The first of these purposes is to seek to protect anybody who would be at risk of fuel poverty and adversely affected by moves in carbon taxation. The second purpose will be to fund the development of needed infrastructure and the third will be to make progress on the retrofitting of homes. This is not a new approach initiated by this Government; it is what we did last year. We will continue with that approach in the coming budget. There is a lot of value in being able to explain how this money is used and in using it to influence decisions that families and businesses might make in the future with regard to the use of carbon and fuel. I am very much aware of the need to get the balance right between such a move and protecting the living standards of those who are vulnerable. That is why a significant share of the revenue generated by that move is put into changing the relevant allowances in our social welfare code.

Deputy Richard Boyd Barrett

I welcome the Minister.

Deputy Paschal Donohoe

I believe this is the first time the Deputy and I have ever sat on the same side of a committee room.

Deputy Richard Boyd Barrett

It could be the beginning of a great relationship.

Deputy Paschal Donohoe

I think we already have one. One might have to be more optimistic to see it leading to policy agreement.

Deputy Richard Boyd Barrett

Yes, indeed. Everything we do at the moment, we do in the context of Covid-19 and the need to maintain social solidarity in the face of the existential threat we face now and which we have been facing for some time. The guiding principle that has underpinned this is that we are all in it together. People bought into that and have suffered great hardship on the understanding that we would remain in it together against Covid-19.

As the Minister will know, for some time I have been raising the plight of particular sectors that are suffering disproportionately. He referred to some of these groups in answering earlier questions. Their futures, however, remain very unclear. I refer to the 25,000 or so taxi drivers whose livelihoods and industry have been decimated. As long as restrictions persist, or if they become even more severe, they are in deep trouble. The arts, music and live entertainment sectors are also affected. These sectors are important but they have been ignored or dismissed. We realise now more than ever that we need these people. When access to public transport is restricted, we really need the taxi drivers. We will need them afterwards as well. We also need the arts to sustain us through this time and, when we come out the other side, we will need the music and live entertainment people.

Their key demands are for the retention of the income supports and for flexibility to work a bit beyond what is allowed, when work is available to them in this very uncertain period. These are their key demands although they have others. Both these groups have ongoing costs, including insurance and loan repayments. Many of these people are in deep trouble. Will the Minister sustain them so they can pay their bills, rent and mortgage payments and so that their businesses can survive? That is one key question.

Other groups have been affected but these are two that have got themselves organised. I welcome the engagement of the Minister and his Department, particularly with regard to the events sector. I wish he would reconsider his decision not to meet the four groups representing taxi drivers. He should meet them and hear their case. I would also like a breakdown of the other groups that have been hit particularly hard. Does the Minister have a breakdown of those who are getting the pandemic unemployment payment? By definition, everyone getting the payment is in a sector that has been hit. We need to know precisely in what sectors and employments people are getting the PUP. It is a similar situation in respect of the wage subsidy scheme. If the Minister does not have that information now, I would appreciate it if he would provide it later as it would help us understand which sectors really need help.

Connected to that, some sectors have not been hit as hard. Looking at corporate tax returns and some of the income tax returns, they are surprisingly good. This suggests some people are doing well. If we are all in this together, should we consider a solidarity tax on wealth and profits for those people who are not suffering, or in some cases who are doing very well, in order to finance the supports necessary for the people who are hardest hit? That is if we are all in this together. Would it not be a reasonable suggestion?

I have a question on collateralised loan obligations. There was a rather alarming article in The Business Post about commercial loans securitised on a very big scale that are floating around the global financial system like the residential securities that plummeted the entire global economy. We could be facing a similar position with commercial loan obligations that are securitised and on the balance sheets of financial institutions with all sorts of potential consequences or a very severe economic crisis if they go bad. We need to know about such matters.

I will comment on the fiscal rules. We opposed them because we thought that positions precisely like this would render them redundant and pointless, or an obstacle to taking the necessary actions. Is it not fair to say now that the fiscal rules are a bit like an umbrella full of holes; when the sun is shining, that might be fine, but when it starts raining it is absolutely useless. We should recognise they were misguided and they have, effectively, been abandoned in the current context.

Deputy Paschal Donohoe

I will deal with each of those points in turn. We have figures of the breakdown by sector of people in receipt of the pandemic unemployment payment, PUP, and wage subsidy scheme. I will have those figures sent to the committee. The composition will not come as a surprise to members and the sectors affected most include construction, retail and hospitality. They formed a very large share of either employers on the wage subsidy scheme or former workers on the PUP.

The challenge I face in engaging sectors is that there is a range of Ministers who come before a range of Oireachtas committees and they must engage with the sectors for which they have responsibility. I have to respect that. After our previous engagement in the Dáil, I raised with the Minister for Transport, Deputy Eamon Ryan, the concerns mentioned by the Deputy about taxi drivers and the role of the National Transport Authority, NTA. I raised the matter with the NTA as well.

On the arts and performance sector, which relates to the questions put to me by Deputy O'Donnell, I am very much aware that there are really important parts of our society that have been adversely affected. A life without concerts or theatre is a very different life to look forward to. I fully appreciate that. I am really aware of those who are affected by this disease in that way. The Minister for Public Expenditure and Reform, Deputy Michael McGrath, in his engagement concerning spending with other Ministers is also looking at this.

Many governments are grappling with this and not many have found a clear or effective solution. It is very difficult for the Government to be able to step in and entirely take the place of live audiences or regular live events happening while compensating all the revenue without setting off big challenges in doing the same for the rest of the economy. This is the matter we have considered now for quite a while.

The Deputy mentioned that some parts of the economy are doing better than others and that is the case. We made changes in the employment wage subsidy scheme and there are many parts of our economy that were able to manage that change in subsidy.

They were reopened or they were doing well at the time the change in subsidy was made. That, I believe, will be evidenced when we are able to point to the number of employers on the new scheme. I accept that, at the point we made the change in the subsidy, other things happened in the economy and in our public health guidance that created an issue for important employers in our country and their workers. It goes back to the big challenge we have here that even in this phase of dealing with Covid, the so-called multi-speed Irish economy is now moving in different cycles. This is something the Minister, Deputy Michael McGrath, and I are looking at in terms of how we deal with it from a policy point of view.

On collateralised loan obligations, CLOs, and what the Deputy referred to in terms of commercial property risks, globally that is one of the set of challenges that are there. From an Irish point of view, the Deputy will remember the years of debates we had in this room regarding the owners of commercial property in Ireland. The relationship of the Irish banking sector and our domestic economy with the owners of commercial property is now different from what it was a number of years ago. If certain trends in commercial property were to develop, while it will have an impact on our banking sector and we will have to evaluate what that impact would be, the Irish banking sector is no longer the only owner of commercial property in Ireland. That is a big change from where we were a decade ago.

On fiscal rules, it will not surprise the Deputy to hear me say I would make the opposite argument to his, namely, the fact that most countries in Europe, including our own, went into this crisis with public finances that were balanced, in surplus or had smaller deficits allowed two things to happen. First, it helped with the European Central Bank making its huge intervention to support the selling of government debt across this period of the crisis. Second, countries had a capacity available to them to borrow huge amounts of money quickly. It makes a big difference to our economic fortunes that we can now borrow money as a semi-core European economy as opposed to where we were when we were dealing with another global crisis a decade ago. That makes a huge difference to our country's ability to fund the things we will need to fund in the future.

Deputy Ged Nash

I welcome the Minister. He is in an elevated position today, though I know he would never dream of talking down to anybody. The Parliamentary Budget Office figures we have looked at and the Parliamentary Budget Office commentary that arrived on our desks over the last couple of days suggest that a further €7 billion in public spending will be made this year additional to what was originally allocated by the Dáil. That suggests that there will be at least one further set of Revised Estimates or Supplementary Estimates presented to the Dáil this year. Will the Minister comment on that? If it is the case, when will that happen?

Second, I note in the Minister's response to Deputy Mairéad Farrell earlier that he put on the record that he expects an additional €1.5 billion in receipts transferred from the National Asset Management Agency, NAMA, next year, so he is clearly factoring that into his budgetary considerations ahead of budget 2021. Are there any other significant once-off payments he expects to arise next year?

Third and final, though I hope to have the opportunity to put more questions to the Minister after his initial response, the Social Insurance Fund is obviously under significant pressure and there is expected to be a €3 billion refund to the Department of Employment Affairs and Social Protection from that fund before the end of this year. Outside of getting people back to work, how do the Minister and his colleagues plan to replenish the fund? There are huge draws on that fund at the moment and huge expectations in terms of additional benefits people might expect over the next few years. Does the Minister plan over the next period of time to bring, for example, PRSI contributions for self-employed and employer's PRSI up to the level of EU norms?

Deputy Paschal Donohoe

I thank the Deputy for his questions. On the timings for Revised Estimates, Cabinet earlier this week agreed a set of Revised Estimates.

Earlier today, I was fixing a time with the finance committee as to when the finance Estimates would come before it. Many Estimates will be coming before the relevant committees over the next few weeks.

The Deputy asked about the Social Insurance Fund and the kinds of steps that need to be taken. He is correct that the largest contribution that can be made to the fund is to get people back to work. That is why dealing with our unemployment challenge is so important. One of the things I believe we need to assess, as recognised in the programme for Government, is the level of social insurance payments we have in the Irish economy. To be clear and precise, I am not saying they are going to change in this budget or even imminently. If we are going to make a change like that, it clearly must happen at a point when the economy is not dealing with the level of challenge that it is today. That said, we are going to need to fund policies in the future that have always been important but are probably going to be even more important as we become aware of our vulnerabilities regarding public health. We are going to have to look at the social insurance code. I am aiming, in conjunction with the Tánaiste, to put in place a process through which we can get views from the Oireachtas and different parts of our society and economy on that matter.

I am not aware that any other one-off transfer of the scale of that from NAMA will be coming in. It will be the case, as we move through the year, that some other one-off payments may accrue but they will be nowhere near the scale of the NAMA figure.

Deputy Ged Nash

The Minister spoke about vulnerabilities and the expectations for the kinds of services that we ought to provide in this country. A degree of consensus is building about some of the lessons that have been learned about where there are gaps in public services as a result of the pandemic and how we have responded to it, as well as about the need to improve our public services, particularly our healthcare service, in the longer term. The programme for Government has ruled out any increases in income tax, regardless of what one might be earning, over the duration of this Administration. The Minister will have been briefed on the Central Bank report issued a couple of weeks ago, which shows clearly the level of wealth held by a relatively small minority of people in this country and the nature of that wealth. It should not be beyond us to introduce a net wealth tax as has been achieved in analogous EU states to try to tax that wealth in a smart fashion. Most wealth is held not in income but in assets, property, inherited wealth and other ways. It can be done. Is it something the Minister is considering? We need to broaden the tax base and make it much more sustainable because we are vulnerable to international shocks. We are reliant on corporation tax and there are a lot of moving parts around the international conversation on corporation tax at the moment. It is possible to achieve the design of a wealth tax that would have a minimal impact on the productive economy. Is that something the Minister and his officials are looking at now? Is work taking place in the Department of Finance on that possibility?

The following point has already been mentioned and, in fact, I raised it in the Dáil when we had an opportunity to ask Priority Questions in the middle of this week. IFAC has referenced in a recent report the requirement for a €10 billion multi-annual stimulus fund. Is that fund interchangeable with the Minister's notion of a national recovery fund? Where does he plan to obtain the resources to fund that recovery fund?

The Minister will know that I, along with the Labour Party and the Irish Congress of Trade Unions, have been a proponent of the idea of this country adopting a German-style short-time work scheme. Deputy Boyd Barrett has referenced, for example, the particular difficulties experienced in the arts and entertainment sector and by embedding the kind of short-time work scheme that has been in place in Germany since the last recession, we can address in a more sustainable fashion the kinds of problems we are having at the moment.

That would also allow us to embed the ideas of training and of conditionality around State support for the business sector. I would appreciate the Minister's remarks on that.

Deputy Paschal Donohoe

I will deal with the Deputy's queries in reverse order. We will have to learn the lessons from the two different wage subsidy schemes that we brought in. I believe there are elements of those wage subsidy schemes that will become more permanent features of where we will be in the future. I am not saying a wage subsidy scheme would always be "on" and operational but we will have to reflect on the possibility that we would have tools such as that which would be quickly available. For me, in comparing what happened in Germany and Ireland, the speed of a response of a tool such as that makes a big difference to keeping jobs. We moved with extraordinary speed to implement the TWSS, and I thank Deputy Nash and other Deputies who facilitated us in doing that over a long day and night in the Dáil. However, if something like that had been available a couple of weeks earlier or a week earlier, it might have made a difference to the lives of thousands of people. When we get through this particular phase of living with Covid-19, I want to think about how something such as this would be available to this and future Governments so that we would be able to quickly turn it on with a speed that we could not do at that time. I would say, however, that I am not sure it will offer the panacea the Deputy is looking for in relation to particular parts of our society and country. This scheme has proven its ability to work effectively for the PAYE sector, whereas many of the citizens to whom the Deputy is referring are self-employed. That is at the heart of some of the difficulties that we have and that I have debated with other members of the committee.

I am aware that IFAC's view on the multi-annual stimulus is that it is necessary. I would be cautious, however, about putting a figure on that multi-annual stimulus at this point in time because it is one thing to try to get the level of stimulus that is needed for 2021 right, but another thing to make decisions at the end of 2020 about what could be needed in 2022 or 2023. Those are big decisions to make. I fully anticipate that we will need to continue to provide levels of stimulus for a while yet. What those levels of stimulus will be will only become obvious when we get nearer the point in time in which we need to make it available. IFAC's advice that I need to have a multi-annual stimulus available can equally be critical if I find myself in a given year in which the level of stimulus is too high. Although it will never be too high for those who are benefiting from it or who need it, it could well be too high in the eyes of IFAC.

On the matter of a wealth tax, no such measure will be presented in a week and a half. We have an array of different taxes such as capital gains tax. The way local property tax is implemented makes a big difference to the progressivity of our tax code. The Deputy referred to some effective wealth taxes in other countries. It appears to me that wealth taxes in other countries lead to wealth moving or to tax advisers and solicitors being paid well for advising their clients on those taxes. The figures from the CSO that the Deputy has mentioned also showed that the relative share of net wealth held by the top 10% of households in our country has decreased since 2013. The decrease in Ireland was bigger than that in other eurozone countries, which points to the fact that between our direct and indirect taxes, we have effective ways of taxing wealth.

I am always open to getting the views of the committee regarding how these things can be done differently.

Chairman

As there is no representative from the Rural Independent Group, I call on Deputy Canney from the Independent Regional Group.

Deputy Seán Canney

I thank the Minister for coming over when the technology was not at its best.

During the conversation over the past hour and a half, several issues have come to mind. First, we cannot pre-plan what we will be doing beyond the middle of next year, which creates a difficulty and means we cannot prepare a forecast. We do know what has happened since last March and on what money was spent, however. With the emergency funding which has been put in place and all of the good this has done as a life support for the economy, how do we measure the outcomes and results? Are we getting value for money? Is there a deadweight within what we have done? How are we learning for the next six months of this crisis?

The performing companies are in pharmaceuticals, chemicals, medical devices and computer services. It is the smaller indigenous industries which are on life support at the moment that concern me. They have got supports like the wage subsidy scheme and the restart grants. How sustainable are these? How long can we keep them going? Until we know we will have a vaccine and are on top of Covid, as well as how we are figured out with Brexit, how can we plan next year's budget to support those industries?

Deputy Paschal Donohoe

If we look at the level of supports made available since July, it is an indication of the kind of policy measures likely to be needed for 2021. These measures included the wage subsidy scheme, the continuation of the pandemic unemployment payments until next year, although at a reduced level from where they were at the crisis, and the availability of restart grants. Do I believe we can keep those supports going indefinitely? The honest answer to that question is we cannot.

Can we keep them going for a long enough period to deal with the impact of Covid-19, however? I believe we can if we are willing to make choices regarding the level at which those policy interventions are made. The wage subsidy scheme is a good example. We made changes to the subsidy which was available in September, which gives me the confidence to say that we can extend the scheme up to 31 March in an unchanged format.

I am equally aware that when we get beyond 31 March, there will be things that will be needed after that. If we can build up a consensus regarding the reduction of subsidies, as our economy begins to reopen or stay open for longer, then I believe we will be able to continue to support our economy as we live with this disease and then contain and cure it. Integral to that is an acceptance, if not an agreement, of the need to change those level of subsidies and the frequency with which they are made available.

Is there deadweight in these supports? I have no doubt at all that in the coming weeks, months and years, many will argue there is deadweight in the interventions we have made and they should have been done differently or better at the time. Whatever deadweight is there, I am certain it is more than offset by the jobs and income that we protected at a time of enormous risk for Ireland. What we have saved far outweighs any deadweight effect that is there.

Deputy Seán Canney

How will local authorities be financed from now on? Today, my own county council met to discuss the prospect of closing down two of its public swimming pools as it cannot afford to keep them going. The income of the local authority sector has been decimated. It will take a huge commitment to bring them and their rates base back when things start to improve. The plan to support local authorities is very important but it must not be a stopgap measure as they will need support for a number of years to recover if we are still to provide the services from local authorities that we expect and take for granted. What is the financial commitment in the budget? What are the Minister's thoughts on the matter?

Deputy Paschal Donohoe

We have made a commitment on the funding of rates. For three quarters of this year, we have committed that the Exchequer would centrally fund rates income across that period. I am sure that the Minister for Public Expenditure and Reform, Deputy Michael McGrath, and the Minister for Housing, Planning and Local Government, Deputy Darragh O'Brien, are looking at what kind of commitment we can give for the final quarter. Despite a huge intervention like that, we will not be able to meet every need that we are asked to meet. Due to the level of need that is coming from local authorities and other parts of Government, not to mention from our economy and society overall, not all of those will be met. I hope that in the engagement that will take place with the Department of Housing, Planning and Local Government and with local authorities, really important facilities like swimming pools can be maintained and kept open.

My understanding of the swimming pools that the Deputy referred to is that they have a private operator and are in licence to the local authority. The impact of social distancing and the general decrease in attendance at swimming pools like that is having a really big impact on the funding of those swimming pools and the revenue that that operator is getting from the maintenance of those pools. I hope engagement will be possible on issues like that.

The Deputy also asked whether we can keep this going forever in terms of the funding and things that we had, and I said we cannot. I do believe, however, that we will still be able to do enough to meet really important key needs. I hope now that the local authority in his area and the Department of Housing, Planning and Local Government can engage on the future of those swimming pools. I and the Chair know from our constituency the importance of those kinds of facilities and I can well imagine the upset that will be caused by the closure of them elsewhere.

Deputy Seán Canney

What is the status of the review of the local property tax?

Deputy Paschal Donohoe

I made the decision not to go ahead with a revaluation in November of this year. That was mostly for practical reasons. To be able to go ahead with that and for the Revenue Commissioners to be able to implement it, we would have had to have legislation passed relating to all of that across May and June of this year. For many reasons, that simply was not possible to do because there was either no Government or a Government was just being formed, and then when the Government was formed we were focused on and preoccupied with lots of other huge priorities. What will now happen is that I have indicated to the Oireachtas that I will look to have the relevant legislation for a change for next November, presented and passed in the Oireachtas by the first quarter of next year, which will then allow the Revenue Commissioners to make the change they need to make.

Deputy Bernard J. Durkan

I acknowledge the work done by the Government to support business and industry, both employers and employees. It is vital support in the present climate. Unfortunately, as the Minister has indicated, more will have to come. At least we hope that more will come.

We do not want to go into that other than to say I support the points raised by other speakers relating to the entertainment, services and sporting sectors, all of which contribute to the mass of our economy.

I have questions about two issues. First, we have the potential double whammy of Covid-19, as it stands now, and Brexit. If the Minister does not want to answer this question, that is fine, but is he satisfied that adequate provision can be made in the case of an island nation for adequate transport to and from this island, air and sea, to meet the double challenges to which I referred, and I refer to the national airlines, Aer Lingus and Ryanair, in particular, given that other countries had to bail out their respective airlines for obvious reasons?

The other question relates to the extent to which our colleagues throughout the European Union are impacted by Covid-19. Does the Minister see that affecting their ability to recover and that having an impact on this country in terms of them not being able to meet their commitments in the way that was anticipated, which may cause changes in the way the Stability and Growth Pact is applied?

On the calculations, businesses have been hit in a severe way. I disagree with the notion of increasing taxes in the current climate. It would be implosive in so far as the range of businesses in the sector is concerned. Will the Minister put into his calculations situations where, for instance, businesses that were hit by the downturn in the economy in the past ten years, followed by Covid-19, may have a need to re-equip? I am aware there are supports already in place but they may or may not be sufficient to re-equip and prepare for business. If businesses can write off the various investments against their taxes, it works. If they cannot do that, they are at a disadvantage. I will take written answers if the Minister runs out of time.

Deputy Paschal Donohoe

I can deal with each of those in turn. I will begin with accessing airlines and so on. It is the case that many very high-profile national carriers in other countries have received funding from their own governments. It is a tribute to the way in which a number of very big airlines are run here in Ireland that they are able to keep access going and the support they have received is a matter for them. We have brought in some broadly available support schemes for the entire economy. They may or may not have participated in them but up to this point they have been able to maintain the level of access they have without some of the very high-profile things that have happened in other countries.

In respect of the EU and what is happening in other countries, the issues we have debated regarding the speed of recovery here in Ireland play out across the entire European Union. The impact that Covid-19 has had on the economic growth of member states of the European Union is divergent. Some countries have taken a hit of a particular magnitude. Other countries have taken far bigger hits. The next generation EU initiative and the recovery and resilience fund that was launched by the European Commission and the European Council is vital because that is trying to close the gap between different member states of the European Union to try to bring all countries to an average level of recovery. That is why the historic decision has been made in respect of the availability of grants towards member states of the European Union.

It absolutely is the right thing for the European Union and it is a significant development. If one looks at what the European Central Bank is now doing and if one looks at the Next Generation EU recovery plan, there is a profound difference between these kinds of interventions and where we were ten years ago and it represents a gigantic change.

On the Deputy's point regarding employers re-equipping, Deputy Lahart, in his questioning, talked about the consequences of 2008 and 2011 and what that means for policymaking today. One of the important consequences in dealing with this crisis is that the level of private and corporate debt in the Irish economy as we entered the Covid-19 crisis was far lower than it had been at other times. That will prove to be an incredibly important part of how companies have equipped themselves to recover. The combined impact of that and the work we are doing in restart grants, the income subsidy schemes and so on can help employers of all sizes recover from the economic effects of this terrible disease.

Deputy Mairéad Farrell

Gabhaim buíochas leis an Chathaoirleach agus leis an Aire. At this stage, we are preparing for a disorderly Brexit. What spending provisions are there to deal with a no-deal Brexit and of what does the Minister see them being composed?

Deputy Paschal Donohoe

In terms of the existing provisions, there are two important dimensions to it. The first is the supports that have been made available through Enterprise Ireland as we have got ready to deal with Brexit over many years. The supports that are available, primarily from Enterprise Ireland, EI, have been really important components of helping employers and companies get ready for dealing with Brexit.

The second is the support in training that is available now in grants to help companies deal with the different customs regime that we may be in if we find ourselves having to deal with a no-trade-deal Brexit. New ideas and proposals from that were recently launched by the Tánaiste.

The last part of it all that has been really important is what has been done from a loan point of view. We have initiatives that are now in place such as the Brexit loan scheme, which involved €300 million, and the future growth loan scheme, which involved a further €800 million. Those kind of loans that are available at lower interest rates for longer have been really helpful in getting companies ready for the shock of a no-trade-deal Brexit.

As the Deputy will be aware, we had to invest a great deal of money in getting Dublin Port, Rosslare Europort and Dublin Airport ready to deal with the consequences of Brexit. However, that money to get our airports and ports ready has been spent over a number of years.

Deputy Mairéad Farrell

Gabhaim buíochas leis an Aire.

We all know that public health and the health of our economy are inextricably linked and our economic forecasts are based in the existence of this virus. The public health measures are, of course, necessary to contain its spread and its impact on the economy. The economic forecast published this week outlined public health restrictions here have been more stringent than those in other EU states and I would be interested to hear the Minister's view as to why this is.

I also wish to touch on the interview by the Tánaiste, Deputy Varadkar, with the The Currency today, where he stated that we have to say to public health experts that it cannot be public health only. The Tánaiste touches on the fact that he had been in Berlin where there were more people in offices. He states that we need to be looking at the numbers in hospitals and that kind of thing, although we are aware that even if one is not hospitalised, there can be long-term impacts on people, including young people. Does the Minister know if the Tánaiste has raised these concerns with NPHET or if this is just with the media and does the Minister have a stance on it?

Deputy Paschal Donohoe

The statements from the Tánaiste today reflect the debate which is always under way on how we can deal with the public health consequences of this disease and try to get people back to work and keep them in their jobs. The Tánaiste, the Taoiseach, myself and the Cabinet are always looking at what that balance is and how we can get it right and that is what has underpinned the publication of the five-stage roadmap. That five-stage roadmap looks to have a set of public health restrictions in place to reflect where we could be with the disease at any one point in time. For myself, in these kinds of debates, I have always argued that the long-term foundation of our economy recovering is our citizens having ongoing confidence in our public health. Of course, there are always discussions about how we get the balance right, stage by stage, within NPHET, between the Government and NPHET and then within Government. However, the Tánaiste and the Cabinet believe that in the roadmap we have published we are getting that balance right but we always need to be open to debating this and looking at what the right thing is to do.

Chairman

The second round is only four minutes so I am going to move ahead with the next group. I think we do have time for a third round so I will come back to Deputy Patricia Ryan, if that is okay.

Deputy Patricia Ryan

I am just watching the Chamber as well, unfortunately.

Chairman

I call Deputy Leddin.

Deputy Brian Leddin

I thank the Minister for coming in to speak to us and to answer our questions. He touched on an awful lot already but I want to focus on the stimulus measures we have taken so far, more so on the capital stimulus measures rather than the wage subsidies, unemployment assistance and so on. I acknowledge it is still quite early but are there indications that these measures are having an economic effect? Are there particular stimulus measures on the capital side that the Minister sees as being particularly effective?

Deputy Paschal Donohoe

Yes, there are two that I would pick out at the moment. The first one is the employment wage subsidy scheme. I hope in the next 48 hours to be clear about the number of employers who are on the scheme and the number of people affected and supported by the scheme. The two wage subsidy schemes we brought in are among the most effective economic policies ever introduced in our country.

Deputy Brian Leddin

I am sorry to cut across the Minister but I was trying to focus on the other stimulus, not so much the wage subsidies but there was a lot of infrastructure investment in the July stimulus, for example. Are we now seeing the effect on the labour market and on the economy generally of that kind of spending?

Deputy Paschal Donohoe

I thank the Deputy for the clarification. We are seeing it in the number of people who have moved from the pandemic unemployment payment, PUP. If we look at the number of construction workers who have moved from being on the PUP, which they were in March and April, I am certain that if we had not given clarity regarding what our public capital spending was going to be later on in the year and had not given an indication we were going to maintain it for next year, the reduction of people on the PUP from the construction sector would not be as big as it has been.

Within that, if I were to pick out two aspects that have been really important, the first would be getting public housing projects under way again. Having people building them is important for all the reasons the Deputy knows but it is also really important for getting people back to work across the country. The second aspect is the work that has been under way in cycling and pedestrian infrastructure, where councils all over Ireland moved really quickly to do it. Consequently, they were able to employ people who, in the absence of this kind of work, might not have had work to do. For me those are the two standout examples of what has happened in the past few months.

Deputy Brian Leddin

Will that kind of stimulus be a central part of the budget?

Deputy Paschal Donohoe

Yes. It has already been indicated by the Minister for Public Expenditure and Reform, Deputy Michael McGrath, that it is not just about how we can increase those levels of capital spending, it is about how we can preserve them. When I was before this committee several years ago, we had capital spending of between €3 billion and €4 billion per year. It is now €9 billion annually. Being able to have the confidence that we can maintain that level of spend in the context of there being uncertainty regarding private sector investment in 2020 and 2021 will have a significant effect on the recovery of the economy. The Government and I are committed to maintaining that.

Chairman

I will now go to a third round which, given the number of people in the room, will be a relatively free round for whomever wishes to contribute. Deputy Ryan wishes to come in.

Deputy Patricia Ryan

I thank the Minister for his attendance. In his opening statement he referred to the pandemic-related supports from the EU. Does that include the Brexit adjustment reserve? Will Ireland be able to draw down on that?

Deputy Paschal Donohoe

It does not include funding from the Brexit contingency reserve. Ireland will be making an application for that funding but the amount of money that will be available to us from the fund has not been decided by the European Union.

Deputy Patricia Ryan

As the Sinn Féin spokesperson for older people, I am interested in the measures the Minister is proposing to include in the budget for older people. As all members are aware, today is the international day for older persons. We need to value our older people. They have given so much and have so much to give. What hope can the Minister give them in the budget that next year will be better?

Deputy Paschal Donohoe

There is always an awareness of older people in budget day announcements because of the contribution they have made to our country. I have no doubt that will be recognised again in the announcements that will be made by the Minister, Deputy McGrath. As to what those measures will be, the Government has not yet decided on the specific nature of those decisions.

Deputy Patricia Ryan

The Government was due to publish its housing plan in September, the last day of which was yesterday. When will it be published? What provisions will be made in the budget for that plan?

Deputy Paschal Donohoe

I am not in a position to be able to tell the Deputy what are the timings of any announcement or plans from the Department of Housing, Planning and Local Government, but there will be provision for continuing to deal with the great challenges in housing in our budget day announcement.

Deputy Patricia Ryan

It would be nice to remember carers in the budget. They save the State a fortune by providing a valuable service for free. After the year they have had, they are burnt out. Can the Minister reassure them that they will not be forgotten? What measures will be available in the budget for carers?

Deputy Paschal Donohoe

The budget is a week and a half away. I know it is not too far away, but there is a long way to go before any decisions are made from a social support point of view for any part of our country and society. Like the Deputy, I wish to appreciate the significant contribution carers make to our country and echo the fact that this has been a particularly difficult year for them. I am sure that when the Minister, Deputy McGrath, is putting together his plans, he will try to ensure that is recognised. There are currently a significant number of demands on the State. We need to recognise the very important contributions the Deputy has highlighted, but also the big challenges we face in getting people back to work and the maintenance of so many support schemes. All of that will come together and be announced in the budget on Tuesday week.

Chairman

Will the national economic plan be published with the budget?

Deputy Paschal Donohoe

It will not. The plan for the national economic plan is that it will follow from the budget. I expect it to be published in the first half of November.

Chairman

Does Deputy Durkan wish to contribute further?

Deputy Bernard J. Durkan

Commissioner Vestager has reiterated her intentions to help us out in the future. One of the things that is damaging is this notion that 0.0001% in tax is paid by a particular firm, and this is used in justifying the pursuit. It is bad PR for this country, particularly because it is not correct. My understanding is that the firms in question pay 12.5% corporation tax in this country, where they are manufacturing, and the rest is drawn from other manufacturing locations throughout Europe, and sometimes outside Europe. The presentation of the carrot in front of the donkey that was already well burdened leaves people to conclude that we are that particular donkey and we intend to be in that position for a long time. Will the Minister comment? It is another whammy that is sitting there waiting. The pretence is that there is money there for us. I do not believe there is, but that is neither here nor there.

My second question is in regard to the recovery. I noticed one day last week about 60 trucks on the motorway heading for the port - huge trucks with six axles and more, heavily laden. I presume they are serving manufacturing industries which are making frantic efforts to catch up, and which I believe will catch up quickly. Hence, I do not think we should penalise them in their part of the recovery, which would be a disincentive. Can we rely on the extent of the recovery in the time ahead, which will be very important?

Deputy Paschal Donohoe

I thank the Deputy. I am participating in an event with Commissioner Vestager in the morning. I have a lot of respect and recognition for the work she does. All of the issues in regard to Apple have been well aired elsewhere for quite a while. We just have to look at the work that has been published by the Revenue Commissioners, in which they indicate that the effective rate of tax paid here in Ireland for very large employers is very close to the headline rate of corporation rate in Ireland of 12.5%. There are other publications, for example, those that came out from the OECD earlier in the year, that point to the rate in Ireland being very close to our top-line rate, reflecting the fact we have a broad, simple rate, and then there are a small number of exemptions from that, for example, the research and development tax credit.

In regard to the trucks and our exporting sector, we can depend upon that for now and it has been the bedrock of helping our economy to stabilise during 2020. However, as the Deputy knows, it is a world that changes very quickly and is a highly competitive world for the companies involved in the export of goods and services. We have to be ever-vigilant that we are a competitive country and that we are able to ensure those Irish companies, and larger companies that are located in Ireland, continue to be in Ireland and do business from Ireland. If we ever needed a reminder of how important it is to have a diverse range of exporting companies of all shapes and sizes, it is 2020.

Chairman

I thank the Minister for attending in person when the technology failed us. As there is no further business, that concludes our meeting for today. The meeting stands adjourned until the next private meeting, which will be at 12 noon on Tuesday, 6 October. The committee’s next public meeting will be with the Minister for Public Expenditure and Reform at 10 a.m. on Thursday, 8 October.

The select committee adjourned at 3 p.m. until 10 a.m. on Thursday, 8 October 2020.