Tuesday, 17 November 2020

Questions (91)

Jim O'Callaghan

Question:

91. Deputy Jim O'Callaghan asked the Minister for Public Expenditure and Reform the likely impact of the move to level 5 on public expenditure for the rest of 2020. [36663/20]

View answer

Oral answers (6 contributions) (Question to Public)

The pandemic has had a significant impact on people's health and lives. It also has had a significant impact on the economy. Since we have gone to level 5, there are obviously much greater calls upon the resources of the Department. Will the Minister set out the impact of the country moving to level 5 and the impact it will have on public expenditure for 2020 and beyond?

I thank the Deputy. Covid-19 has had a profound effect on our citizens and the Government has taken significant steps to cushion the impact of the crisis on households and businesses. Expenditure Report 2021 outlined the significant additional resources allocated to Departments in response to Covid-19. At that time, gross voted expenditure of €87.1 billion was estimated for 2020. This represents an increase of €16.7 billion relative to the allocation set out in the 2020 Revised Estimates published last December. This was primarily driven by additional expenditure to support our key front-line services in responding to Covid-19 and support workers and businesses devastated by the impact of the virus.

The Government's response has been driven by the overarching need to protect our citizens from the virus and to ensure that our health service can respond effectively to meet demand for services while dealing with the impact of the pandemic. As the Deputy will be aware, the Government introduced the Covid restrictions support scheme, enhanced the employment wage subsidy scheme and reinstated the top rate of the Covid-19 pandemic unemployment payment.

Gross voted social protection measures amounting to just over €30.3 billion were set out in Expenditure Report 2021. Taking account of the impact of the Christmas bonus, this would have brought social protection expenditure to just over €30.7 billion, reflecting the position of the labour market at that time. However, the Further Revised Estimate for 2020, presented to the Dáil on 4 November, set out expenditure of over €31.5 billion, an increase of more than €800 million relative to the position on budget day in October.

This increase from budget day reflects the increase in recipients of the Covid-19 pandemic unemployment payment, the reintroduction of the €350 weekly rate, the cash flow impact of the change in the frequency of employment wage subsidy scheme, EWSS, payments and the increase in the rates of same. Finally, I note that the move from level 3 to level 5 has added approximately €40 million per week to the cost of the Covid restrictions support scheme, CRSS.

I thank the Minister and commend him on the measures he has introduced. It was very appropriate for the Covid-19 pandemic unemployment payment to go back up in light of the imposition of level 5 restrictions. The Covid restrictions support scheme is also very appropriate and is much needed. However, this all costs money. There was a question around whether we would move to level 5. It is the most severe level of restrictions and the cost to the State is quite considerable. I do not know whether the Minister can state the cost of moving to level 5. He introduced a very successful and well-received budget, but ten days later, a decision was made to go to level 5. That has obviously had an impact on the country's budgetary outlook. If we move out of level 5 at the end of this month, we must be very careful about going back to it. The amount of money available is limited. We can borrow at present but borrowing may not be as cheap in the future.

I thank the Deputy. Moving to level 5 has had a significant impact on the public finances. The number of people on the Covid-19 pandemic unemployment payment has increased by more than 100,000 in that period and currently stands at 350,000. The weekly payment rate has gone from approximately €66 million per week at level 3 to €104 million per week under level 5. Some of that is accounted for by the reinstatement of the €350 per week rate, but the move to level 5 and the extra 100,000 recipients have had an impact. That number could increase further because of a time lag, though we certainly hope and expect to be out of level 5 in two weeks.

The cost of the CRSS has increased by €40 million per week because of the move from level 3 to level 5. These are significant sums. They have an impact and, alongside the overarching objective of keeping our people safe, they are a factor in Government decisions.

I thank the Minister. The real effect of level 5 is its significant impact on the domestic economy. An overview of the effects of the restrictions on the economy's performance shows that the multinational sector has performed well. The difficulty is that when we impose level 5 on the country, we effectively close a large part of the domestic economy down. We close non-essential retail outlets, hairdressers and restaurants. It may be a difficult thing to say, but we need to be careful if pressure is put on us to go back into level 5 at some point next year. We have seen that level 3 can be very effective. It had an effect in bringing down the numbers in the last three weeks. When the Government comes under pressure to go to level 5 again, it will be perfectly legitimate for the Minister to express the concern that if we start spending significant amounts again, we may not be able to afford other services.

I thank the Deputy. As he has rightly said, the impact on various sectors of the domestic economy has been acute. A breakdown of the profiles of recipients of the Covid-19 pandemic unemployment payment shows that the largest number of workers comes from the accommodation and food service sector, which accounts for approximately 103,000 people. It is followed by wholesale and retail trade, accounting for approximately 57,000. Other sectors such hairdressers, beauty salons and so on account for approximately 31,000 recipients.

This is not a direct competition between health and the economy. The job of the Government is to weigh up competing considerations. Our first priority has to be helping to keep our people safe and investing in our public health service. We must only impose restrictions where we believe they are absolutely necessary. The Government's response, focused on supporting businesses and incomes and protecting employment where we can, has been noteworthy. The Deputy has been good enough to acknowledge that. A lack of confidence in public health can also impact the economy. We need to get both right.