Dáil Éireann Debate, Wednesday - 31 March 2021
98. Deputy Paul McAuliffe asked the Minister for Finance his plans for the repayment of the substantial debt built up throughout the Covid-19 period in future years; if there will be an increase in taxes or cuts to services as a result; and if he will make a statement on the matter. [17137/21]
View answer143. Deputy Peadar Tóibín asked the Minister for Finance his plans to increase taxes or cut public services to deal with the national debt resulting from the Covid-19 pandemic and lockdown. [17078/21]
View answerI propose to take Questions Nos. 98 and 143 together.
The unprecedented large-scale State intervention has seen a significant increase in public indebtedness. In Ireland, the debt-to-GNI* ratio rose to around 108 per cent last year. Given the supports required so far this year, this ratio will increase even further.
Crucially however, the low interest environment that we find ourselves in means that, despite this sharp increase in debt, interest costs are actually falling. This is the case not just in Ireland but throughout Europe.
There is no doubt that the very large increases in borrowing that have been undertaken were the correct approach. However, we must think about the implications for fiscal policy once we move out of the immediate phase of the crisis.
Supports will continue for as long as they are needed. However, permanent increases in expenditure are only possible when funded by permanent increases in taxation. To that end, it is imperative that once the public health situation allows, we begin to roll back the once-off and emergency supports that were put in place in an appropriate and incremental way. The objective will be to close the gap between what the State earns and what it spends.
While we must return the public finances to a sustainable setting, I anticipate that economic growth will do much of the ‘heavy lifting’ in this regard. The best way to service the increased debt is to grow the economy. The fundamental strengths in our economy will help us to do that. There will be no return to the austerity measures that were necessary during the last financial crisis.
We faced into this pandemic on a solid footing, with a strong pre-crisis fiscal position. Two consecutive annual surpluses had been recorded and the debt-to-income ratio had seen a significant downward trajectory over a number of years. This strong pre-crisis position gave us policy options
Reducing the debt ratio back to lower and safer levels must be a key priority over the medium-term. This will, once again, provide us with options should we face another unexpected shock in the future.
