Press release
Government publishes the Summer Economic Statement
From Department of Finance; Department of Public Expenditure, NDP Delivery and Reform
Published on
Last updated on
From Department of Finance; Department of Public Expenditure, NDP Delivery and Reform
Published on
Last updated on
The Minister for Finance, Paschal Donohoe T.D., and the Minister for Public Expenditure and Reform, Michael McGrath T.D., today (Wednesday) published the Government’s Summer Economic Statement (SES). This document sets out the Government’s medium-term budgetary strategy and outlines the fiscal parameters within which discussions will take place ahead of Budget 2022.
The SES outlines a core budget package for Budget 2022 of €4.7 billion, of which €1½ billion will be available for new measures. This package is consistent with substantial investment in public services. Reflecting the continued uncertainty around the public health situation, and its economic consequences. A further €2.8 billion has been set aside to provide for income, business and other supports, should they be needed.
The SES sets out a medium-term budgetary strategy to return the public finances to a sustainable trajectory. The objective is to stabilise and even reduce slightly, the debt-income ratio over the coming years. To achieve this, Government will more closely align revenue and expenditure, while allowing for the deficit to reduce in line with the economic cycle. In order to do this, the Government is setting an expenditure rule whereby core (non-Covid) expenditure growth is fixed at the estimated trend growth rate of the economy (once allowance is made for inflation).
The expenditure rule is consistent with reaching a headline deficit in the region of -1.5 per cent of GDP by 2025, broadly in line with the fiscal position of comparable European countries. The incremental way in which the deficit will be reduced reflects, in particular, the Government’s commitment to investing in capital expenditure to meet the goals of the National Development Plan and to deliver on the economic, social and climate priorities set out in the Programme for Government.
The SES also provides a high-level, ‘top-down’ update to a number of the macroeconomic and fiscal projections published in the Stability Programme Update. Reflecting a robust performance in exports, predominately from large, multinational firms, GDP has been revised upward this year, to 8¾ per cent, while continuing resilience in taxation receipts has led to an upward revision of €1.6 billion for tax revenue this year after allowing for additional tax warehousing in response to the ongoing impact of Covid-19.
Commenting on the release of the SES, the Minister for Finance, Paschal Donohoe T.D. said:
‘With the publication today of the Summer Economic Statement, the Government has set out a credible medium-term strategy for returning the public finances to a sustainable position, while maintaining temporary supports to households and businesses. We are continuing to invest for the long-term needs of our economy and society’.
“There is increasing cause for optimism as our vaccination programme continues at pace and society reopens, with indications that a strong economic recovery is taking hold. As we emerge from the pandemic, the budgetary strategy published today will guide fiscal policy over the medium-term, responsibly phasing out the range of temporary support schemes to allow resources to be directed at key national priorities.
“By 2023, we will borrow only for capital investment, which is being ramped up to provide for, among other things, significant additions to the housing stock. All-in-all, this fiscal framework is one that stabilises our debt ratio, gradually reduces the budgetary deficit, supports households and firms and invests in our future”.
The Minister for Public Expenditure and Reform, Michael McGrath T.D. said:
‘Under the SES, core expenditure will grow by just over 5 per cent on average over the period to 2025 - an amount which is prudent, sustainable and consistent with our plan to reduce the deficit in an orderly manner. Within this framework, we have set out our intention to make a massive investment in the future well-being of our country and the lives of our citizens, through further enhancements to the public capital programme. Over the next four years, we will spend almost €50 billion on vital infrastructure’.
“This sustained and ambitious investment programme will ensure that we tackle the housing crisis head on, building thousands of social homes and take immediate action to improve affordability for first time buyers and renters. The revised National Development Plan will set out critical investment plans to address with the most important challenges and opportunities facing us as a nation, including climate action, transport, housing, education, balanced regional development, healthcare and other infrastructure.”
ENDS