Social welfare budget nears breaking point

CONCERN is growing across Fianna Fáil and Fine Gael over the capacity of the Department of Social Protection to continue to fund the cost of the coronavirus shutdown without an emergency estimate.

The scale of the fiscal challenges are so steep one senior Government source warned: ‘The cost of dealing with coronavirus and its impact, especially on the Social Protection budget, may compel Fine Gael and Fianna Fáil to escalate the process of government formation.’

Fianna Fáil and Fine Gael are struggling to secure the support of the Social Democrats, Labour, or the Green Party, while Fine Gael have indicated that negotiations could carry on into June.

However, a combination of the coronavirus pandemic response and an accounting technicality means that the Department of Social Protection is in real danger of requiring a HSE-style bailout.

At €21.2bn, the Social Protection budget is the largest in Government. But 533,000 people now receiving the Government’s Covid-19 Unemployment Payment of €350 a week has placed the current budget under serious strain.

A further 42,000 employers have also registered with the

Revenue Commissioners for the Government’s Covid-19 Wage Subsidy Scheme.

The department also received 27,300 applications for the Covid-19 Enhanced Illness Benefit of €350 a week.

Responding to queries, the Department of Public Expenditure confirmed all three schemes will cost ‘approximately €4.5bn over a 12-week period and is paid for from the existing budget’.

But despite an increase from €20.5bn in 2019 to €21.2bn in 2020, the department also has 20% less money in its coffers than planned.

This is because of a technicality where the Revised Estimates for Public Services 2020, published on December 18, 2019, had not been voted on before the dissolution of the Dáil on January 14.

Consequently, spending by departments and offices is currently operating under the ‘four-fifths’ rule that applies under the Central Fund Permanent Provisions Act 1965.

Under this four-fifths rule, until the estimates from the budget are passed, departments may spend an amount not exceeding 80% of the amount included in the previous year’s budget.

This technicality means that the Department of Social Protection budget is also down a further €4.8bn on top of the allocation of €4.5bn.

One senior Minister warned: ‘[Finance Minister Paschal Donohoe] is tearing his hair out over this. It is not sustainable in the short term, let alone long term. The department is running out of money at an alarming rate.’

The Department of Social Protection warned: ‘Consideration is being given to the appropriate timing for bringing forward a new estimate for the Department of Employment Affairs and Social Protection considering the impact of additional Covid-19 related expenditure on the four-fifths limit.’

Mr Donohoe also confirmed that while the caretaker Government could not ‘impose’ an additional or emergency estimate, the Dáil could agree one if proposed.

Senior figures within both Fianna Fáil and Fine Gael have expressed concerns about the legitimacy of the process given that serving Social Protection Minister Regina Doherty is no longer a TD.

One minister noted: ‘We are approaching the edges of legitimacy. We are talking about a defeated government and a minister who isn’t even a TD or senator adding billions to the national debt.’

The concerns were echoed by the Fianna Fáil Social Protection spokesperson Willie O’Dea who said: ‘We need to know what the hole in the budget is.’

‘This isn’t sustainable even in the short term’

‘We are approaching edges of legitimacy’