Unease grows over State’s spending after decision to halt full reopening
THE decision not to fully reopen hospitality has derailed the Coalition’s plans to return to fiscal normality by the end of summer, Cabinet sources have told the Irish Mail on Sunday.
In the wake of recent Exchequer return figures which reveal the national debt grew by €12.3billion over the last 12 months, Finance Minister Paschal Donohoe said Ireland could ‘look forward to a sustainable and broad-based recovery’.
Privately, however, serious unease is growing within Government over the scale of the national debt – and of more sigspending costs to come. A Cabinet
‘Paschal’s prudence gene is back’
source told the MoS: ‘Everyone is talking about vaccine IDs and all that, but the reality is that one of the biggest casualties from NPHET’s big bombshell is the Government’s great economic plan.’
The Economic Recovery Plan, launched a month ago, hopes to fund record levels of expenditure in health and housing by increasing those in employment to a record 2.5 million, starting with a full ‘reopening in June and July’.
But ministers told the MoS that a key element of any successful plan is weaning people off Pandemic Unemployment Payment supports. Ireland currently has the highest national debt in Europe as a consequence of the bailout of the economy and expenditure of €24.6billion in 2020 alone on coronavirus supports.
The Government’s Covid package caused public spending to rise by 20.5% in last year, the second highest of all EU countries.
Even with the ending of lockdown, the massive rise in public spending means public debt is projected to hit €250billion by the end of the year.
However, ministers now fear a fourth Covid wave could see debt figures ‘spiralling towards the €300billion mark’.
One minister warned: ‘We are in uncharted territories and Ireland is rapidly becoming a European outlier. We’re especially vulnerable should interest rates start to rise.’
Tensions have already been rising between the Fianna Fáil and Fine Gael over Tánaiste and Enterprise Minister Leo Varadkar’s expansionary economic plans. One minister warned: ‘Even Paschal is very uneasy. He has had his flirtation with boom and bust, but the prudence gene is back. He is looking to his legacy … and his CV.’
In an indication of the growing tensions behind the scenes in government, Public Expenditure Minister Michael McGrath fired a shot across the Tánaiste’s bows when he moved to rule out the possibility of a four-day working week. The Department of Enterprise is planning to fund a four-day week pilot scheme, with Mr Varadkar noting: ‘The Covid-19 pandemic has caused us to rethink and re-evaluate how we work.’
However, the normally circumspect McGrath publicly shot the idea down, noting that it would add at least €4.2billion onto the public sector pay bill and pose a ‘huge challenge’ to emergency service provision, teaching children and childcare arrangements.
One senior government source told the MoS: ‘The message to Leo was clear. The kitty is bare and there will be no more great experiments on my watch.’
The concerns of ministers were echoed by John McGuinness, chairperson of the Oireachtas finance committee that oversees budgetary spending.
The Fianna Fáil TD told the MoS: ‘We are at €250billion but if we do not get coronavirus under control an escalation towards €300billion in debt cannot be ruled out.’
He added: ‘Unless Europe comes up with a grand plan there is the real likelihood of a recession and inflation.’