Budget: Government to spend its way out of Covid crisis as deficit to be 'closer to €24bn'
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The Government is planning to spend its way out of the Covid crisis and has ruled out an austerity Budget next month.
The Department of Finance is also confident that the deficit will now be well below the €30bn indicated as income tax returns have been stronger than had been forecast at the beginning of the pandemic.
Senior sources in the Department of Finance are confident that the deficit will now be "closer to €24bn than €30bn".
"The vaccine is going to come," a source said.
"When it does come, we need to be ready to get fully back up and running so the key priority is to support jobs and businesses."
On Tuesday, Finance Minister Paschal Donohoe and Minister for Public Expenditure Michael McGrath updated Cabinet on their strategy ahead of October's budget.
It is understood that the Government will pump as much money into supports for businesses, hospitality and the arts.
"The key figure going into the Budget will be the end of September returns. The Minister will be waiting to look at those before making decision," a Department of Finance source said.
A spokesperson for Mr Donohoe said Budget 2020 will take place under "unprecedented circumstances" with an economy bearing the impact of the Covid-19 pandemic and the threat of a disorderly Brexit.
"Budget 2021 will provide counter-cyclical support for the economy. It is too early to remove such support.
Housing, health and climate change will also be prioritised, the spokesperson said.
Taoiseach Micheál Martin told the Dáil that a "broader intervention" is under consideration to help people in certain sectors such as the arts.
"The budget will include further financial intervention to support certain sectors of the economy.
"We are going to particularly assist those sectors that will not enjoy the incomes they would have enjoyed if the public health advice was otherwise."
The latest exchequer returns show the Government’s had spent €9.4bn more than it took in up until August.
However, the State has taken in €13.9bn from income tax, which is just 1.4% lower than last year, giving those in the Department of finance cause for optimism.
"Tax receipts have been buoyant, which reflects the progressive nature of the tax system but also shows that those on lower incomes have lost out more," Mr Martin said.
Tánaiste Leo Varadkar last week warned that there will be a deficit of at least €25bn this year.
Meanwhile the Department of Finance's tax strategy group has recommended an increase in diesel in the upcoming Budget.
The group has suggested an equalisation of diesel and petrol duties and has recommended 2.32 cent/litre increase per year for the next five years, or a 1.16 cent/litre rise over the next decade.