Budget 2021 - progress and shortcomings

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Budget Criteria

Budget 2021 must be judged by the degree to which it protects people from poverty, equips people and businesses to confront Covid-19 and Brexit, and addresses the climate and environmental crisis. The challenge for Government is to use the fiscal space available to introduce the necessary measures to support incomes and underpin the public health measures to save lives, preserve our economic capacity and prepare for the impact of a no-deal Brexit.  Its response to this challenge in Budget 2021 has been mixed.

Correct Fiscal Stance

The White Paper indicates that, on a no policy change basis, the General Government deficit for 2020 would have been 6.1% of GDP and 4% for 2021. Budget 2021 measures will bring the deficit to 6.2% of GDP in 2020 and 5.7% in 2021. This, and the historic support offered by the ECB which allows for the issuance of Government debt at historically low rates, indicates the significant fiscal capacity available to the State.

This is a very different environment than 2008 - 2014, when the State faced an unsympathetic ECB and higher budget deficits (including the once-off costs of recapitalising the banking system).  Social Justice Ireland welcomes the fact that the lessons of a decade ago have been learned and the approach we advocated at that time is now being followed.

Inadequate Covid-19 response

The Covid-19 public health measures rely on the State supporting the incomes of workers and viability of firms to ensure that both are in a position to comply with the measures and, for workers and owners alike, to live with dignity. This was the key to addressing the first wave of the virus.

As we face the necessity to return to tougher public health restrictions, many people are not receiving sufficient support through adequate income payments and public services. 

The choices made by Government in Budget 2021 mean that vulnerable people will see their standard of living fall and they will slip even further behind the rest of society. This is not acceptable.

Increased investment welcome

Social Justice Ireland welcomes the increased expenditure on core capital programmes by €1.6 billion next year. Social Justice Ireland has strongly argued that investment is essential to secure economic development; to protect communities; to keep unemployment low; to ensure critical infrastructure deficits are addressed; and to tackle climate change at the level required.

Borrowing cheaply for needed investment always makes good fiscal sense, but it makes sense now more than ever. However, these added resources come with some policy challenges.  Government will need to use these resources strategically in the current health crisis, to ensure they deliver additional output rather than additional costs.

CHNs rollout will see primary care in rightful place at last

In its report on the Irish Healthcare system in 2019 the OECD found it to be hospital-centric, with significant capacity constraints in primary and secondary care. The global pandemic proved the accuracy of that assessment.  Budget 2021 allocated an additional €3.7bn for current expenditure. 

While recognising the significant additional resources provided in response to the COVID Pandemic it is essential that the resources are deployed in a way which delivers the transformation of the health service in line with Sláintecare.

Especially welcome to Social Justice Ireland, given our promotion of primary care in recent decades, was the allocation of an additional €150m   to support the redesign of care pathways to make care more accessible in the community, including the development of Community Health Networks and specialist integrated care teams. 

No progress towards just taxation

Social Justice Ireland believes that Budget 2021 was an opportunity for Government to reform some aspects of the current taxation system in the interests of enhancing fairness and sustainability. While we acknowledged that 2021 was unlikely to be a year of major taxation initiatives, we believed it to be an opportunity to make some overdue changes which would boost fairness and provide some additional revenue. Unfortunately, the package of measures announced have made almost no progress in that direction.

C & V Sector funding gap ignored

Budget 2021 also failed to take the most important initiative required to acknowledge the key role the Community and Voluntary sector played in addressing the challenge of Covid19, replacing the huge level of funding taken away after the last crash more than a decade ago and never restored—the only example of such failure to restore Budget cuts.

Conclusion

All budgets are value-based documents.  They represent how a government intends to meet their objectives.  To be socially progressive it should have ensured that nobody was left behind.  This it failed to do.  Post-Covid Ireland requires a new social contract and a new social dialogue. While Budget 2021 took many welcome initiatives, it did not do nearly enough to move towards these outcomes.

Download our detailed analysis of Budget 2021 here.