The major areas of focus in the 2021 Budget include additional health expenditure allied to Covid 19, a significant capital budget of over €10.5bn and a range of business and income supports right through until the end of 2021.
For 2021 GDP growth is estimated at 1.75% and this reduced level is based on a no deal Brexit. Job losses in 2020 are estimated at 320,000 and this is expected to reduce to 165,000 by the end of 2021.
Maintaining employment has been a key plank of Government policy since the onset of Covid 19. We have seen two wage support schemes to date and the Budget gave welcome news that a new scheme will be in place until the end of 2021 to minimise the hit on jobs. While reference was also made to EU funding under the SURE scheme it appears to be more in the nature of loans to the State rather than grants but it will help in terms of overall Government financing.
Prior to the Budget Mazars had called for a widening of access to the EIIS and the announcement by the Minister to look at enhancing the scheme will support business back to growth and development.
The Recovery fund of €3.4bn will provide vital resources to increase domestic demand, help in reskilling and supporting jobs and investment. Support for the hardest hit areas of the economy will range from direct supports to VAT rate reductions and employment subsidies and these should give greater optimism to most sectors right through to the end of 2021.
While most of the focus has been on Covid 19 the Government has taken steps to move on the climate agenda, with increases in Carbon taxes and some revenue neutral changes in VRT and Motor Tax.
On the international tax front there is growing pressure to agree some changes in particular in the area of digital taxation. It is hard to see Ireland continuing to collect the levels of corporation tax that we have seen over the past 5 years and the mid 2021 OECD proposals should be interesting.
Budget 2021 will be seen as a Budget of necessity where balancing the health needs of the nation with ensuring we maintain jobs and livelihoods became intrinsically intertwined.