The government’s Summer Economic Statement, which sets out its medium-term budgetary strategy, sets aside nearly €7 billion for Covid-related spending in 2022.

Budget 2022 will have an expenditure ceiling of €88.2 billion, and €80.1 billion in non-Covid related expenditure will be spent in 2022, which is an increase of 5.5%.

The summer statement departs from the government’s stated objective of achieving a balance budget by 2025, set out in April in the Stability Programme Update sent to the European Commission.

Instead, the SES plots out a different fiscal path, with a series of much larger budget deficits leading to a deficit of €7.4 billion in 2025, as against the €800m that finance minister Paschal Donohoe bandied about earlier this year.

The SES says that the policy shift “reflects the government’s commitment to resourcing capital investment and to meet the goals of our National Development Plan review”.

In Association with

It is also linked to the housing crisis and the ESRI’s recent report that called on the government to spend twice as much on capital investment in housing by running bigger annual budget deficits.

The SES forecasts the projected deficits are “consistent with reaching a headline deficit in the region of -1.5% of GDP by 2025, broadly in line with the fiscal position of comparable European countries”.

The SES also revises previous GDP forecasts, up from 4.5% to 8.75%, and consequently the tax take, estimated to rise by €1.6 billion through 2021.

In 2020 the national debt was €218 billion, and will grow to €280 billion by 2025. Per capita, the public debt is now almost €44,000 per person, one of the highest levels in the world.

Donohoe (pictured) commented: "There is increasing cause for optimism as our vaccination programme continues at pace and society reopens, with indications that a strong economic recovery is taking hold. 

“As we emerge from the pandemic, this budgetary strategy will guide fiscal policy over the medium term, responsibly phasing out the range of temporary support schemes to allow resources to be directed at key national priorities.

“By 2023, we will borrow only for capital investment, which is being ramped up to provide for significant additions to the housing stock. All-in-all, this fiscal framework is one that stabilises our debt ratio, gradually reduces the budgetary deficit, supports households and firms and invests in our future.”