Public Policy Bulletin, 5 June 2020

Jun 05, 2020

In our latest Public Policy news, Ireland’s May 2020 Exchequer returns reveal €6.1 billion deficit as COVID-19 spending soars. Also, new legislation has been launched to enable major expansion of two emergency COVID-19 loan schemes in Ireland.

 

Flattening the curve leads to steepened spending, as May 2020 Exchequer returns reveal €6.1billion deficit

Ireland’s latest Fiscal Monitor for May 2020 has shown that an Exchequer deficit of over €6.1 billion was recorded to end-May 2020, as compared to a deficit of €63 million in May last year. As the disease curve flattens, the report indicates that COVID-19 public spending continues to rise, with an increase of 19 per cent or €4.175 billion in predicted spending.

The Exchequer returns also shows the current resilience of corporation tax receipts to the overall economic slowdown as receipts amounted to €2.5 billion. Tax revenues in May 2020 were up 1.3 per cent as compared to May 2019, owing to an increase in corporation tax receipts of €1.2 billion.

The top five key takeaways of the report are:

  1. An Exchequer deficit of over €6.1 billion was recorded to end-May 2020.
  2. Total net voted expenditure, was ahead by over €4 million or 19 per cent, mainly in response to COVID-19, particularly in the areas of health and social protection
  3. Corporation tax receipts amounted to €2.5 billion, with an increase of €1.2 billion since May 2019
  4. Income tax fell 7.8 per cent or by €137 million, and PRSI receipts declined by close to 16 per cent in May
  5. VAT and Excise receipts fell by 35 per cent and 36 per cent year-on-year respectively, or nearly €1 billion combined due to a decline in consumption

Touching upon the Government’s main COVID-19 schemes, Minister for Finance and Public Expenditure and Reform Paschal Donohoe reiterated that the Pandemic Unemployment Payment will continue beyond the planned closure date. Minister Donohoe also said the Temporary Wage Subsidy Scheme will not be disappearing overnight, and any decision on that will try to get the balance right between unwinding the scheme and keeping jobs that are dependent on it.

 

Legislation launched to enable major expansion of two emergency COVID-19 loan schemes

The Minister for Business, Enterprise and Innovation, Heather Humphreys, T.D., has published the Microenterprise Loan Fund Amendment Bill 2020. The Bill, which was approved by Government on Friday 29 May 2020, will significantly beef up Microfinance Ireland, which provides low cost COVID-19 loans to Ireland’s smallest businesses. It will also enable a significant expansion of the Future Growth Loan Scheme, mainly aimed at supporting SMEs.

This announcement could lead to a higher take up of the loan schemes, as it has emerged that in the two months since its initial launch at the end of March, only €11 million in lending to 400 businesses has been approved under the scheme. While this is almost double the total loans of €6 million approved by MFI for the whole of last year, the sum is still small in proportion to the high number of SMEs adversely impacted by the pandemic.

The Acts amended will be the Microenterprise Loan Fund Act 2012 and the European Investment Fund Act 2018.

 

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