The Opposition finance spokespersons have made a song and dance about the deficit outcome in 2021. They argue that the increased deficit of €1.5 billion implies that Government mismanaged finances greatly.
The Minister for Finance, with his speech included a detailed appendix explaining the cause of the higher-than-expected spending made in 2021. In total, spending was some €559 million higher than budgeted. However, most of this revision was clearly due to pandemic-related circumstances.
The table below gives a breakdown.
Nearly half of this revision was due to higher expenditure in the Ministry for Energy, Enterprise, and Sustainable Development, which reflected the payment of the full wage supplement. The wage supplement was reintroduced when the Government increased restrictions earlier this year to reduce the spread of the pandemic. This measure safeguarded greatly the financial viability of firms, particularly those in retail and restaurants.
A quarter of the revision was due to higher spending on health. This reflected two developments: the need to purchase additional vaccine doses to give boosters together with increased spending related to the pandemic.
Two significant sources of upward revision in spending were from the Finance and the Economy Ministries. Once again this reflected financial assistance related to the pandemic, including subsidies on interests, the introduction and extension of many other support schemes.
A quarter of the revision was due to higher spending on health.
A number of other ministries registered higher-than-expected recurrent expenditure, primarily due to pandemic-related issues. Among these, education spending had to be increased to reflect the restrictions, including more expensive transport as the number of children per van had to be reduced for health reasons. The police and other security forceshad to undertake several additional duties to monitor the enforcement of restrictions.
Spending on security services and the armed forces also reflected increases related to arrears of collective agreements that had not been negotiated in previous years.
Once one considers all these factors, it is clear that the increase in the deficit was explained by the particular circumstances of this year. It is hard to understand which of these additional outlays Opposition spokespersons would have not done.
Would they have not reintroduced the wage supplement? Would they not have bought the vaccine booster doses? Would they have not spent additional money to guarantee that children could attend schools safely?
It is therefore clear that the criticism posed by the Opposition does not hold water. One has to keep in mind that the same spokespersons served in Conservative cabinets that caused the ignominy that our country was the only one in the EU to be placed for three times in the excessive deficit procedure.
Whereas the Leader of the Opposition had argued that it was impossible for 2021 tax revenue to be higher than 2019 tax revenue, this actually happened. This confirms that economic growth was in line with expectations despite the evolution of the pandemic during the year.
For the Opposition to be credible it needs to quantify which elements of spending it would not have incurred. The deficit is projected to nearly halve in 2022 given the gradual diminishing impact of the pandemic. Moreover, the debt burden is projected at under 62%, much lower than the nearly 70% that was the legacy of the preceding Conservativeadministration.