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State and public health sector will be larger after Covid, says McGrath

Minister says pandemic has forced a change in direction on spending


Recovery: Public Expenditure and Reform Minister Michael McGrath. Photo: Frank McGrath

Recovery: Public Expenditure and Reform Minister Michael McGrath. Photo: Frank McGrath

Recovery: Public Expenditure and Reform Minister Michael McGrath. Photo: Frank McGrath

A “larger state” and public health sector will be permanent features of post-pandemic Ireland, according to Public Expenditure and Reform Minister Michael McGrath.

The minister said that the Covid-19 crisis has forced a “change in direction” when it comes to health spending.

“Our public sector is growing and I think that, coming out of the pandemic, we are going to have a larger state. We’re certainly going to have a larger public service, for example in the whole health area,” Mr McGrath told an online event on Thursday.

The size of the public service will rise to between 360,000 and 370,000 people over the course of the next 12 to 18 months, the minister told the event organised by TASC, the think-tank for action on social change.

The Government set aside €4bn for health spending in 2021, to be spent partly on recruiting around 16,000 extra people to the health service.

Mr McGrath said €2bn of the health spend represents a non-pandemic-related “step-change decision to increase the capacity of our public health system”.

He said maximising EU funds and boosting economic growth will help to pay for Ireland’s extra spending.

Ireland was the only EU economy to grow in 2020, with gross domestic product (GDP) up 3pc on the back of multinational exports, the European Commission said on Thursday.

Growth fell by an average of 6.3pc across the EU, with large reductions recorded in Germany (-5pc), France (-8.3pc), Italy (-8.8pc), Greece (-10pc) and Spain (-11pc).

The Commission expects the Irish economy to grow by 3.4pc this year and 3.5pc in 2022, a more pessimistic forecast than the Irish Central Bank’s prediction.

EU economy chief Paolo Gentiloni encouraged governments to continue spending their way out of the crisis, saying Brussels would not “dictate” how to withdraw support.

“Timing is everything. Our message is: Right now, February 2021, do not withdraw these measures prematurely.”

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The EU has also promised Ireland €853m in grants from its €672bn pandemic recovery fund and just over €1bn from a separate Brexit adjustment fund.

Mr McGrath said the Government would continue spending on Covid-19 supports “for as long as they’re needed and as long as we can afford them”.

"They are costly, but we can afford them for now, and what we have committed to is that there won’t be any cliff edge,” he said.

But the Government will eliminate the budget deficit “over time” in order to be able to borrow and invest.

And Ireland should "remain firmly within the [EU] pack” when it comes to spending and borrowing so as not to attract “unwarranted attention” from bond market investors.

“In other words, that we wouldn’t be an outlier on the negative side, that we wouldn’t stand out as a country that has a much higher deficit than all of our peers.”

Mr McGrath also joined calls from EU countries such as Italy and France to change the EU’s debt and deficit rules, which have been suspended during the crisis.

He wants capital investment “to be accounted for in a manner that is more supportive of countries investing in public capital programmes”.

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