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€5bn recovery fund set to be a key feature of Budget 2021

Written by Robert McHugh, on 12th Oct 2020. Posted in Financial

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One of the largest fiscal giveaways in the history of the state is set to be unveiled tomorrow in Budget 2021. Goodbody stockbrokers say the headline announcement will be a recovery fund worth €4-5bn to counteract the twin threats of COVID-19 and Brexit.

It has been suggested in the media this morning and over the weekend that a separate compensation fund will also be available to businesses affected by ongoing restrictions, while business rates relief is also likely to feature. The health sector will be allocated a large increase in funding, bringing their 2021 allocation to €21bn.

A reduction in the 13.5% VAT rate to 9% for the hospitality sector is also likely to be announced. On housing, it appears that the enhanced Help-to-Buy scheme will be extended in 2021, while a new Affordable Housing Scheme will be unveiled.

Estimates published on Friday showed that the government expects a budget deficit of €21bn (6.1% of GDP) in 2020, significantly lower than was anticipated earlier in the year. For 2021, a deficit of €14bn is anticipated prior to budget day measures. Given the better starting position the government believes it can inject significant stimulus.

According to Goodbody Stockbrokers, "Like other’s, the Irish government will eventually face the difficult task reducing the size of government spending, but with large immediate threats to the Irish economy, this is a time to keep the foot on the fiscal accelerator."

Source: www.businessworld.ie

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