Introduction - leaving cert business
Introduction(minimum 200 words – maximum 250 words)TitleHow the COVID 19 pandemic has shaped fiscal policy in 2020 for sustainable development in IrelandLine of inquiryThe effects on Irish Government finances of COVID 19 from January 2020 to December 2020Aims based on curriculum specificationsidentify the main sources of government revenue and expenditure; distinguish between the current and capital parts of the government accountsdiscuss measures that a government can take to manage a budget deficit, surplus or balanced budgetdebate the purpose and impact of taxation on the economy as a whole, explaining how tax policy can be used to address inequalityThe research sources that I have chosen are the December 2020 Irish Fiscal Advisory council report and BEFORE COVID 19 advice issued in March 2020 and advice issued 9 months into living with the pandemic.I will use qualitative data from this sourceWWW..ieBEFORE COVID 19ESTIMATES OF RECEIPTS and EXPENDITURE FOR THE YEAR ENDING 31 DECEMBER 2019AFTER COVID 19ESTIMATES OF RECEIPTS and EXPENDITURE FOR THE YEAR ENDING 31 DECEMBER 2020I am using mainly quantitative data from this government websiteThis research project looks at economic sustainable goals and social sustainable goalsThe areas that I will examine are the effects of COVID19 and the lockdowns on all government current revenues and specific expenditures namely Health, Education and Social protection.Introduction 224 wordsThe Research Process(minimum 650 words - maximum 750 words)Table 1CURRENT RECEIPTS20202021Excise duty5,8405,801Income tax23,92822,715Corporation tax10,44312,892VAT15,59814,029SAMPLE CURRENT EXPENDITURE20202021Health17,40122,117Education10,2068,861Social protection21,08025,126History of the Irish economy in the 10 years preceding COVID19Irish economy was in very strong shape ahead of being hit by very deep H1 2020 COVID recession Economy had recovered strongly from severe recession of 2009-2012 periodWell balanced, robust underlying growth of circa 5% per annum over 2013-19 period Large inflows of FDI and strong export growth remain key features of the economyStrong jobs growth, averaging over 3% per annum during the period 2013-19Unemployment rate fell from 16% in early 2012 to below 5% in H2 2019 Budget deficit eliminated quicker than expected. Public finances in surplus in 2018/19Current situation DECEMBER 2020Unemployment rate down to 14.7% by September, but rising sharply again in Quarter 4 on new lockdown resulting in higher social protection figures in 2020 Core retail sales rebound strongly; up 22% in Q3 vs Q2 level, +7.2% year on year. Flat in October vs Sept resulting in smaller VAT receipts New car registrations rose in August-October period after very weak H1 2020 – well down in 2020 resulting in smaller VAT receipts.(SOURCE AIB ECONOMIC PRESENTATION DEC 2020)The potential implications of the Covid-19 crisis on sustainable development for Irish Fiscal policy areFiscal policy refers to the use of government spending and tax policies to influence?economic conditions.Fiscal policy is largely based on ideas from John Maynard Keynes, who argued governments could stabilise the?business cycle?and regulate economic output.Before COVID19 in 2019Irelands Current expenditure was €53,561Irelands Current revenue was €59,863As seen in Table 1 aboveThe main drain on current expenditure traditionally has been the spend on Education, Health and Social protection.COVID19 has had implications on the cost of each on the expenditure side of Fiscal PolicyEducation which is a core part of Social Sustainability has had the following extra costsStaffing costsSanitisation costsMedical equipmentTechnology CostsCost of tackling educational inequalityExtra waste disposal chargesHealth which is a core part of Economic and Social Sustainability has had the following extra costsExtra staffing costsPersonal protective equipment estimated at €1Bn per yearThe cost of testing tracking and tracing.The cost of rolling out the vaccine.Social Protection which is a core part of Economic and Social Sustainability has had the following extra costsPandemic Unemployment Payment cost €5 BillionWage subsidy schemes cost €4.1 BillionThese effects can be seen in Table 2 belowThe COVID-19 adjusted unemployment rate for November 2020 was 21% for all persons including those on Pandemic Unemployment PaymentsTable 2 My research has shown that on the Income sideTax revenues were down €2.1 billion or 3.6% compared to 2019.?This relatively good return from taxes, despite COVID was helped by the receipt of almost €1 billion more than forecast in corporation tax and €575m more in stamp duty.?This latter amount relates to a once-off payment.?Income tax also held up despite Covid-19. Receipts were down €224m or just 1% on what was collected in 2019.?But VAT receipts were down €2.7 billion, or 18%, as consumers cut back on spending. ?Finance Minister?Paschal Donohoe said the end-year Exchequer returns show the scale of Government intervention during the?pandemic.?"From an expected surplus of around €2.5 billion before the pandemic struck, to an estimated deficit of €19 billion, the strength and depth of the Government's response is unprecedented in our country's history," Paschal Donohoe said."Although we once again enter a difficult period of tough but necessary restrictions, today's figures point to some positive underlying trends in the economy,"?the Minister said in a statement."The Government will continue to use the resources of the State to protect the most vulnerable, support businesses and sustain incomes until our country emerges from this pandemic even stronger than before," he added. (Source RTE BUSINESS NEWS)The use of this expansionary Fiscal Policy at an extra cost of €19Bn by the Government is to counteract the economic effects associated with the worst of the pandemic. It is to protect jobs and disposable income which is all needed to stimulate Aggregate Demand and to keep the Circular flow of Income flowing using Keynes multiplier effect670 words on the Research partConclusions (minimum 300 words - maximum 350 words)Present conclusions as they relate to the stated line of inquiry, the associated aims and the economic concepts and economic theory underpinning the line of inquiry.To recap on our Line of InquiryThe effects on Irish Government finances of COVID 19 from January 2020 to December 2020Domestic spending will contract again in Quarter 4 2020 with lockdown, though government provides supports through PUP and wage subsidy schemes.This will have a further negative effect on public financesGDP to fall by 3.0-3.5% in 2020 - resilient exports offset part of steep decline in domestic demand Growth prospects improve for 2021-22, with positive news on vaccines. Strong rebound likely which will improve the public finances which will make it easier to balance the books going forward.Our general government debt of €19 Billion for 2020 as opposed to €2.5 Billion for 2019.Controlling the spread of the virus and a swift rollout of the vaccine will strongly impact our current budget deficit for 2021.Even though the Government has taken the three tiers of Economic, Environmental, and social sustainability as part of its fiscal policy response to COVID19.This is evident through the Pandemic Unemployment Payment without a corresponding rise in Income tax (Social Sustainability)Lowering the top rate of Value Added Tax rate to 21% temporarily (Economic Sustainability)It has also maintained its green commitments through the raising of carbon taxes (Environmental Sustainability)In the short term the government through its sizeable current budget deficit for 2020 and 2021 also has managed the economy effectively.This is feasible at the moment due to the very cheap borrowings available from the European Central Bank.According to the Fiscal Council report of December 2020 (Source Fiscal Council website)“Sectors like retail, hospitality, transport and the arts are especially vulnerable to the pandemic. New analysis in this report highlights some of the regional differences in activity lost due to Covid-19. Western and border regions, areas that are more heavily reliant on sectors like tourism and hospitality, have been worse affected.”A greater worry is that our National Debt has spiralled from €202 Billion at the end of 2019 to €223.9 Billion at end of November 2020 (Source NTMA website).The cost of servicing monies borrowed to protect the economy from the perils of COVID 19 will harm us in future years if the ECB were to sharply increase interest rates.CONCLUSION 350 wordsReflection(minimum 125 words - maximum 150 words)Reflect on the insights gained from engagement with the research study.Demonstrate how thinking has evolved and/or how attitudes, opinions or behaviour may or may not be influenced as a result of the research study.After researching the impact of COVID19 on the public finances and how it shapes fiscal policy I have learned a few lessons about the normal sources of current Income in a regular year and also the three main drains on the exchequer annually i.e. Social protection, Health and Education.My study has shown me that the Irish economy was thankfully in good shape at the beginning of 2020 and tax revenues have fallen by less than expected amounts.I now realise the impact Foreign Direct Investment has on tax revenues due to direct and indirect employment.The worrying aspect is the effect the drain on extra social protection billions will have on the economy going forward even though the Government have considered the three pillars of Sustainable Development i.e. Economic sustainability, Social sustainability, and Environmental sustainability while formulating an appropriate fiscal policy to steer the economy out of the current pandemic.151 words reflectionReferences & BibliographyInclude full references for all sources cited in your report. You should also include details of additional sources of information that you consulted but have not cited in your report.December 2020 Irish Fiscal Advisory council .ieCentral Statistics Office websiteAIB research markets economic presentations 2020Positive Economics textbook Susan Hayes Culleton ................
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