| 13.2°C Dublin

'Recession is on the way, but tax cuts could help', says Varadkar

Close

Taoiseach Leo Varadkar at a press conference yesterday. Photo: Leon Farrell/ Photocall Ireland

Taoiseach Leo Varadkar at a press conference yesterday. Photo: Leon Farrell/ Photocall Ireland

Taoiseach Leo Varadkar at a press conference yesterday. Photo: Leon Farrell/ Photocall Ireland

Taoiseach Leo Varadkar has said Ireland is headed for a recession as a result of the Covid-19 pandemic, but the austerity of the bailout years can be avoided with tax cuts used to stimulate the economy.

Mr Varadkar said the econ- omic picture is "very bad", with the economy "put to sleep".

"We've experienced in the last two weeks a sharp, sudden and unexpected shock to our economy," he said.

"The number of jobs lost in the past week or so was lost over a period of three years during the economic and financial crisis of 2008 onwards."

Mr Varadkar said tax rec-eipts would continue to fall in April and that the deficit and the national debt will rise in the coming months.

Cost

"We're facing a public health emergency, which in turn is leading to an economic recession - but as is always the case, it has always been the case, we will get through it," he added.

The economic cost of the crisis through fiscal supports and deferred tax revenue will likely be over €16bn, Finance Minister Paschal Donohoe has estimated.

He indicated that the potential loss of taxation this year could be higher than €8bn.

Mr Varadkar said the objective, "certainly if I have any-thing to do with it", is to avoid "another era of austerity" and the tax increases and welfare cuts that were a hallmark of the post-Troika bailout period.

He said the Government intends to pursue counter- cyclical measures to get the country out of recession, which he described as "the reverse of austerity".

This could potentially include tax cuts, he said, citing the reduction in VAT for the tourism, service and hospitality industry at the beginning of the last decade.

"We have cut taxes in the past to stimulate the economy and it has worked," he added.

Mr Varadkar said pursuing this policy would depend on the State's ability to borrow at affordable prices, which will also determine whether it can continue to maintain emergency welfare payments to hundreds of thousands of people who have lost their jobs.

"I think we're in a good place in that regard, because we had a surplus going into this, because we've the rainy day fund, because the economy was in good nick, I think we will have the capacity to borrow long before other countries may lose it," he said.

Mr Varadkar also said the intention remains for the state exams to go ahead, and that Education Minister Joe McHugh and the State Examinations Commission are working to ensure this.

A decision will be taken towards the end of next week as to whether the restrictions on public movement have to be extended, relaxed or refined, Mr Varadkar said.

Tanaiste Simon Coveney said earlier that the restrictions were unlikely to end.

"I think people do need to realise that these restrictions may go on for some time, and it's wrong to put a timeline on it," he said.