Cost of Covid battle means pain: Burke

The cost of the battle against Covid is going to mean pain in the future – and the effects that the shutdown has had on business are going to put a considerable strain on local authority finances.

That’s the reality check issued by Peter Burke, TD, Minister of State for Local Government and Planning, whose department is already examining the effects that the rates waiver and the collapse of other income is going to have on the ability of local authorities to deliver services.

“It’s a nationwide problem. Each local authority – and they’re setting their budgets now – is going to face a shortfall because of the collectability of the rates post the rates waiver,” the Fine Gael man told the Westmeath Examiner on Thursday.

“The waiver runs until the end of September and what happens from October to December is going to pose a question mark. Take if you have a hotel, and you are only at 20% occupancy – and getting a bill for rates post-October: is that right?

“We are going to have to try and see can we do something with that.

“There will be also reduced income from paid parking, and in Westmeath, reduced income from Belvedere – and indeed from any service that local authorities take income from, there will be a massive shortfall.

“In the department I am in, we are working on trying to get a supplementary budget for the local authority sector to try and absorb that.”

Ultimately, Minister Burke points out, repayment of the money currently being used to prop up the economy will have to begin.

“The European Central Bank has given a no limit bond issue for the moment because every country in Europe is the same position and that is where it is different to the crash, because then there were only four or five countries that were very bad, and this time everyone’s in the one boat.

“The problem is it’s almost free money in terms of interest rates at the moment because interest rates are so low – but they will go up in the future, so there is going to have to be some pain in the years ahead to try to stabilise the finances again.

“Interest rates won’t stay low forever.”

It would, Minister Burke continues, be ill-judged to keep rolling the debt over, not least because it would affect investors’ confidence in the country.

“If they keep rolling it over, it won’t be credible, and every country needs to have credible finances, because you are relying on investors to fund part of the economy,” he points out.

As to when the belt-tightening will have to begin, his prediction is that 2023 will be the year that Ireland will start with the adjustment in finances.

“We know now that public investment has to be strong because private investment is going to be weak,” said Minister Burke, “the capacity of the private sector to invest in its own business over the next 12 months is going to be weak, and so that is where the state is aiming to do the reverse of what happened the in the crash, when there were historical cutbacks.

“The state is aiming to invest to make up for weak private sector investment; and if we invest a lot of money in capital infrastructure projects and get work going and get people employed again around the country, then hopefully the year after that the private sector will be in a better position to respond to the challenges of the future.”