Paschal Donohoe is being advised to look five years ahead in a bumper budget next month.
The Minister for Finance is bracing the country to face a disastrous economic downturn caused by the double whammy of Covid and Brexit.
And the Irish Fiscal Advisory Council is warning him that he must introduce the building blocks for a five year “roadmap” of taxation and spending.
This should include a “multi-annual” stimulus when he presents Budget 2021 in four weeks.
The Government’s independent spending watchdog is warning that national debt is set to spiral as taxes coming in are falling and government spending is soaring.
A Council spokeswoman said: “Uncertainty remains exceptionally high with both Covid-19 and Brexit posing risks to the outlook.
“Government spending has increased sharply and tax receipts are lower. The debt ratio is likely to be around 120 per cent of GNI* this year, well above the pre-Covid-19 crisis level, but low interest rates make this more manageable.
“The Council assesses that support to business and household incomes should continue as needed.
“A large-scale multi-year stimulus is needed in Budget 2021.
“Moreover, a contingency should be made for Brexit or a worsening of economic conditions associated with Covid-19.”
Chairman of the Fiscal Council, Sebastian Barnes, said: “Budget 2021 should ensure that there is a substantial multi-year stimulus in place for 2021 and beyond to continue targeted support measures and to support demand.
“Given the high uncertainty around Covid-19 and Brexit, putting in place an appropriately-sized contingency would help manage risks.
“Looking ahead, there are challenges posed by ageing, climate change, developments in the international tax environment and the need to get the debt burden on a downward path.
“A ‘roadmap’ is needed in Budget 2021 to set out how tax and spending priorities will be balanced over the next five years.
“Strengthening the domestic fiscal framework would help.”
The other Council members are Dr Martina Lawless (ESRI), Prof Michael McMahon (University of Oxford and St Hugh’s College), and Ms Dawn Holland (NIESR).
Economists in the ESRI (Economic and Social Research Institute) have also released a forecast today in which they also say that the “layering” of Brexit and Covid is bad news.
An ESRI spokesman said: “The COVID-19 pandemic continues to have a major impact on the Irish economy. In addition, the risks of a hard Brexit without a free trade agreement by the end of the year appears a real possibility.
"While the potential economic impacts of Brexit have been substantially overshadowed by the COVID-19 crisis, layering a hard Brexit on an economy dealing with COVID-19 could make the previously estimated effects of Brexit worse.
"The extent of overlap in exposure across sectors to the two different shocks is an important consideration for the near-term economic prospects."
