An overview of the Government’s July Stimulus Plan
On Thursday 23rd July, the Fianna Fáil, Fine Gael, Green Party administration released details of a €5.2 billion spending package in the form of a Stimulus Plan that had been committed to in the Programme for Government. With almost every sector being catered for, there is a particular focus on securing existing jobs, spurring job creation and employee re-skilling, particularly in sectors that employ young people. The July Stimulus will be followed by a National Economic Plan that will accompany Budget 2021, due to be announced in October.
From September, a new Employment Wage Support Scheme will replace the Temporary Wage Subsidy Scheme and will run until April 2021. Employers whose turnover has fallen 30%, will receive a flat-rate subsidy of €203 per employee including seasonal workers and new employees. New businesses operating in affected sectors will also be eligible. The Scheme is expected to support around 350,000 jobs, and the policy change dovetails with those of other EU states who availed of a new €100 billion EU SURE loan fund.
A variety of back-to-work and re-skilling schemes are being prepared at a cost of €200 million, with the expectation they will create tens of thousands of jobs as the Pandemic Unemployment Payment is wound down. Employers will be paid €2,000 for every apprentice they hire in 2020 and 8,000 jobs are to be created through the JobsPlus scheme under which €7,500 will be available over two years for employers to hire someone under the age of 30 who is on the Live Register or the Pandemic Unemployment Payment. Half of the €100 million spend will go towards creating new places in higher and further education.
The Pandemic Unemployment Payment (PUP) is set to continue until April 2021 but payments will be gradually reduced to €203 per week over that period based on the pre-pandemic earnings of the claimant, with claimants separated into three ‘tiers’. The extension of the PUP will cost an estimated €380 million more than if claimants were receiving the standard Jobseekers’ Allowance.
The Stimulus prolongs and enhances some of the tax arrangements introduced to help businesses through the crisis. The waiver on commercial rates will be extended until the end of September with the Government also planning to allow firms to warehouse part of their PAYE and VAT bills without incurring interest or penalties. It is important to note that these liabilities will not be waived. Self-employed persons who will make a loss this year, after making a profit last year, will be able to reclaim a portion of their 2019 tax. Similarly, to relieve cash-flow pressures on previously profitable companies, an immediate refund of some or all corporation tax paid will be made available through permitting the early carry-back of trading losses.
From September, the standard rate of VAT on will be reduced from 23pc to 21pc for six months. Separately, a “Stay and Spend” tax refund of up to €125 on spending of up to €625 by individuals on food and accommodation in hospitality businesses from October 2020 will be introduced in a bid to encourage “staycations”.
Meanwhile, the Green Party have blocked a proposed cut to Capital Gains Tax (CGT) from 33% to 20%. However, the debate over the reduction proposed by Finance Minister Paschal Donohoe (FG) and backed by Fianna Fáil is likely to return ahead of the budget in October.
The Government plans to spend €500 million on a range of investments in communities. Some of this, such as the €75 million for minor works in schools is aimed at supporting the adjustment of facilities to the Covid-19 public health regulations. There is also a heavy focus on environmental causes including a 113 million spend on active travel, public transport and renewal of transport infrastructure, and a €100 million investment in the Energy Efficiency National Retrofit Programme. The Government will also launch a Green Enterprise Fund worth €10 million for businesses engaged in green research as well as development and innovation, capital investment and capacity building that are part of their adaptation to a green economy.
In the short term, the Government plans to further finance the fight against Covid-19 through a €25 million addition to the Covid-19 Life Sciences Products Scheme to aid the research, development and production of relevant medicinal products in Ireland. Separately, €20 million will be provided to SMEs to acquire staff, software and IT systems to adapt to the new relationship with the UK from January 2021.
In a bid to spur private investment, the Restart Grant for Enterprises is being extended to a broader base of SMEs and expanded by €300 million, bringing the total funding of the Restart Grant to €550 million. Micro and small enterprises will be able to avail of €55 million in enterprise investment measures through additional resources for MicroFinance Ireland and Local Enterprise Offices. In cooperation with the European Investment Bank Group, the Future Growth Loan Scheme is being expanded from €200 million to €500 million and made available to businesses with up to 499 employees. The Government will also expand the Enterprise Ireland Sustaining Enterprise Fund worth €180 million, which will now include direct grants to viable businesses. Enterprise Ireland’s funds for investment in the Seed and Venture Capital Sector will also be topped-up by €10 million. Separately, the IDA will receive €10 million for marketing activities focused on attracting job-rich FDI projects.
Alongside the July Stimulus, the Government recommitted itself to raise infrastructure spending by €1 billion (12%) to €9.2 billion in 2021, which will include investments in housing, broadband, schools, transport and healthcare. Meanwhile, as part of the previously announced Covid-19 Credit Guarantee Scheme worth €2 billion, the Government will guarantee 80% on a wide range of credit products for businesses from €10,000 to €1 million for up to 6 years. Furthermore, in hinting at what is to come in the National Economic Plan in October, the Government underlined that seizing opportunities from the digital transition and preparing for the next phase of technological transformation will be key.