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Future changes to pandemic payment and wage subsidy scheme to be considered, says minister

Paschal Donohoe says people may have to move to normal social welfare schemes and wages subsidy scheme will have to be tapered.

Image: Shutterstock/Joey Laffort

FINANCE MINISTER PASCHAL Donohoe has said decisions will have to be made in a few weeks’ time about how the State will continue to pay welfare supports to people who have lost their jobs due to Covid-19.

“We are in a position to fully implement the wage subsidy for eight or nine more weeks. After that point, decisions will have to be made as to how it is maintained.”

Speaking to reporters in Government Buildings today, the minister said unemployment is predicted to hit 22%, while a 10.5% fall in GDP is also on the cards. 

The recovery of the Irish economy in the second half of this year is dependent on the successful containment of the virus. 

When asked about the continuation of the pandemic payment and the wage subsidy scheme, Donohoe said:

“I’ve made no decisions at all to extend any of those programmes beyond that which is already agreed by the government.

“The wage subsidy scheme is to come to an end after a 12-week period,” he said. 

The government’s Stability Programme Update 2020 published today is only based on the policy decisions that have been already made, said the minister, outlining that any further decisions that are made about the wage subsidy scheme, or any other policy measure, would impact on the figures.

Donohoe said he would soon be engaging with Business Minister Heather Humphreys and Social Protection Minister Regina Doherty regarding the future of the pandemic payment.

He said when public health guidance allows restrictions to be changed, the government will look to modifying the supports so that it can “support the incomes of those who don’t have a job, but also encourage and allow citizens to move into a job”.

Donohoe said those in receipt of the pandemic payments will “gradually” move “into our normal welfare code, but that is going to take time to happen, because there’s hundreds of thousands of people who are currently in the scheme”.

“The key thing that we need to do over time is gradually move on to normal welfare and normal social welfare policies,” he said. 

Wage subsidy scheme

In relation to the wage subsidy scheme, which pays a percentage of the wage bill for businesses during the public health emergency, Donohoe said:

We will have to taper the wage subsidy scheme over time. We will need to do that.

As people return to work, and as the Irish economy begins to recover, employers will be able to pay their workers, said the minister.

As payments increase from employers, “then we will have to change the subsidy”, said Donohoe. 

“We are in a position to fully implement the subsidy, as it stands, for the next eight to nine weeks, which is for how long it continues to be in operation. But then after that point decisions will have to be made regarding how it is maintained.”

Any changes to the scheme would be done in a graduated way, and over time the subsidy scheme “will have to be tapered and will have to be changed”.

The Department of Finance economist John McCarthy today warned that Ireland’s government deficit could reach €30 billion if restrictions currently in place continue until the end of the year.

McCarthy said he is forecasting a ‘U’ shaped rather than a “V” shaped recovery but stressed everything is dependent on the epidemiology of the coronavirus.

Donohoe said Ireland’s economy is in a better position compared to 2008.

“Firstly, we do not have a private lending bubble. Also there is no weakness in our public finances, such as a balance of payments deficit.

“We do start from a position of strength. We’ve had a budget surplus over recent years. We do have significant cash reserves. And we have a restored reputation in the financial markets,” he added.

The minister said the “most important thing we can do economically, is get people back to work in our economy!”.

“And as soon as the public health guide facilitates that, that will be a matter of huge focus for me.”

He added: “There is no doubt that, along with the rest of the world, Ireland is on a difficult road. However, we face into this journey from a position of strength. We can and we will rebuild our economy, continue to provide for society, get our people back to work and keep them safe while doing so.”

He added that running a deficit in a recession is appropriate because “this is how we support the economy in difficult times”. 

Donohoe said an economic recovery plan will be published to lay out the necessary measures to restore full employment and outlined the steps needed to get the country back on track. 

He said a range of incentives will be considered in order to stimulate job creation and consumer spending. 

“We will give consideration to policies that will be needed to encourage our citizens to spend money at a time in which our public health guidance allows it, and also to what measures we need to put in place to encourage employers to recruit again.

“But I’m not in a position to be able to indicate what that because the government has not made any decisions on these matters. And also because our public health guidance at the moment doesn’t facilitate that happening,” said Donohoe.

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