Speech
Opening Statement by Minister Donohoe on Dáil Motion on the Extension of EWSS and CRSS
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Introduction
I move today two resolutions seeking the approval of the House for the following draft orders which provide for the extensions up to the end of June of two support schemes, the Employment Wage Subsidy Scheme, the EWSS and the Covid Restrictions Support Scheme, the CRSS:
and
Responding with speed and scale
Speed and scale of response to the supply and demand shocks created by the pandemic has been the focus of our economic response.
Since March last year, we have moved rapidly, using the public sector balance sheet to replace lost private sector demand, in order to ensure that firms, workers and incomes were supported and protected through wage subsidies, deferrals of liabilities and income supports.
Our overarching objective has been to support households and firms, as well as to limit the ‘scarring’, or permanent, effects of the pandemic.
The Schemes
The schemes we are seeking to extend today are part of the broad range of supports provided by the Government to help businesses through the pandemic and it is no exaggeration to say that the level of support provided to businesses has been unprecedented.
Significant levels of support have been provided by way of direct income supports via the Pandemic Unemployment Payment (PUP) and the Wage Subsidy Schemes, which represent real payments to our citizens and businesses to help manage financially in these very difficult times.
The Temporary Wage Subsidy Scheme (TWSS) cost almost €3 billion; the EWSS has cost €2.8 billion with almost half a billion in PRSI foregone; the CRSS is approaching €0.5 billion; and €2.3 billion of tax debt has been warehoused. This gives a total of €9 billion in supports for businesses under the aegis of my Department alone.
In addition, €6.5 billion has been paid by the Department of Social Protection under the PUP.
The Wage Subsidy Schemes have been a central pillar of our response to this pandemic, supporting businesses, encouraging employment and helping to maintain the link between employers and employees.
The TWSS was in place from March until the end of August.
The EWSS, which is an economy-wide support scheme open to all sectors, replaced the TWSS from 1 September 2020.
In addition to these schemes, a number of other Departments are also providing further direct supports, whether to specific sectors such as tourism and live performance or in specific circumstances, such as assistance in re-opening.
The beginning of the end – cautious reopening
We have to look at the motions before the Dáil today in the context of where we are in relation to the re-opening of the economy.
We are already seeing the start of the re-opening process with the full return to schools from last Monday week, travel limits extended to 20 kilometres or within county and the resumption of residential construction, as well as early-learning and childcare projects.
This week, inter-county GAA training and elite athlete training was permitted to resume.
And as we look towards this cautious reopening of our society and economy over the weeks and months ahead, it is clear from last week’s Stability Programme Update that the relationship between economic activity and public health restrictions has weakened over each successive wave.
The adaptability and innovation shown by businesses and consumers is borne out by the high frequency, real-time economic data published by my Department, which shows that the impact of the current set of restrictions is around half that of the spring 2020 lockdown.
Much of this is down to the flexibility of our domestic enterprises.
Consumers have adjusted too.
Last month’s VAT data, up 8 ½ per cent on the first quarter last year, shows that people have altered their behaviour.
They are buying local, buying online and have shifted their consumption habits.
In the medium—term, the speed at which the economy can recover will, of course, depend on the success of our vaccination programme.
A consistent theme of the IMF and World Bank Spring meetings that I attended recently is that vaccine policy is economic policy.
And our vaccination programme will be the touchstone for our economic recovery.
However, it will take some time before the economy is fully re-opened, and in recognition of the challenges that continue to face businesses I want to reiterate today that there will be no cliff-edge in the removal of support.
Supports will continue for as long as is necessary to ensure a strong recovery.
We have not fought this pandemic and its economic fallout for over a year on a scale that is unprecedented in Irish economic history just to fall at the final hurdle.
The Motions
The motions are required as part of the process of extending the schemes until the end of June 2021.
In the case of the CRSS, subparagraph (ii) of section 484(2)(a) of the Taxes Consolidation Act 1997 inserted by Section 11 of the Finance Act 2020 provides that the Minister for Finance may vary the Scheme by extending the end date of the measure beyond 31 March 2021 (but not later than 31 December 2021).
The draft Taxes Consolidation Act 1997 (Covid Restrictions Support Scheme) (Date Adjustment) Order 2021 provides for this extension and has been laid before the Dáil on 8th April.
The legislation requires that the Order shall not be made unless a resolution approving the draft has been passed by the Dáil.
In relation to EWSS, Section 28B(21) of the Emergency Measures in the Public Interest (Covid-19) Act 2020 provides that the Minister for Finance may vary the Employment Wage Subsidy Scheme by extending the end date of the measure beyond 31 March 2021 (but not later than 30 June 2021).
The draft Emergency Measures in the Public Interest (Covid-19) Act 2020 (Covid-19: Employment Wage Subsidy Scheme) (Date Adjustment) (No. 2) Order 2021 provides for this extension and has been laid before the Dáil, also on 8th April.
Again, the legislation requires that the Order shall be approved by this House. This is similar to the processes we went through at the end of January in relation to the additional seasonal support over the Christmas period for the CRSS and early February in relation to the extension of the enhanced rates of EWSS to end-March.
There are certain specified conditions which must be fulfilled before these Orders can be made and the necessary steps have been taken to comply with the legislation.
Both the CRSS and EWSS schemes have been monitored with regular assessments undertaken, noting the continued challenges for the Irish economy arising from the pandemic, the Exchequer cost and scheme utilisation.
I recently published the assessments I received on the EWSS to date, for the period September 2020 to January 2021.
I note that the coverage of the EWSS remains significant, with over a quarter of all employers making a claim in January 2021 in relation to 15% of all employees in that month, thus clearly demonstrating that the EWSS is an important policy intervention during this challenging time.
I have formally consulted with my colleagues, the Minister for Public Expenditure and Reform, Deputy McGrath and, in respect of EWSS, the Minister for Social Protection, Deputy Humphreys, and have determined that it is necessary both schemes remain in place until 30 June 2021.
I think that it is fair to say that the two schemes have provided much needed support to businesses as they endeavour to cope with the effects of the pandemic and that they have helped ensure that businesses remain viable as we start the process of re-opening the economy.
The schemes in action
The numbers are striking and I think that it is worthwhile to consider their impact.
As at today, 22nd April, 22,100 businesses have registered 25,900 premises for CRSS with Revenue. 148,400 claims for CRSS payments of €478.9 million in respect of 24,600 premises have been made to date and €475.5 million of this has been processed for payment.
With regard to EWSS, 48,900 employers have currently registered with Revenue and over half a million employees have benefitted.
€2.8 billion has been paid and almost half a billion in PRSI foregone so far.
As of last week, there were over 420,000 people in receipt of PUP.
I would like to take the opportunity to acknowledge the input of the Revenue Commissioners into the success of the schemes.
They successfully re-engineered their systems to pay money out to businesses rather than taking money in.
Of course, they have continued in their vital role of tax collection, while facing the difficulties that all organisations have faced in dealing with working from home for a very large proportion of staff.
They have also provided helpful guidance on the operation of the schemes and have added to this guidance as issues arose.
Employment Wage Subsidy Scheme
I wish to first look at the extension of the EWSS for now to 30 June 2021. The EWSS represents a substantial and key part of the Government’s response to the pandemic.
This will be the second extension of this scheme by the Government, thus demonstrating that the EWSS is a successful and vital policy instrument in supporting viable firms, encouraging employment and assisting in maintaining the link between employers and employees.
The primary employer qualification for the EWSS is based on the employer's turnover in the current six-month period being less, compared with the same pre-pandemic position period in 2019.
The legislation provides that the employer must be able to demonstrate that it is operating at no more than 70% in either the turnover of business or the customer orders received by the employer by reference to the period from 1st January to 30th June 2021 compared with the equivalent period in 2019.
The EWSS is designed to be flexible for the employer and take account of potentially sudden changes in turnover so if there is a reduction in turnover in the future because of a change in circumstance the employer may be entitled to make a claim for that later period.
The level of subsidy given to the employer is based on the number of paid workers on payroll per week and a flat, per-head value rate is applied based on prospective pay levels so that claims may also be made for new hires or seasonal workers.
Following the re-introduction of Level 5 restrictions in October 2020, the Government decided that from 20th October 2020 the amount of the EWSS subsidy paid per employee would be up to €350 per week, graduated on the basis of the income of the employee, in line with the levels of payments given under the PUP scheme.
As set out in Finance Act 2020, the enhanced rates were to be in place until 31st January 2021 after which they were due to return to the original rates of €151.50 for those paid more than €151.50 per week and €203 for those paid more than €203 per week.
However, given the current circumstances with this public health pandemic, the Government decided on 23rd February last to maintain the current EWSS rates to 30th June 2021.
This is aligned with the rates of payment of the Pandemic Unemployment Payment.
Such alignment is important, as otherwise there would be a risk of migration of employees from the EWSS to the PUP, which has the potential to undermine the very purpose of the EWSS – supporting viable businesses and maintaining the link between employers and employees.
The EWSS is also an important bridge between social welfare payments, such as the PUP, and regular employment, which is the ultimate goal.
The relevant legislation provides that, as Minister for Finance, I may vary certain aspects of the scheme such as the end date, the rate of subsidy, and the criteria of the turnover test for qualifying employers, by Ministerial Order.
This affords me, as Minister, sufficient flexibility to ensure that the scheme remains agile and responsive in light of changing circumstances associated with the pandemic.
In terms of direct subsidy payments, the estimated cost of the extension of the enhanced rates for Q2 is €1.167 billion. This is to be met from the voted expenditure of the Department of Social Protection.
In addition, it is estimated that further €180 million will arise from the continuation of the 0.5% reduced rate of Employers’ PRSI, thus giving an estimated total cost of about €1.3 billion.
Covid Restrictions Support Scheme
Turning to the CRSS, this scheme has provided much needed support to businesses that have been forced to close or restrict access to their premises on foot of public health regulations.
The vast majority of businesses in Ireland are affected by Covid but the CRSS is intended to target specific businesses where access by customers is restricted. The CRSS is and was intended to be a targeted scheme, and was never meant to be a general support measure for the entire economy.
As I have said, the economy is only slowly and cautiously beginning to re-open and therefore the Government has agreed that the CRSS should be extended for now to 30 June 2021.
The “restart week” provided for in the CRSS, which allows a business to claim for an extra week upon reopening after restrictions are lifted, will be of particular benefit as businesses start to re-open.
The estimated cost of the extension of the CRSS is in excess of €240 million, to be met out of resources allocated for Covid contingency funding.
As we look forward to reopening the economy and society in the coming weeks and months, we can expect an initial rebound, in part fuelled by pent-up demand, but this is not the same as a full recovery.
We recognise that re-opening will be costly and will pose new challenges that will need to be sustained by continued supports and corrective measures to allow us get the balance right between supporting recovery and cost to the Exchequer.
Conclusion
I will conclude by restating the Government’s commitment that there be no cliff-edge end to the economic supports at the end of June.
We are conscious that continued support will be required to assist sectors of the economy on the path to recovery and we will set out these plans in the coming weeks.
The resolutions before the House seek approval of the two orders to extend these important schemes and I commend them to the House.
ENDS