The National Economic Recovery Plan is a €1bn plan which was signed off by the Irish Cabinet on Tuesday 1st June, having been agreed in principle by Taoiseach Micheál Martin, Tánaiste Leo Varadkar, and Leader of the Green Party, Eamon Ryan, on the evening of the 31st of March.
The National Economic Plan is part of a commitment in Ireland’s Programme for Government and was originally expected to be published in October 2020. The dual challenges of Brexit and the COVID-19 pandemic, however, delayed its publication. The Plan is the most recent medium-term economic plan in eight years. Before its publication, the most up to date plan was “A Strategy for Growth” which was published in 2013.
The National Economic Recovery Plan is also being published alongside the submission of Ireland’s National Recovery and Resilience Plan for submission to the European Commission which took place on 28th May 2021. Both plans closely align with the review of the National Development Plan (NDP) which is currently underway. Phase one of the NDP has been published and phase 2 is expected by Q3 2021.
The National Economic Recovery Plan is based on four pillars:
- Ensuring public finances are sustainable for a lasting recovery.
- Helping people back into work by extending labour market supports and through intense activation and reskilling and upskilling opportunities, driven by Pathways to Work 2021-2025.
- Rebuilding Sustainable Enterprises through targeted supports and polices to make enterprises more resilient and productive.
- A Balanced and Inclusive Recovery through strategic investment in infrastructure and reforms that enhance our long-term capacity for growth, balanced regional development and by improving living standards.
- The National Economic Recovery Plan focuses on: a greening of the economy, upskilling and training programmes for the unemployed, future proofing the Irish economy and society, an inclusive and balanced recovery and supporting young people through capital, housing, education, employment and transport.
- There are ongoing disputes regarding the funding of the Plan. Although some of the Plan is funded through the EU’s Recovery and Resilience Fund, there are concerns about sustainability and State borrowing measures.
- Taoiseach Micheál Martin has stated that the plan is the ‘opposite to austerity’ and hopes that the measures will appeal to younger cohorts in particular.
- The Plan details how the Government hopes to reduce the level of support to incomes and businesses as the economy returns to normal and outlines projects to be funded through the EU’s Recovery and Resilience Fund- one of which is a low-cost loan scheme for retrofitting homes.
- The phased withdrawal of the PUP and the introduction of Local Property Tax for owners of new homes built since 2013 are the two most contested issues. There has been industry, media, political and public scrutiny in relation to these changes.
Summary of the National Economic Recovery Plan
- Aims to get 2.5m people into employment by 2023. This is more people in work than in pre-pandemic times (2019).
- Extends the Employment Wage Subsidy Scheme (EWSS) from June to September.
- Extends the Commercial Rates Waiver
- Contains details of the planned withdrawal of the Pandemic Unemployment Payment (PUP). The PUP is expected to close to new entrants from July and to reduce in instalments of €50 from September.
- Tánaiste Leo Varadkar has said that Section 12A of the Redundancy Act will be extended. However, he noted that this is the last extension, and that people on the PUP who are not back to work after it expires will be able to trigger their redundancy package.
- Includes details for “green projects”, which includes loan guarantees for retrofitting, public transport, supports for small and medium sized enterprises and related projects. 50,000 training places for digital and green jobs were also announced.
- Includes a “Pathways to Work Plan” which focuses on upskilling, re-training and helping people to get back to work.
• Priority 1: Advancing the Green Transition – €503 million.
• Priority 2: Accelerating and Expanding Digital Reforms and Transformation – €295 million.
• Priority 3: Social and Economic Recovery and Job Creation – €181 million.
What is being said?
The Government has said that the publication of the National Economic Plan is timely as the OECD has forecasted growth of over 4.2% in the Irish economy this year. The Government has said that it intends to draw down €950m in EU grants for spending projects and reform initiatives between now and the end of 2022, which it hopes will further the economic recovery in the country.
Opposition TDs from Sinn Féin, Labour and Social Democrats have strongly criticised the Government’s plans to withdraw the Pandemic Unemployment Payment (PUP) and have stated that there is an obligation for the Government to support those who have been adversely impacted by the pandemic. In addition to political backlash, the Society of St Vincent de Paul (SVP) is also reported to have criticised the winding down of the PUP and called on the Government to use poverty proofing safeguards while implementing any changes.
Some business and employer groups, however, seem to be in support of the Government’s withdrawal of the PUP and have even called for it to be withdrawn at a faster rate. Several sources have been emphasising the difficulty of hiring young workers due to the presence of the PUP, with the Government committing to offer supports to businesses who are struggling with hiring employees. The Irish Business and Employers Confederation (Ibec) and The Small Firms Association have also complimented the Government’s Plan, stating that it provides certainty for businesses as the economy begins to transition over the coming months. They have also emphasised the importance of the effective deployment of funding from the EU Recovery and Resilience Fund and have come out in support of the Plan.
Additional debates have ensued politically and within the media regarding the introduction of Local Property Tax for owners of new homes built since 2013. The Government have said that Local Property Tax is used to fund local services such as social housing and estate maintenance and have emphasised that the plan is fair and affordable. Opposition TDs have called for the abolition of the tax, however, with homeowners also vocalising their dismay in the media. The introduction of the Tax adds to an already complex and volatile property landscape within the Republic and will most likely continue to fuel the existing turbulence.
Housing, Property and Transport
- The Government is ending the exemption from the charge on new homes built since 2013. This means that approx. 100,000 people will face local property tax bills for the first time.
- Increases of up €100 or more for 36% of people who have been paying property tax since it was introduced are expected. Around 60% of property owners will see no increase.
- A metropolitan railway network was announced for Cork, Limerick, Waterford and Galway as well as 30,000 houses zoned along near the stations.
Tourism, Hospitality and Arts
- The 9% VAT rate for the tourism and hospitality sectors has been extended until September 2022.
- A pilot income guarantee scheme for artists will be introduced. The scheme will be finalised in July and was one of the key recommendations from the Arts and Culture taskforce.
Payments and Business
- The Pandemic Unemployment Payment (PUP) will be phased out in three stages from September. The first reduction will see €50 taken off the top three rates of the pandemic support. A further €50 reduction is planned for November, followed by a final cut of the same amount in February 2022.
- The Employee Wage Subsidy Scheme (EWSS) will run until June next year.
- The suspension of redundancy payments will be extended until November while the commercial rates waiver will remain in place until at least September.
- A new business resumption supports scheme will come into place in September.
- CRSS will be extended until the end of 2021.
- The Government has also stated that it will continue to promote digital adoption, driven by the forthcoming national AI Strategy and substantial digital initiatives as part of the National Recovery and Resilience Plan to a total value of €295 million. This includes developing a Shared Government Data Centre in the Republic.
- The National Economic Recovery Plan outlines how the Government will spend the funding it received under the European Recovery and Resilience Facility.
- Over 50% of EU funding will go towards green initiatives aimed at ensuring the Government reaches its carbon emission targets.
- A loan scheme will be introduced for retrofitting homes, which it is hoped will see banks and financial institutions offer loans with 3.5% interest rates to homeowners seeking to make their houses more environmentally sustainable.
- EU funding will also be used to provide risk protection to banks and financial services institutions that offer low rates for retrofitting loans.
- €40m will be spent on a transformation fund for technological universities (TU) across the country.
- €70m will be set aside for research projects in the areas of climate action and digital infrastructure.
- A new Green Skills Action Programme will be launched, including an online green skills programme and an expansion of the retrofitting scheme to include an additional 5,000 people.
- Training will also be offered to those in the construction sector to make infrastructure more sustainable and accessible in the context of Ireland’s ageing population and for those with disabilities.
- Targeted supports and training for new digital skills. This will take place under the TU fund.