ESRI: Any review of PUP payments 'best left until the autumn'
Kieran McQuinn, research professor at ERSI. File Picture
Any Government review of the pandemic unemployment payments (PUP) and the wage-subsidy scheme would best be left to end of September at which time the economy will hopefully be fully open, the research professor at the Economic and Social Research Institute has said.
Professor Kieran McQuinn told the Irish Examiner that with the restrictions only starting to be lifted this week that an end-summer review of the PUP and the Employment Wage Subsidy Scheme would allow Government ministers time to assess new levels of support that will then likely be required for small firms.
The comments come amid signs that Finance Minister Paschal Donohoe and Expenditure Minister Michael McGrath are canvassing the views of business groups on their views of the PUP.
Some business groups have cited the difficulties of some employers in areas of the economy that were shut through the winter and spring and that will only start reopening this week to recruit staff ahead of the summer season. They have called for a review of the PUP payment levels.
Business group Isme has warned many small firms will go under this autumn as business supports come to an end.
It wants a "solidarity tax" on Paye workers earning over €100,000, and other measures, to help the exchequer pay for a range of business supports next year.
Last year, following the lifting of the first lockdown, the Government cut or "tapered" the universal flat rate pandemic unemployment payment of €350 a week to other bands to include €203, €250, and €300 a week, depending on previous weekly earnings.
However, Prof McQuinn said research by the ESRI had shown that the major part of the increased welfare costs for the State during the Covid-19 crisis had come from unemployment or jobseekers' payments and similar "traditional welfare payments", even as commentators have focused on the costs of the PUP.
The costs of the traditional supports will come down as unemployment falls through the year as the economy starts to recover strongly again, he said.
The Department of Finance in its major economic update last month said the exchequer spent €5bn last year on the PUP and has allocated €3.3bn for the scheme this year.
The Revenue which operates the wage-subsidy scheme, said last week the new EWSS has so far cost €3bn since the programme came into place last July, succeeding the similar TWSS programme.
Prof McQuinn said that the exchequer appears to be on course to benefit from "a relatively strong" recovery.
The ESRI forecasts that unemployment will fall "quite sharply" from the current rate of around 20% to around 10% by the end of the year.
Income taxes have held up, Vat should recover as the restrictions are lifted, and corporation tax revenues look set to do well again this year, as the world economy bounces back.
The Government could be set to post a budget deficit that is lower than the €18.1bn it projected last month.
And as long as there no further public health restrictions with new corona variants, "we are heading for strong recovery this year", Prof McQuinn said.
On the PUP and wage-subsidy schemes, he said that keeping the payments in place until the autumn "is probably a good idea" because "hopefully the unemployment will have come down".
Prof McQuinn said the Government at that time will likely need to divert assistance to small firms because many will struggle to keep from going under even when restrictions are lifted fully.
Government supports have meant that company insolvency numbers have been at very low levels but most experts believe that business failures will climb later this year.
The latest ESRI review will likely be slightly more optimistic on the wider economic outlook, Prof McQuinn said. Isme chief executive Neil McDonnell said small firms will need supports this autumn.
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