There has been a broad welcome for the Government’s €7bn stimulus package announced this week. Its ‘borrow and spend’ approach follows a general consensus here, and across Europe, that the only way to revive Covid-battered economies is to spend.
Nobody wants to see a return to the austerity measures of 2008, so it’s not surprising that the largest-ever injection of cash into the Irish economy would be, on the whole, well-received.
It is worth about €1,000 to every Irish citizen, finance minister Paschal Donohoe said yesterday, putting a face on a plan that includes more than €5bn in cash and €2bn in loan guarantees to keep businesses going and save jobs.
The plan’s range — it has more than 50 measures — is an acknowledgment of how deeply the pandemic has touched every single aspect of Irish society. It includes tax measures, grants, loan guarantees, income support, accelerated public investment, and supports for training and education, which will hopefully arrest — if not undo — some of the damage.
News that the pandemic unemployment payment is to continue will be reassuring for those who lost their jobs, although many will spend anxious moments wondering how they will cope when those payments are tapered from September.
The Government has also recognised the particular hardship felt by the arts sector. A package of €31m reflects that “very particular hit”, to quote Minister Catherine Martin. It is to be welcomed because Covid restrictions mean theatre and concert venues will be among the last to reopen.
If the Government is spending, it hopes the stimulus plan will encourage Irish consumers to do the same. Tánaiste Leo Varadkar made that point clearly when he said the ‘stay and spend’ tax rebate was designed to encourage the “millions of people who have not seen their incomes go down” to spend money.
Opposition parties said it was unfair, but this is a plan for taxpayers, not those who are most in need of holiday subsidies. It is designed to encourage people who have money to part with some of it for the good of the Irish economy.
That is why it makes sense for businesses, when possible, to pass on the 2% cut in VAT. Consumer confidence is key now.
The hospitality sector was disappointed its VAT rate remained unchanged. It will be a difficult summer season as hotels, restaurants, and those bars allowed to open try to recoup their losses. It is essential that they resist the temptation to hike up prices. There have been reports of price increases from disillusioned staycationers, but this is not a time to return to rip-off Ireland.
There is also another reason to welcome this package. It shows that the three-party coalition can come together to deliver something that has a widespread impact quickly.
There are enormous challenges ahead. The enthusiasm for the July cash injection will wear off very quickly if, for instance, the Government fails to produce a back-to-school plan that is clear, coherent, and workable. What will happen if we see a second wave of coronavirus?
There are many other unknowns but, for now, the Government has taken one definite step forward on what remains a very unclear path.