Minister for Finance, Public Expenditure and Reform Paschal Donohoe has said that at the end of the 12-week introduction period he will be “tapering and changing” the Covid-19 pandemic welfare subsidies.
Mr Donohoe said the welfare subsidies “cannot be sustained indefinitely”, but they can be sustained for long enough to allow incomes to be protected “for as long as possible”.
The minister said the Government wants to give the 40,000 companies availing of the Wage Subsidy Scheme “a fighting chance”.
He said the Government wants to avoid cutting core social welfare rates and wants to protect public pay, but this it contingent on the global economy and Covid-19.
Confidence in public health will underpin how economic re-growth is achieved, he added.
Speaking on RTÉ’s Morning Ireland, the minister said that he “is not applying any pressure” on decisions about a return to work and will be guided by public health experts.
He said the current unemployment rate of 22% is “horrific” for those who have lost jobs, but added that he hopes to see it reduce to 14% by the end of the year.
Mr Donohoe said we have to look at the consequences of different choices.
But if the virus takes longer to contain it will take longer to return to growth, he cautioned.
In a worse scenario, the economic deficit could increase further and unemployment will grow if a return to working is slower.
Minister Donohoe said we are “facing a very big economic challenge” in circumstances that only a few weeks ago we all thought were unimaginable.
He said that with time, patience and focus we will recover our health and rebuild our economy.
Mr Donohoe also said he is confident we will not return to where we were between 2008 and 2012 in the world economy, but we will have to make decisions about what we can do and what we can not do.
He said to have confidence about the economic future, we need to have confidence about our public health.
This will happen though “transparent honest communication” led by public health experts and supported by politicians.
ESRI says economic bounce back not likely to happen
The director of the Economic Social Research Institute has said the Government’s economic forecast released yesterday is “bleak” and that is without considering for another surge in virus cases going forward.
Dr Alan Barrett said that in a rapidly evolving situation this is the most up to date official forecast that will underpin economic policy going forward.
Dr Barrett said that even a few weeks ago “we were clinging to the hope of a v-shaped recovery”, where sections of the economy that were “turned off” would bounce back when the economy was turned back on.
But he said it seems that bounce back will not happen now.
Instead, we will have a gradual lessening of restrictions and that delay presents a much starker picture, he stated.
Dr Barrett said there is a huge amount of uncertainty around the forecast and that is without considering what will happen if there is a new surge and further restrictions are re-introduced.
He said tax increases will depend on how long the economic recovery takes and how many people return to work and help to reduce the enormous deficit.
Borrowing ‘ad infinitum’ is not sustainable, according to Dr Barrett. Even with a pretty healthy recovery there is an understanding that the world has changed, he added.
He said issues such as the postponement of elective surgeries in hospitals will require a build up in demand for spending on public services and therefore it is hard not to foresee tax increases down the road.
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