Covid supports to households and businesses are now set to be phased out rapidly in line with the decision to scrap pandemic-related restrictions.
he Pandemic Unemployment Payment (PUP) will be closed to new applicants Saturday (January 22).
PUP will be effectively gone by March 8 when anyone eligible for the current €250-a-week payment will move to a weekly rate of €208 which is in line with the standard job seekers’ allowance.
From February 1 most businesses getting Employment Wage Subsidy Scheme (EWSS) will also move to a reduced rate of support of €203 per employee, and that will fall to a flat rate subsidy of €100 per employee for the final two months of the scheme in March and April this year.
An exception will apply to specific sectors such as hospitality that were directly impacted by the Omicron public health restrictions in December. They will have an extra month of the higher rate of supports in February, and will not be finally cut off entirely until the end of May 2022. But the era of blanket supports is set to end within weeks.
The full rate of Employers’ PRSI will be reinstated with effect from March 1 for all businesses.
The Covid-19 Restrictions Support Scheme (CRSS) which tops up cashflow while firms are subject to Covid-related restrictions is to go. One final week of CRSS supports will be paid after restrictions are lifted.
Since the start of the pandemic 25,0000 business have received a payment and the scheme paid out €13.4m last month to 2,700 premises.
Final cutoffs have also been announced for the various Revenue schemes that have allowed businesses to warehouse or postpone making tax payments. These will not be extended beyond April 30.
Taxpayer-funded wage and income support schemes have made up the bulk of the extraordinary costs associated with Covid over the past two years, which in turn have led to a cumulative €27bn government deficit for 2020 and 2021, paid for by borrowing on the bond market.
Finance Minister Paschal Donohoe outlined the exit strategy in a letter yesterday to the Irish Fiscal Advisory Council
“While there are clearly high levels of uncertainty, the Government is cautiously optimistic that, once this Omicron wave of the virus retreats, we could be in a better situation from an epidemiological and immunological perspective. At that stage, it is the Government’s intention is to exit the various financial supports.”
The letter says the number of workers in receipt of the Pandemic Unemployment Payment was 76,000 on January 11 – down dramatically from the 839,000 who were getting the payment at the end of January 2021. EWSS underwrites paycheques for more people with 275,000 jobs still being supported by the scheme at the end of December.
Under the terms of the tax warehousing programme, businesses hit by Covid will still have 12 months before any outstanding tax bills incur interest. In addition, a reduced 3pc interest rate will apply into the following year although new tax bills will have to be met as they fall due.
The final economic toll from Covid will, however, take some time to play out.
The number of businesses becoming insolvent has been unusually low over the past two years, despite the economic damage from the pandemic and lockdowns, thanks to the availability of financial supports and forbearance from lenders, landlords and other creditors who had little to gain from forcing firms out of business.
Nonetheless, some big businesses including Debenhams and other UK fashion chains did go to the wall early in the pandemic.
However, the end of the public health crisis and the withdrawal of emergency financial supports is tipped to be followed by a rise in insolvencies. That in turn is expected to result in job losses later this year and into 2023.
The sharp rise in inflation associated with the economic disruption from the pandemic is also potentially a threat to some businesses.
At the same time, and unlike the last financial crisis, the economy continued to grow during Covid.
Disposable incomes rose on average and household savings are now dramatically higher than before the crisis, potentially setting the scene for a sustained consumer boom.
The Exchequer’s tax take has also risen and an appetite for higher Government spending on non-Covid areas like housing and services appears to have become embedded in demands from voters.