Government planning ‘significant’ one-off financial support for firms in budget

The Government is said to be planning a significant once-off financial support for cash-strapped businesses in the Budget 2024.

The scheme, which is being championed by Minister for Enterprise Simon Coveney, will be aimed at Small and Medium Enterprises (SMEs) hit by rising energy costs, inflation and higher taxes.

It is also seen as compensation for the expected removal of the reduced rate of VAT in hospitality and the likely hike in the minimum wage next year.

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The support will be part of the Coalition’s temporary package of measures, which lie outside of the main €6.4 billion budgetary envelope earmarked in the Summer Economic Statement but which have been complicated by a €1 billion overspend in health that has constrained the potential scope of the Government’s one-off package.

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The parameters of the scheme — the companies that will benefit and how they will access it — have still to be finalised but it is said to have broad support within the Cabinet.

In an interview with The Irish Times, Mr Coveney said he wanted to see the Government support companies, “particularly vulnerable businesses which have found their cost base has increased”, similar to the way households have been supported with cost-of-living increases.

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To get large numbers of payments out in two months, the scheme will have “to be simple to apply for and simple to administer,” he said, hinting that it would not be as targeted as the Government would have liked and easier to access than the Temporary Business Energy Support Scheme, introduced last year which many firms complained was too complicated.

“We need to recognise as a Government that businesses are under pressure just as households and we need to respond to that.” he said. The plan was “to help businesses go into 2024 with a modest improvement in their cash flow,” he said.

Speaking ahead of an SME conference in Waterford at the weekend, hosted by Fine Gael which Taoiseach Leo Varadkar and Minister for Public Expenditure Paschal Donohoe are due to attend, Mr Coveney said the budget would include further measures to reduce the tax burden on middle-income earners and that he did not see it as a “binary choice” between improving services and boosting wages.

“There are very few countries in the world that apply the highest rate of income tax to somebody who earns €40,000 a year. Ireland is an outlier in this space and Fine Gael policy recognises that and that’s why we’re insisting on changing it,” he said, hinting the threshold at which workers had to pay the higher tax band would be increased again.

Consensus notable

Mr Coveney also gave his strongest indication yet that he would approve the Low Pay Commission’s recommendation for a 12 per cent increase in the minimum wage, which would lift the rate from €11.30 per hour to €12.70.

He said there was “a lot of consensus” around compensating workers for increases in the cost of living from businesses and others. “There’s good reason why they [the Low Pay Commission] have made those recommendations ... but we’ve also got to keep a close eye on the cost of doing business to keep the enterprise and business environment strong,” he said.

On warnings from the Irish Central Bank and the Irish Fiscal Advisory Council that the Coalition’s planned spending package will add to existing inflationary pressures in the economy, Mr Coveney said: “Of course, we’ve got to make sure our budget doesn’t add to the inflationary pressures that are already there but at the same time we’ve also got to respond to the reality of life that many businesses and families have to deal with. When Ireland committed to limiting expenditure to no more than 5 per cent per year, we were dealing with an inflation environment that was no more than 1 per cent. It is about getting the balance right.”