Q&A: What's in the economic recovery plan and when will PUP rates change?

The Government has announced a range of extensions to pandemic supports, but also started the politically combustible task of mapping out how they will be dismantled over time.

Just what has changed in today’s latest set of announcements?

What will happen to the Pandemic Unemployment Payment (PUP)?

As widely expected, the PUP will begin being dismantled from September. The Government will point out this is, in fact, an extension of the original June expiry date.

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However, the Opposition is already zeroing in on the planned cuts – which will take place in three phases – arguing that as long as people are out of work due to public health measures, and employment remains below pre-pandemic levels, the levels should be untouched.

The reductions will kick in from September 7th, with the top rate dropping from €350 to €300. The middle rate will drop from €300 to €250 and the bottom rate from €250 to €203.

On November 16th the middle rate will drop to €203 and the higher rate to €250. Finally, the top rate will drop to €203, bringing all three into line from February 8th.

PUP will close to new entrants from July 1st and students will not be eligible from September 7th.

Will we all be paying more property tax?

While this is not formally part of the plan, it is a tax increase that will affect tens of thousands of people.

It’s estimated up to 100,000 homes will be brought into the tax net by the decision to include homes built after 2013, with a revaluing date for the purposes of the tax set for November. People will have to pay the rate from next year on.

While Ministers were told that the Coalition has kept to the Programme for Government commitment that most people will not pay more, there will be a sizable rump of people newly paying the tax or hit with a higher charge.

Cabinet was told about 53 per cent of people will stay where they are, and 11 per cent will get a reduction in the band they pay property tax in.

But 33 per cent will see an increase of one band and three per cent are likely to jump two bands. About €560 million will be raised from the tax annually after the changes are introduced. It isn’t quite clear yet the exact nature of the changes to be announced, with more detail due on Wednesday.

What about the hard-hit arts and hospitality sectors?

Minister for Tourism Catherine Martin has secured an extension to the 9 per cent VAT rate, currently in place for the hospitality sector, until the end of September next year. It was due to expire at the end of this year.

For the arts, the Cabinet agreed to support a pilot scheme for guaranteed minimum income for artists. Work on the scheme is being completed over the summer and it is expected to launch in January.

There will be an events sector support scheme for SMEs who don’t qualify for the Covid Restrictions Support Scheme or forthcoming schemes for the live performance and music/entertainment sectors.

What’s that I heard about job placements/training and education?

Some €225 million will be given to the Department of Further and Higher Education, including a €40 million transformation fund for technological universities and €70 million for research projects - dubbed “national grand challenges” - in climate action and digital infrastructure. About 50,000 education and reskilling places will be supported, with the largest funding pot for Solas, the skills agency. Reskilling and upskilling for those whose jobs are unlikely to return is a main aim, as are skills in digital abilities, growth areas and the green economy.The skills to compete programme will be expanded and a new green skills action programme will be developed.

What supports will there be for business?

The Employment Wage Subsidy Scheme has been extended to the end of the year, and on current terms until the end of September when there will be a recalculation. The question of an employer contribution and the “appropriate calibration of rates” for the last quarter of the year will be addressed then. The assessment period will be broadened, which is likely to mean more firms become eligible.

The Covid Restrictions Support Scheme has been extended to the end of the year, with double payments for those reopening for up to three weeks, to a maximum of €30,000. Government sources believe the numbers availing of this will diminish as the economy re-opens. The commercial rates waiver has also been extended for three months, with the possibility of further targeted extensions, and the capacity of companies to warehouse tax liabilities will also be extended to the end of the year. An interest-free period will be permitted until the end of 2022.

A new Business Resumption Support Scheme will begin in September, aimed at firms with significantly reduced turnover. The stay on redundancy payments being paid out to those who have lost their jobs has been extended to the end of September. Improvements are due to be made to the examinership process for restructuring debts of small businesses.

I heard there is also money for climate projects, what are they?

A range of low-carbon transport projects will be funded, with the flagship project being enhancements and upgrades to the Cork commuter rail network. The total funding package of €503 million will also support a residential retrofitting loan guarantee scheme, costing about €60 million between State and European Union funding, which will backstop losses for commercial lenders with the aim of bringing interest rates and the cost of financing for households down. There will be funding to accelerate decarbonisation of the enterprise sector, to support rehabilitation of former industrial peatlands, and a €20 million river basin management plan.

How much will this all cost?

The extension of economic supports in the plan is expected to lead to additional spending of €3.6 billion, the bulk of which relates to the continuation of the PUP beyond the end of June.

As many people on the PUP would otherwise qualify for unemployment supports, the net cost to the exchequer will be lower. Significant extensions to tax and PRSI warehousing and the extension of the 9 per cent Vat rate to September 2022 will increase the total gross cost of the measures being announced to close to €5 billion. This is likely to increase borrowing this year by more than €2.5 billion.