Wage subsidy could continue until end of year, says Paschal Donohoe

Minister says new Government will consider reducing 13.5 per cent VAT rate

 Minister for Finance Paschal Donohoe (right) alongside Minister for Public Expenditure and Reform Michael McGrath during a press conference outside Government Buildings in Dublin on Thursday. Photograph: Julien Behal/PA Wire

Minister for Finance Paschal Donohoe (right) alongside Minister for Public Expenditure and Reform Michael McGrath during a press conference outside Government Buildings in Dublin on Thursday. Photograph: Julien Behal/PA Wire

 

Minister for Finance Paschal Donohoe has said that the Covid-19 wage subsidy scheme will not end abruptly and suggested it could last until the end of the year.

Mr Donohoe told RTÉ radio’s Morning Ireland that he would look at all options, but that the scheme would not come to an abrupt end as that could lead to jobs being lost.

The objective of the July stimulus will be to take action in 2020 that is successful in “keeping jobs that we have and allowing new jobs to be created,” he added.

The wage subsidy scheme is now responsible for keeping more than 400,000 people in a job, he said.

On top of this, more than 213,000 people signed on to the live register in June and a further 438,933 people were receiving the pandemic unemployment payment, CSO data shows. The total receiving income assistance from the State to just in excess of 1 million, with some overlap between the schemes.

“What I can confirm now is that it will not come to an abrupt end because were that to happen, that itself creates the risk of jobs being lost,” Mr Donohoe said.

“In relation to the pandemic unemployment payment, the last government outlined that across the month of August we would begin to make changes in relation to that payment, as our economy reopens.

“We’ve in fact made one such payment this week in relation to those who would have been on part time work in the past.”

When asked if the scheme would be extended to the end of year, Mr Donohoe said that was a decision that needed to be taken by the Government.

“As I said, I and the last government, brought in these payments, the value of them and the value of the wage subsidy scheme in particular is recognised very strongly by the Government. I’ll be working with the Tánaiste Leo Varadkar and with my new colleague Michael McGrath to come up with the right plan now for those schemes.”

As a former minister for tourism, Mr Donohoe said that he was very aware of the strains and pressures the sector is under. He said he would keep the option of a VAT reduction under review when making decisions for the July stimulus and could look at the matter again in the Budget in October.

A cut in the 13.5 per cent VAT rate is being examined by the new Government. However, a reduction in the VAT rate of 13.5 per cent to 9 per cent, as was introduced in 2011 by the then Fine Gael-Labour government, is seen unlikely and any move this year will not be as “drastic”, Government sources have said.

Mr Donohoe said that job creation and job retention had to be prioritised over other options. “We need to get the balance right and implement a stimulus plan that makes a difference to the keeping of jobs.”