Pandemic recovery plan: €3.5bn stimulus will taper supports and fund training

Covid support schemes to be wound down gradually with payments cut in three stages

People enjoying the sunny weather and eased Covid-19 restrictions at the beach in Greystones on Sunday. Photograph: Alan Betson/The Irish Times

People enjoying the sunny weather and eased Covid-19 restrictions at the beach in Greystones on Sunday. Photograph: Alan Betson/The Irish Times

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Up to €3.5 billion in additional spending on Covid supports and economic stimulus will be announced by the Government on Tuesday as it seeks to jumpstart a post-pandemic economic recovery.

But the income and business support schemes that have sustained hundreds of thousands of workers and small businesses since early last year are to be gradually wound down, a move which will see payments cut in the months ahead.

The size of the package to be announced on Tuesday will put it on a par with a conventional budget day of recent years, which saw spending and tax giveaways of comparable size. But Tuesday’s announcements are intended to mark the beginning of the process which will see the Government wean itself off the massive borrowing of the pandemic period and transition towards more sustainable public finances.

The spending round announced on Tuesday will include almost €1 billion from the EU’s recovery fund, and there will be close attention paid to any policy commitments the Government gave in return for the money.

Climate action and education/training are expected to be the big winners in Tuesday’s funding pledges, with the majority of the EU recovery money going to those two areas.

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Retrofitting

Over half the €1 billion in EU funds will be devoted to climate action projects, including the first widespread national retrofitting programme. Among the initiatives planned is a new loan guarantee scheme that will provide homeowners with low-interest loans to retrofit their homes.

The plan will also include provisions for a new major public transport project outside Dublin, as well as other environmental and green business projects.

The Department of Further and Higher Education is expected to receive €225 million in additional funding for projects, including €40 million for Technological Universities and €70 million for research projects in area of climate action and digital infrastructure. Solas, the State training agency, will see the largest investments, much of it for training schemes related to climate action.

Ministers were meeting on Monday night to finalise the details of the plan, but it is understood that the Pandemic Unemployment Payment (PUP) could be closed to new entrants as soon as July.

The reduction in rates is expected to begin at the start of September, and will be staggered across three phases over the following months. Under plans being considered, those on the highest rate, €350 per week, will see their payment cut to €300, while those in receipt of €300 per week will have their payment reduced to €250. The lowest rate, €250 per week, will come into line with the jobseekers’ allowance of €203.

Final phase

In the following phase, the €250 rate will also be brought down to €203, while the €300 rate will fall to €250. In the final phase, all recipients will be put on €203 per week.

The Emergency Wage Subsidy Scheme (EWSS) will be extended in unchanged form until the end of September.

The commercial rates waiver looks set to be extended through the third quarter, while VAT cuts are likely to remain in place.

Sources in Government suggested the final version of the plan could yet be “softened”, with the coalition wary of a political backlash if supports are reduced too quickly. The Government has been at pains to publicly emphasise there will be no “cliff edge”. On Monday, one source noted the additional borrowing required for a more gradual tapering would be small relative to already-committed sums. One source said: “For the sake of a couple of hundred million, we will play it safe.”

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