Coronavirus stimulus plan for businesses must be about more than money
The broader need is to ensure a safe return to economic activity as quickly as possible
The stimulus package due to be unveiled by the Government next week will be a “series of immediate actions to support the economy to return to capacity”. As far as Irish business is concerned, it cannot come quickly enough. It is right to acknowledge that by putting together a programme for government, in both unprecedented times and with historical arrangements, we now have legislative certainty to enact the necessary stimulus.
The challenges faced by businesses and employees due to Covid-19 are well documented. We all know people who have lost their jobs, the difficulties that families are facing to provide childcare, and business owners who are experiencing mounting debts, trying to plan prudently for the period ahead to keep their businesses running despite the ongoing uncertainty.
As with any major investment, announcement a note of caution is warranted. It is important that the conditions are optimised to ensure a maximum return for all of our society. The stimulus will not be the panacea we hope it will be unless measures are in place to support a safe return to as much economic activity as possible – and some parts of the reopening plan are being delayed due to health concerns. For many businesses, the biggest challenge will remain lack of demand. This isn’t for the want of money in consumers’ pockets but is being driven by the absence of normal work and retail activity in our cities and towns. Unless footfall quickly returns to our business, retail and hospitality districts, many businesses will struggle to keep their doors open, despite the improved Government supports.
Scaling up support
Offering supports to struggling businesses is ineffective unless they can be accessed much more quickly and effectively than has been the case to date. Processes and protections must be enhanced too. The backlog in applications for enterprise supports is growing, putting at risk the core purpose of getting money to businesses. The enterprise support system must be urgently scaled to cope with the short-term pressures it is currently facing.
This could be a mix of building on the Revenue Commissioners’ track record in new scheme deployment, pooling or sharing of existing public-sector resources to clear the backlog and using external providers during the peak application processing period. Weekly reporting of data must include the number of applications approved and total payments made under all new and existing enterprise support schemes.
Improvements to the credit guarantee scheme this week are welcome but the establishment of an export credit insurance scheme is critically needed with Ireland a significant outlier in not having such a scheme.
The Revenue Commissioners should take a ‘maximum flexibility’ approach with long-term debtors under the ‘warehousing’ scheme where those debts are the result of the Covid-19 related disruption. This may include both long-term payment plans with suspended interest and debt forgiveness in cases where tax debts are the biggest obstacle to business viability.
Local authorities need to be funded to extend the rates exemption for impacted companies to six months and to support a further six-month deferral. There should be consideration given to extending the duration of these supports for companies in sectors that face extended recovery timelines such as those in retail, tourism, hospitality and entertainment.
Rebooting the Irish economy is not just a simple question of flooding the market with money
The temporary wage subsidy scheme was an imperfect but important solution to the sudden economic crisis and has proven to be a significant support for workers and the broader economy. A permanent scheme of a similar nature should be installed that allows firms to maintain employment during periods of temporary economic or sectoral fluctuation, such as Brexit. This should be introduced to replace the existing scheme from the end of 2020 and should build on the lessons learned from it.
The reach of the stimulus will not and should not be limited to making funding available to businesses. It has a broader imperative to ensure a safe return to economic activity in towns and cities all over Ireland, as quickly as possible.
A key part of rebooting economic activity are measures such as reducing the VAT rate for the food, drink and hospitality sectors most impacted by the crisis. This has broad implications, not least regarding the employment of younger workers who are disproportionately represented in pandemic-related unemployment payments and the sectors heavily impacted by Covid –19, with many further disadvantaged by low education or skills levels.
Targeted supports will keep them close to the labour market and avoid long-lasting scarring from the crisis on their future earnings, employment opportunities, health and well-being. To that end, a range of training grants, active labour market policies and measures supporting firms to hire new staff should also be rolled out immediately. The JobsPlus scheme has previously been very effective in supporting job creation at times of high unemployment and it should be further enhanced.
A broad range of ‘shovel ready’ public infrastructure and investment projects, which will have an immediate impact on economic activity should be rolled out, with a particular focus on advancing regional development, housing and sustainable transport objectives. Given the challenges facing retail and hospitality businesses, a major town centre renewal initiative should be advanced as quickly as possible.
The provision of education and care for children is a significant obstacle to labour market and societal recovery. The whole economy would benefit from the confidence and clarity that clear timelines on school reopening would bring.
Rebooting the Irish economy is not just a simple question of flooding the market with money. It requires targeted and considered series of measures sequenced in just the right order. Done correctly, it offers an exciting opportunity to reimagine an Ireland that better serves all society.
Danny McCoy is chief executive of Ibec