Economic Recovery Plan

On 1 June 2021, Taoiseach, Micheál Martin T.D., Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar T.D., and Minister for the Environment, Climate and Communications and Minister for Transport, Eamon Ryan T.D, launched the Economic Recovery Plan 2021.

The plan sets out a new phase of supports for the next stage of the economic recovery after the COVID-19 pandemic. The overall ambition of the plan is to exceed the pre-crisis employment levels by having 2.5 million people in work by 2024.

It is anticipated that the initial funding of €915 million through the National Recovery and Resilience Plan, under the EU’s Recovery and Resilience Facility, plus the forthcoming revised National Development Plan, will create a green and digital job revolution. The EU’s Brexit Adjustment Reserve will also be used to support the recovery by helping to counter the adverse effects of Brexit in the sectors and Member States most impacted. Ireland’s proposed allocation of the Brexit Adjustment Reserve is approximately €1 billion and represents just over 20% of the overall fund.

The Economic Recovery Plan consists of four Pillars:

1. Ensuring Sustainable Public Finances
2. Helping People Back into Work
3. Re-building Sustainable Enterprises
4. A Balanced and Inclusive Recovery

The July Jobs Stimulus 2020 launched a suite of key economic outputs intended to help the Irish economy recover from the COVID-19 pandemic. The April 2021 Stability Programme Update (SPU) set out the medium-term technical macroeconomic and fiscal forecasts. The Economic Recovery Plan builds on these measures. Upcoming key economic outputs include the Summer Economic Statement, a new Climate Action Plan and revised National Development Plan.

Four Pillars of the Economic Recovery Plan

Pillar 1: Ensuring Sustainable Public Finances refers to the objective of returning to sound public finances as the foundation of the recovery. Getting people back to quality, productive employment will help restore public finances, and in turn enable sustainable access to better and more accessible public services. The forthcoming Summer Economic Statement will include further details on the deficit reduction framework and a medium-term fiscal target.

Agreement at the OECD on addressing global tax challenges, in particular that of digitalisation, and the establishment of a Commission on Taxation and Welfare will bring stability to the international and domestic tax framework.

Pillar 2: Helping People Back into Work will be achieved through a combination of extending existing supports, such as, the Employment Wage Subsidy Scheme (EWSS) and COVID-19 Pandemic Unemployment Payment (COVID-PUP), increased activation capacity through Pathways to Work 2021-2025, and accelerated training and skills opportunities.

The new Pathways to Work 2021-2025 represents Ireland’s national employment services strategy and overall framework for activation and employment support. It supports those who are unemployed because of the pandemic, or pre-pandemic, and those whose former jobs are no longer available to them, to return to work through intense activation, and upskilling and reskilling through education and training initiatives.

Pillar 3: Re-building Sustainable Enterprises through targeted supports and polices to make enterprises more resilient and productive. In addition to the extension of the existing supports, such as the EWSS and COVID-PUP, this package includes a particular focus on sectors such as tourism, events, arts, and aviation, where the impact of the pandemic is likely to continue, given the easing of restrictions around mass gatherings and international travel will lag.

As part of ongoing support for the tourism sector, the lower tourism VAT rate of 9% will be extended until 1 September 2022, and Fáilte Ireland will continue its support initiatives through its Business Continuity Scheme or equivalent schemes.

Pillar 4: A Balanced and Inclusive Recovery through strategic investment in infrastructure and reforms to enhance the long-term capacity for growth, balanced regional development and improved living standards.

A more inclusive labour market will be built with a greater focus on participation and on reducing barriers. The Government’s priorities include Statutory Sick Pay, the Living Wage, a basic income guarantee pilot scheme for artists, the Roadmap for Social Inclusion, gender equality initiatives, an approach to piloting universal basic income, and appropriate regulation for the platform economy.

Extension of Existing Supports

Some of the extended existing supports are outlined below:

  • The Employment Wage Subsidy Scheme (EWSS) will be extended from 30 June until 31 December 2021. The current enhanced payment rates will be maintained for July, August, and September (Quarter 3). The time-period for assessment will be expanded from the current 6-month period of assessment to a full 12-month period. In addition, the question of an employer contribution to employee wages under the scheme will be considered for Quarter 4.
  • The COVID-19 Pandemic Unemployment Payment (COVID-PUP) will be extended in full for existing claimants from 30 June to 7 September 2021. The scheme will close to new applicants from 1 July 2021. The current weekly rates of support will be gradually reduced over three phases by €50 increments, from 7 September 2021, 16 November 2021, and 8 February 2022, if progress continues as expected.
  • The Covid Restrictions Support Scheme (CRSS) will be extended from 30 June until 31 December 2021. There will be an enhanced restart payment of three weeks at a double rate of the payment to support businesses in meeting the costs of reopening, as they exit the scheme, with a maximum restart payment of €10,000 per week allowing businesses to receive up to a maximum of €30,000.
  • The Small Business Assistance Scheme for COVID-19 (SBASC) eligibility criteria will be broadened, with a new round of applications for Quarter 2.
  • The Commercial Rates Waiver will be extended to end-September 2021 in its current form.
  • The Debt Warehousing Scheme, available to support businesses that are experiencing tax payment difficulties arising from the COVID-19 pandemic, will be extended to the end of 2021 for all eligible taxpayers, with an interest-free period during 2022. COVID-19 related liabilities will then fall to be paid from 1 January 2023.

National Recovery and Resilience Plan

The National Recovery and Resilience Plan outlines how Ireland intends to utilise an initial allocation of grants from the EU’s Recovery and Resilience Facility which has been developed alongside the Government’s Economic Recovery Plan.

Ireland will receive approximately €915 million in grants from the EU’s Recovery and Resilience Facility. These grants will be used to support investments from mid-2021 to mid-2026. A further set of grants will be allocated to each Member State in 2023, considering economic developments between now and then.

To avail of the grants, each Member State must prepare a National Recovery and Resilience Plan. Ireland submitted its draft Plan to the European Commission on 28 May 2021. The draft Plan will undergo a formal assessment by the European Commission – the process is expected to take two months, before being submitted to the Council of the European Union for approval.

The overall objective of the National Recovery and Resilience Plan is to contribute to a sustainable, equitable, green, and digital recovery effort, in a manner that complements and supports the Government’s broader recovery efforts.

Ireland’s Plan reflects the requirements of the EU’s Recovery and Resilience Facility for a minimum of 37% of expenditure to be on climate; 20% on digital investments and reforms and the need to address investment and reform challenges identified in relevant Country Specific Recommendations made to Ireland by the EU in recent years.

Ireland’s National Recovery and Resilience Plan proposes 16 investments and 9 reform commitments, arranged under three distinct priorities:

  • Priority 1: Advancing the Green Transition
  • Priority 2: Accelerating and Expanding Digital Reforms and Transformation
  • Priority 3: Social and Economic Recovery and Job Creation