Economic recovery plan ‘the opposite of austerity’, says Taoiseach

PUP rate cut, 50,000 new training places and 9% VAT rate extended under €3.6bn stimulus package

Ministers have agreed a €3.6 billion package of spending supports and measures to boost the economy as it slowly emerges from the Covid-19 pandemic.

Promising to “build back better” and that the economy would “take off like a rocket”, the leaders of the Coalition on Tuesday announced the economic recovery plan which will see business and worker supports extended in the short term but brought to an end in the months after the summer.

Taoiseach Micheál Martin said that the plan would enable a “jobs-led recovery” and, quoting Sean Lemass, said that “social and economic progress must go hand-in-hand”. He said the plan was “the opposite of austerity”.

The size of the funding package puts it on a par with a conventional budget day of recent years.


Central to the plan is a series of reductions to support payments for employees and a focus on the provision of retraining and education places for people whose jobs have been destroyed by the pandemic.

Under the plan, the Pandemic Unemployment Payment (PUP) will be closed to new entrants from July while a reduction in rates is due to begin at the start of September.

Further reductions will be staggered across three phases over the following months.

This will mean that people 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.

The Emergency Wage Subsidy Scheme (EWSS) will be extended unchanged form until the end of September, and will continue at another rate until the end of the year, to be confirmed.


More than 50,000 training scheme places on digital and green job programmes will also be created under the plan.

Ministers also signed off on an extension to the 9 per cent VAT rate for the hospitality sector until September 2022, with options to review supports for the sector after that. The 9 per cent rate had been due to expire at the end of this year.

Another initiative planned is a new loan guarantee scheme that will provide homeowners with low-interest loans to retrofit their homes.

This will cover losses on loans advanced by banks and other financial institutions for retrofitting. The aim is that by covering up to 80 per cent of losses, the interest rate for these loans when they are made to households will come down to around 3.5 per cent, sources said.

Mr Martin announced the plan shortly after noon on Tuesday outside Government Buildings with the other Coalition party leaders, Tánaiste Leo Varadkar, and Minister for the Environment Eamon Ryan.

Mr Ryan said the plan would see huge investments in the green and digital sectors, citing the first stage of a new commuter rail line in Cork, and promising similar schemes in Limerick, Galway and Waterford.

The Green Party leader said that the budgetary strategy of running a significant deficit this year was “by any definition in economics and expansionary policy, which is the right thing at this time.”

Mr Varadkar predicted a rapid economic recovery as society reopened. “I believe that with this plan our economy is going to take off like a rocket in the months ahead,” he said.

The Fine Gael leader said the plan was about “restoring our public finances to good health through employment not austerity, by going for growth not retrenchment and aiming for a rapid recovery”.

While the Government’s focus was on the investments and spending plans announced, Mr Martin defended the cuts scheduled to take effect to the PUP in the autumn.

He said that the supports for businesses were in many cases supports for workers, such as the employee support scheme which enabled businesses that were not trading to continue paying their staff. Those schemes were being extended to the end do the year, he said.

Mr Martin said the plan and the Government’s overall economic strategy was “the opposite of austerity . . . the very opposite”.

However, Sinn Féin spokesman on finance Pearse Doherty accused the Government of “pulling the rug” from under people on PUP, while Labour party leader Alan Kelly said he his party had “deep concerns” about the phasing out of the support payments.

“The idea that they are going to start tapering this off in September is completely unacceptable to us. There are so many unknowns in relation to this pandemic,” Mr Kelly said.

People Before Profit TD Paul Murphy said he was “completely opposed to what will amount to a very severe austerity measure on ordinary people”.

Basic income

The recovery plan also commits to the introduction of a pilot basic income guarantee scheme for artists will be a priority for the recovery.

It is understood that work will commence on the scheme, which has been championed by Minister for Arts and Culture Catherine Martin, this summer, with a view to rolling out a pilot in January next year.

Separately, Minister for Finance Paschal Donohoe brought a memo on property tax to Cabinet on Tuesday which will see an end to the exemption for homes built after 2013.

Sources said the change will likely be enacted from next year, and would address the issue of around 100,000 homes not being eligible for the tax.


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 over €2.5 billion.

The spending to be announced 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.

Over half the €1 billion in EU funds will be devoted to climate action projects, including the first widespread national retrofitting programme.

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.

Jack Horgan-Jones

Jack Horgan-Jones

Jack Horgan-Jones is a Political Correspondent with The Irish Times

Cliff Taylor

Cliff Taylor

Cliff Taylor is an Irish Times writer and Managing Editor

Pat Leahy

Pat Leahy

Pat Leahy is Political Editor of The Irish Times