The latest closure of large parts of the economy inevitably pushes up the cost to the State of supports for affected businesses and individuals. Minister for Public Expenditure Michael McGrath has estimated the cost of a move back to Level 5 at some €300 million a week, mainly via the wage subsidy scheme and the Pandemic Unemployment Payment (PUP). All the signs are that significant spending will need to continue at or near current levels for some months as the economy gradually reopens – and that substantial longer-term problems will remain in a number of sectors.
While the Government will be waiting to see how the virus numbers progress, it is clear now that the wage subsidy scheme will need to continue past its current end date of March 31st. The cut-off for new applicants for the PUP is currently the same date and will also probably need to be extended. Despite the huge cost, these schemes were the correct response when the crisis broke and they remain so now.
Some more focused supports, such as the Covid Restrictions Support Scheme (CRSS), introduced in the Budget to assist businesses which have to close due to restrictions, are also likely to have to be extended. Fortunately borrowing costs remain low and tax revenues will continue to be supported by the parts of the economy which remain open. But the upshot may be that the budget deficit may not fall much from the €19 billion recorded last year.
Another key issue also needs to be addressed. When all this is over, how are businesses to be supported to reopen and begin operating again, and how are individuals to be assisted to return to work? A full-scale reopening may be some months away, but how it happens will need some serious consideration in the months ahead.
It is complicated because each of the sectors hit by restrictions is different and some – particularly those related to overseas travel and event s – face particular uncertainties. It will be a long road back but, for now, the Government must keep as many businesses afloat as it can.