EY Ireland comment on the Economic Recovery Plan

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Prof Neil Gibson, Chief Economist, EY Ireland:

“Under normal circumstances, the announcement of a €3.5 billion stimulus package would be cause for excitement and debate over where and how the money is being invested. These are not normal circumstances however, and the removal of labour market supports later in the year will share the headlines and possibly dominate debate. The transition to growth supporting investment is correct, spending money to support people in work rather than out of it should always be a goal of public policy. However, the timing was always going to be contentious, therefore it will be important to ensure the stimulus is deployed on time and the opportunities are available as the support is eased off, or the €3.5 billion may not achieve its full potential impact.

“The economic data points to a rapid post-pandemic recovery, but for policy makers there is still plenty of hard work to do. Phasing out, or narrowing the focus of Government support, is always the most difficult of tasks, and the roadmap for this complex process was set out today. It is good that the advice has come in good time, that supports are being phased out with no cliff edges and the investment in training and re-skilling is enormously welcome. The strength of Irish tax revenues during the last 18 months have played a large part in facilitating the flexibility that was demonstrated today.

“The plan to have 2.5 million people in work by 2024 is ambitious and welcome, this is about 18 months ahead of when EY forecasts produced earlier this year projected this level would be reached. With almost 600,000 people on wage subsidy or receiving PUP payments – a quarter of the pre pandemic workforce – the easing off of supports represents a critical phase in the recovery. Using the analogy of a relay race, the Government is about to pass the baton of growth to consumers and business. As all good relay runners know, it is the smoothness of the handover that is key, both runners need to be travelling at speed to ensure a seamless handover. Early warning of the roadmap is helpful, as is the attempt to boost economic growth with digital and green training programmes, but this is not all about Government, we all have a part to play in making sure the baton is not dropped.

“Ensuring the stimulus spending achieves maximum impact and does not add to the emerging signs of price rises will be crucial. Getting maximum return for tax-payer investment in an environment in which there could be considerable spending and rising import prices can be difficult. But risking adding to inflationary pressures is a risk worth taking when the scale of economic and societal damage is taken into account. Three quarters of a million adults in receipt of PUP payments, wage subsidy or on the Live Register, is a figure that necessitates a ’whatever it takes’ mindset. Tracking value for money, flexing the approach as the evidence changes, and ceasing ineffective spending are just a few of the fresh challenges that await policy makers.”

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