Increased spending on infrastructure, wage supports and the commercial rates waiver will be welcomed by business, but overall, there is still a need for greater focus on the recovery of our Town Centres
Following yesterday’s publication of Budget 2021 by Ministers Paschal Donohoe and Michael McGrath, County Wexford Chamber welcomes the overall expansionary approach of the Government to address many of the needs of the most exposed members of the business community to the twin crises of Brexit and Covid-19. Speaking this morning, County Wexford Chamber, Operational Manager Emma Dunphy said, “We must enable and empower our SMEs – the drivers of economic growth in communities across the country – to continue to compete and remain productive throughout the crisis. Most importantly, it means investing in the places where we live and work, so that town and city centres can thrive. In many respects Government has listened to this call. The increase in funding for housing and infrastructure and the creation of a €3.4 billion Fund that will address impacts of both Brexit and COVID-19 is extremely welcome and will go a long way to ensuring a sustainable, equitable recovery across the island.”
Under normal circumstances, with the economy performing as well as it has been pre-pandemic, we would be expecting a very different Budget. But in the words of Ministers Donohoe and McGrath, the backdrop or Budget 2021 is a truly remarkable one.
• The Covid-19 crisis has resulted in a severe economic change for Ireland. GDP fell by 6.1% in Q2 from Q1 and 3% below its level in Q2 2019
• The Covid-19 adjusted measure of unemployment is approximately 14.7%2. The Department of Finance in its economic forecast underpinning Budget 2021 estimates that the unemployment rate will be 10.7% in 2021
• A further 300,000 were being supported by the TWSS at the end of August (subsequently replaced the EWSS on 1 September)
• Tax revenue to end-September was €1.2 billion (or 3%) lower than in the same period last year. Efforts to contain the increasing spread of COVID-19 are impacting on the ability of the economy to operate at full capacity, with regional curtailments in economic activity.
• The European Commission’s summer forecast noted that Ireland’s GDP is projected to contract by at least 8.5% in 2020. We called for a Budget which was centred on the theme of “Place” which would support businesses trade through the pandemic, by supporting liquidity, local economies and the long-term investment needs of the whole economy. In a Budget like we face this year, we appreciate the challenge facing Government in delivering on every ask
of the business community. But there are missed opportunities in this Budget. Government should have done significantly more to invest in the affordability of childcare and to support entrepreneurs through reform of CGT and other entrepreneurial reliefs. They could also have been bolder in funding the recovery of urban centres – there is an opportunity for the National Economic Plan to improve on this, and we will continue to urge Government to use it.
Key Points
• Large expansion of investment in infrastructure, comprising mainly of transport and housing
• Establishment of a Brexit and Covid Fund of €3.4 billion
• New reduced VAT rates (23% and 9% for hospitality)
• Extension of the commercial rates waiver until the end of the year with €300m of shortfall in funding of local authorities to be funded by Central Government
Missed Opportunities
• No significant change to Capital Gains Tax – although there is a commitment to review EIIS
• No change in tax relief for remote workers
• NO significant additional investment in affordable childcare
• Lack of clarity on funding for the recovery of town centres