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Financial Provisions (Covid-19) (No. 2) Bill 2020: Second Stage (Resumed) (Continued)

Wednesday, 29 July 2020

Dáil Éireann Debate
Vol. 996 No. 2

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(Speaker Continuing)

[Deputy James O'Connor: Information on James O'Connor Zoom on James O'Connor] The past few months have been extremely difficult for people and businesses up and down the country. I am happy that the TWSS, and the employment wage subsidy scheme will run in parallel from 31 July until the TWSS concludes at the end of August. This provides extra flexibility to employers with new hires and seasonal workers to ensure that as many people as possible will get back to work.

Businesses also need breathing space. They need the time to get back on their feet, reopen their doors and get back to business. I held a clinic in the past few weeks in Cobh, where I met several business owners who expressed not only the need to reopen but to have breathing space once reopened. Businesses are playing catch-up on all fronts and they require the full support of the Government to help navigate their way through this crisis. To borrow a great phrase from Bill Clinton. It is about giving people a hand-up not a handout.

I welcome several tax measures in this Bill that give businesses this breathing space such as enhanced corporate tax loss relief and income tax relief for the self-employed, which will provide additional liquidity supports for business. This is alongside the introduction of the legislative basis for the warehousing of tax liabilities. This will allow for businesses affected by Covid-19 to delay payment of their PAYE and VAT debts for a set period with no additional interest or penalties. There is no point in getting people back up on their feet with the expectation that they will recover by 100% straightaway. It takes time to recover and this is a sensible and necessary move.

I welcome the several measures intended to boost demand in the domestic economy. I will borrow the famous phrase, "Your spending is my income". It is about ensuring people are spending in their local communities, protecting businesses and ensuring we have balanced regional development across the country. The stay and spend incentive for the accommodation and food sector is hugely important. These sectors are immensely important across the constituency of Cork East. Cork East is home to many famous tourist destinations from Midleton Distillery to Fota Island zoo to the historic towns of Cobh and Youghal. Sometimes we forget what a beautiful country we live in and this is a great opportunity to explore it and to spend locally and help the local economy.

The decrease in the standard rate of VAT from 23% to 21% from September until the end of February 2021 will add to the boost to the domestic economy. We want to ensure the recovery is broad-based and measures such as the reduction in VAT allow the Government to provide relief to the widest sections of society. It is also important that no one is left behind in this recovery.

Finally, I welcome the enhancements to the help-to-buy scheme for the remainder of 2020. This will provide necessary support for first-time buyers by either increasing the support available by €10,000 or reducing the criteria of the 10% deposit to 5%. This will stimulate demand for first-time buyers for houses, encourage house completions and assist first-time buyers in accumulating a deposit for a new home. We cannot let this pandemic stop people from getting on with their lives. We cannot afford to have another lost decade in the economy. I believe that this Bill, alongside measures such as the July stimulus package, will ensure that does not happen.

Deputy Jim O'Callaghan: Information on Jim O'Callaghan Zoom on Jim O'Callaghan We all need to recognise that recessions are a feature of all economies. It is unfortunately the case that that is so. We need to recognise that recessions occur when there is a decline in economic activity and a significant reduction in spending. There were many recessions in the 20th century, I am sure there were many recessions before the 20th century, but I suppose our ancestors at that time did not have the means or mechanisms to evaluate and appraise economic activity.

This country and the world went through a significant recession between 2007 and 2009. Such was the severity and breadth of that recession that it is referred to in academic research as the Great Recession. It had significant consequences for the world and this country. It just did not have significant economic consequences for this country; it also had significant social consequences some of which were devastating for the people who live here.

Since the recession between 2007 and 2009, there was a general expectation that we were going to meet another recession. Everyone assumed and hoped that the next recession would not be as severe but there was a recognition that there would be one. I recall that in 2016 there was a belief that because of turbulence in the Chinese markets that there was a recession coming. Then, I recall in 2018 there was concern about trade tensions between China and the US and that another recession might be coming. Although we all knew that another recession was coming, I do not think anyone in this House, or indeed anyone in the world, thought that the recession was going to be caused by a global pandemic, but that is the case with what we have to face and we must recognise that this recession is highly unusual and highly exceptional when one looks at the cause. Because it is a recession that is being caused by such an exceptional event, we need to recognise that it is different in a number of material respects. First, when one looks at how recessions generally occur, there is usually a gradual decline in economic activity leading to the recession or, alternatively, there is a sudden event and after that there is a gradual decline in economic activity. Neither of these happened in this recession. Instead, we had an immediate and unpredictable, dramatic decline in economic activity. It occurred as a result of the outbreak of the pandemic, first in the Far East and then it moved over into Europe.

The second difference in this recession relates to how it was caused, and we should not be embarrassed to say this, as a result of a deliberate act of government, not just our own Government but of governments around the world. As I said previously, those deliberate acts in closing down our economy were merited and justified at the time. We saw what was happening in the intensive care units of Italy and Spain. We were legitimately concerned that people in Ireland would be subjected to the same circumstances in our own intensive care units and that we would be left in the appalling position where people seeking intensive care could not be provided with it because our units were overrun, so we closed our economy. That was a deliberate act by us and that distinguishes this recession from previous recessions.

The third way this recession is different from previous recessions is that, in general, when one tries to get out of a recession, the most important thing to do is to try to invigorate consumer confidence to get people out spending again. One tries to instil confidence into the population because, in general, what a recession does is create a sense of financial insecurity among the citizens of a country. People in this country feel a great sense of financial insecurity, but what distinguishes this recession from previous recessions is that there is more than fear of financial insecurity, people are fearful for their health. That is why we need to recognise that there are some parts of the recovery to this recession that are imponderable to us at this stage. For instance, when one looks at businesses such as restaurants or small cafes, to what extent is the recovery of those businesses going to be dependent upon individuals having the confidence to go back into restaurants and pubs? That is something we do not know the answer to as of yet, but we will have to carefully appraise it.

Much of the academic research on the economic consequences of this pandemic is very uncertain at present. If one looks at any economic research, it will try to give three or four different examples, depending upon whether there is a severe outbreak of the disease in the future or whether it is manageable, as it is at present. In fairness to economists, and to everyone else, there is great uncertainty as to what the outcome will be. We know that the OECD has stated that the level of output in economies will decline by somewhere between one fifth and one quarter. If that happens, consumer spending is going to be down by one third. If that happens and it continues, I regret to say that we will find that this recession is going to be even more devastating than the recession of 2007 to 2009. However, it is not all bad news. Anyone who has looked at June's retail spending figures published by the CSO yesterday, which I am sure the Minister has done, will know they were up on June last year, so that is a positive outlook on the horizon.

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