Wednesday, 29 July 2020
Financial Provisions (Covid-19) (No. 2) Bill 2020: Second Stage
I move: "That the Bill be now read a Second Time."
I am pleased to have the opportunity to introduce the Financial Provisions (Covid-19) (No. 2) Bill 2020 to the House this morning. This Bill provides the legislative basis to introduce the tax measures that the Government announced as part of the €7.2 billion July jobs plan last week. This plan is the next stage in our response to the Covid-19 crisis and aims to get businesses back on their feet, ensuring as many people as possible can return to work in accordance with public health and Government advice.
This plan contains a range of tax, loan and expenditure measures designed to directly support business at all levels of the economy that have been negatively impacted by this disease. The plan is the first step in this Government's mission to reignite and renew the economy following the impact of Covid-19. It aims to build on the recovery to date and the measures previously announced with a further €4.3 billion of spending on supports that will have an immediate impact on businesses, employment and economic activity. The overall value of the package, including tax changes and the opening of the €2 billion Covid-19 credit guarantee scheme, is approximately €7.2 billion.
Today's debate is focused on the tax measures that will have a net cost of approximately €1 billion. The total value of the tax package is €1.4 billion but the amendments relating to corporate tax losses will be cost-neutral to Exchequer as they are an acceleration of the ability of companies to avail of a relief that already exists in the tax code. Importantly, however, this measure will release up to €450 million of liquidity in the current year to companies currently facing significant cash flow difficulties at a point when they most need it. In addition to this, the employment wage subsidy scheme will cost an estimated €2.25 billion, guaranteeing substantial State support for worker wages through to March 2021.
The Bill before the House today only runs to only 13 sections so I will briefly go through them individually. Section 1 is the standard definitions section common to Bills of this nature.
Section 2 makes changes to the existing temporary wage subsidy scheme, TWSS, to include individuals who return to work after maternity and other types of leave, those on apprentice and training courses, as well as changes to the subsidy amounts payable that I announced on 15 April. All of these and other necessary adjustments to the TWSS were previously announced and have been administered to date by the Revenue Commissioners on the basis of their care and management provisions.
The section also provides for the employment wage subsidy scheme, which will replace the temporary wage subsidy scheme. It is being introduced as an enterprise support that gives a subsidy to qualifying employers on the basis of the numbers of paid employees on the employer's payroll. This is an economy-wide support and open to all sectors. The primary qualifying criteria is that the employer must be able to demonstrate that in the majority of cases they are operating at no more than 70% in either the turnover of the employer's business or the customer orders received by the employer by reference to the period from July to December 2020, compared with the same period in 2019.
In this regard, given the importance of childcare to the reopening of the economy and also recognising the unique circumstances where the turnover of such businesses would be greater than 70% but the cost base would be considerably higher, the Government has decided that the key eligibility criteria would be waived for this particular sector.
The level of subsidy the employer will receive is per paid employee. For every employee paid more than €203 gross per week, the level of subsidy is €203. For every employee paid between €151.50 and €202.99 gross per week, the subsidy is €151.50. A nil subsidy is payable for employees paid less than €151.50 or more than €1,462 gross per week; this latter amount is consistent with the eligibility ceiling which exists in our current plan. The scheme will be in place until the end of March next year. It is estimated that it will cost €2.25 billion, comprising €1.35 billion in 2020, inclusive of seasonal workers, and €900 million next year.
Sections 3 to 5, inclusive, together provide a legislative basis for the tax "debt warehousing" scheme announced by the previous Government on 2 May. No interest will be charged on the tax debts for the initial Covid-19 restricted trading period or 12 months thereafter. Interest will be charged at the reduced rate of 3% per annum after that and businesses will also be required to comply with requirements relating to tax returns for the duration and pay other liabilities in full and on time. Otherwise, the normal 10% per annum interest will apply.
Section 6 will add a new interest provision in chapter 5 of Part 47 Taxes Consolidation Act to reduce the interest rate applying to agreed repayments of all tax debt to approximately 3% per annum rather than 8%, 10% or 11.75% per annum depending on tax head where agreement has been reached between the taxpayer and the Revenue Commissioners prior to 30 September 2020.
The measure will assist taxpayers who are in difficulty with tax payments. The purpose of this section is to provide support to taxpayers experiencing difficulty with their liabilities by reducing the interest rate applied to agreed repayments of all tax debt where agreement has been reached prior to 30 September 2020.
Section 7 relates to the stay-and-spend incentive. This will incentivise taxpayers to support registered or accredited providers of accommodation, food or both during the off-season, thus providing support to a particularly vulnerable sector that continues to be constrained by public health limitations. The incentive will allow provide for a refund through income tax of 20% of the vouched cost, subject to a minimum spend of €25. In other words, it offers a maximum tax credit of €125 per person or €250 for a jointly-assessed couple. This innovative measure will be a valuable form of off-season support for the Irish hospitality sector. It provides relief on accommodation and food, including soft drinks but not alcohol. Businesses must be registered or accredited as appropriate and must have tax clearance if registered for VAT. Businesses will be obliged to register with Revenue to participate. It is estimated that this scheme will cost up to €270 million in total. It will run from 1 October 2020 to 30 April 2021, including over the Christmas period. It is designed to unlock the money people may have saved in recent months and encourage spending in the sector and in local economies. I hope and expect that this really important part of our economy will use its creativity and talent to market this opportunity and ensure its best use for businesses and customers. However, this should not be seen in isolation. The extension of the temporary Covid-19 wage subsidy scheme until the end of March 2021, and its extension to new or seasonal staff with effect from 1 July this year, the VAT change, the rates waiver, the reopening grants and a range of other supports will buffer and support businesses and the economy as we move through the remainder of 2020 and into next year.
Section 8 amends the help-to-buy scheme to stimulate demand from first-time buyers for new homes in the housing market, to encourage house completions and to assist first-time buyers in accumulating a deposit for a new home. The level of support will be increased to the lesser amount of €30,000 from €20,000, to 10% from 5% of the purchase price of a new home or self-build property or to the amount of income tax and deposit interest retention tax, DIRT, paid in the four years before the purchase or self-build. The additional relief will be available immediately and will apply to applicants who sign a contract for the purchase of a new house or make the first drawdown of the mortgage in the case of a self-build in the period from 23 July to December 2020. Receipt of the additional relief is not dependent on completion before 31 December. It will expire at the end of this year. All other parameters of the scheme will remain the same.
Section 9 provides for increases in the allowable expenditure under the cycle-to-work scheme. The allowable expenditure will be increased from €1,000 to €1,500 in respect of e-bikes and €1,250 in respect of bicycles. The scheme currently allows the purchase of a new bicycle every five years. This will be amended to four years.
Section 10 provides for a new once-off income tax relief measure that will benefit self-employed individuals who were profitable in 2019 but who, as a result of the Covid-19 pandemic, are loss-making in 2020. This will provide a much-needed cash flow boost in the current year. The estimated cost of this once-off proposal is €150 million in 2020.
Section 11 provides cash flow supports to previously profitable companies that are now experiencing losses as a result of public health measures. It allows companies to estimate their current-year losses and to make an early claim to carry back 50% of that loss to offset against taxable profits of the prior year. This will generate an immediate refund of some or all of the corporation tax paid for that year. Under normal rules, this would not take place until up to nine months after the end of the loss-making year when tax returns are due for filing. As it is based on projections of the expected losses for the full accounting year, the carry-back is limited to 50% of the estimated loss. The balance of the loss will be available for carry-back in due course under normal rules, when accounts have been prepared after the company's year end. The measure has no net cost in the medium term as it is an acceleration of a relief that already exists in the corporation tax code. However, it will release up to €450 million of valuable liquidity in the current year to companies currently facing significant cash flow difficulties at a time when they most need it.
Section 12 provides for the standard rate of VAT to be reduced on a temporary basis from 23% to 21% for the period from 1 September 2020 to 28 February 2021. It is estimated that this reduction will cost some €440 million in total, €160 million in 2020 and €280 million in 2021. This is one of several measures to aid economic recovery in the short term and to help ensure growth in the future. It cuts across a wide range of economic activity, including the retail sector, the motor industry and the hospitality sector, and, as such, a broad range of businesses and traders will benefit. A reduction in the 13.5% VAT rate would have been more limited in its impact. In the context of the prevailing public health advice, other restrictions necessitated by the social distancing rules and the shortage of overseas visitors, a reduction in the standard rate is the appropriate policy response.
Section 13 is another standard section. It relates to the Short Title of the Bill. There is no commencement provision and the Bill will become effective on enactment and signature by the President.
This is a short Bill but it is a crucial element of the next phase of the Government's response to the Covid-19 crisis. It sets out the budgetary measures that will support jobs and our economy and help our country emerge from the period when the economy was shut down. The Irish people have shown remarkable resilience throughout this crisis and now businesses are reopening and taking workers back onto their books. However, those businesses need our help and support. The measures in this Bill will assist in this process and supplement the other measures the Government has taken to support businesses. The Bill introduces new support measures and adapts existing ones to meet the needs of our people and our economy as we continue to make progress in restricting the impact of this disease, reopen our country, help business recover and allow workers to go back to work. These are far-reaching measures involving truly massive support but they are absolutely necessary. I commend the Bill to the House.
Tá sé i gceist agam mo chuid ama a roinnt le mo chomhghleacaithe, na Teachtaí Mairéad Farrell, Conway-Walsh agus Gould. Ba mhaith liom mo bhuíochas a chur in iúl leis na oifigigh sa Roinn Airgeadais a ghlac am leis an mBille seo a phlé liom. Ós rud é nach mbeimid ag dul fríd an ghnáthphróiseas - níl bheidh an coiste ag scrúdú na reachtaíochta - tá sé tábhachtach go bhfuil an teagmháil sin idir oifigigh agus urlabhraithe. Cuirim fáilte roimh an gcabhair sin agus cuirim mo bhuíochas in iúl do na hoifigigh arís.
I welcome the publication of this Bill and the fact that the Minister's officials were able to engage with members of the Opposition, including myself, to brief us on it. Like many other items of legislation, this Bill is not going through the normal process of pre-legislative scrutiny. As the lead Opposition party, Sinn Féin recognises the necessity of facilitating an expedited process through the Houses of the Oireachtas for a wide range of legislation. This is in spite of the difficulties we may have with certain sections of the Bill. Given the pandemic and, particularly regarding this legislation, the situation in which many businesses find themselves, it is appropriate to waive the normal processes of legislative scrutiny.
That has put pressure on us in respect of timelines for tabling amendments and so on, but we have made the best fist of it. We will deal with that on Committee and Remaining Stages.
I will comment on some but not all of the measures provided for in the legislation. It is a mixed bag. There are very positive measures, some of which we argued for, there are some that are very welcome and there are others that are not welcome. I would like to comment on the spirit in which Sinn Féin has considered this and other legislation introduced by the Government since the outbreak of Covid-19. Sinn Féin has provided robust and constructive opposition in the Thirty-third Dáil. Certain provisions of this legislation are proof of this. The temporary wage subsidy scheme was introduced on 26 March to protect incomes, support businesses and maintain a relationship between an employee and his or her employer. While there were defects in the scheme rolled out by the Government, Sinn Féin supported its objectives and the legislation that underpinned it, the Emergency Measures in the Public Interest (Covid-19) Act 2020.
Since the scheme began, Sinn Féin has recognised elements of the scheme that were deficient. We worked with the Government at the time to have them addressed and the legislation before us is proof of that. As early as 2 April, we called for a minimum payment of €350 to be introduced for the wage subsidy scheme to protect workers' incomes further and to address a discrepancy in the scheme whereby workers earned less under the scheme than if they had been unemployed, undermining its very objectives. The Minister and I corresponded on this issue, with the Government responding by increasing the rate of subsidy from 70% to 85% from 4 May. Section 2(1)(d) of the legislation before us will provide for that change in legislative effect.
Similarly, while others claimed that women returning from maternity leave could not access the scheme without legislative change, Sinn Féin argued that the Government could and should include these women on the same administrative basis as the increase in subsidy for low-paid workers, with legislative change further down the line. On 29 May, the Government did just that following a recommendation, which we very much welcomed. Section 2(1)(b) of the legislation before us will provide for this change. These very provisions speak to the constructive role that Sinn Féin has played during this period, standing up for workers and families.
More broadly, the legislation will provide for the many measures announced as part of the July stimulus package. While a number of these measures are welcome, it should be noted that they come very late for small businesses throughout the State. It must be said that, in many regards, the package falls short. While not provided for in this legislation, the Government has opted for a ratio of approximately 4:1 of debt solution to grants, instead of grants for small businesses. While the Government adopted our approach to the removal of the portfolio cap for the credit guarantee scheme to facilitate lending for SMEs, the Minister for Business, Enterprise and Innovation has previously stated it will not be ready until September or October, with interest rates of between 3% and 4% on loans after a short period. In my view, that is too slow and too costly for some businesses on the brink of permanent closure. It is also the case that while the grant scheme has been enhanced, grants for companies can still be as low as €4,000, which is not the type of ambition that many of the companies had hoped for.
I turn to a couple of other sections in the Bill. While the deadline for the temporary wage subsidy scheme should be extended from 1 September to later in October, which we tabled an amendment for, I am very concerned that those under the new scheme who are earning below €151.50 will get no support from the Government. This will create an incentive if a company has to let a worker go. Obviously, it will be the low-paid, minimum wage worker who works fewer than 15 hours, where the employer gets no support from the State, instead of any of the other employees, who will have been subsidised by the State. This can be rectified by ensuring there is an 85% contribution from the State for these categories of workers. I also believe there is a missed opportunity here because the legislation will not allow the Minister, according to my reading, to target certain sectors. We have tabled an amendment that will allow the Minister to vary the rates for categories and groups of workers, such as in the hospitality industry, as opposed to that of retail or others, depending on how each category progresses over the coming weeks.
On the stay and spend initiative, a good proposal put forward by Sinn Féin related to a hospitality voucher. The idea of a tax credit is cumbersome, as is the idea that I could go for a meal in January and get a rebate in 2022. That will not give the incentive that is required. Almost one in three income earners will be excluded from this. We have seen from the ready reckoner that 711,000 people pay neither income tax nor the universal social charge and, therefore, will not be able to avail of the scheme, of a total of 2.4 million taxpayer units. That does not include others who are not income earners in the first instance, who are also excluded from the scheme, such as those who are on certain social welfare payments.
It is just ridiculous that the help-to-buy scheme will be extended. It makes no sense. This is intended to stimulate demand at a time when the supply is not there. Let us take, for example, the case of a self-build. An applicant has to draw down the first portion of the mortgage before the end of the year to apply for it, but to be able to do so means the site has to be cleared, the foundations have to be in place and the walls have to be built up to roof level. That is the standard practice. That means the applicant will also have had to have approval for the mortgage and to have applied for it. Anybody who has gone through that process will know that it takes much longer than six months to do all that. The only potential beneficiaries of this in respect of self-builds, therefore, will be those who have been approved a mortgage, have not drawn down the loan and will now get an additional €10,000.
We have already seen that property prices have been increasing overnight by €10,000 as a result of this measure. No impact assessment has been conducted to determine the effect of this policy on house prices. Mr. Lorcan Sirr has stated: "The timing of this, which will stimulate demand when supply is being reduced, will likely lead to rising prices for the homes that do come on the market." The Parliamentary Budget Office, which has already reported on the matter, stated it found that the scheme had been disproportionately availed of by high-income earners. That was the lower scheme. The new one will be worse again. In other words, it was largely out of reach of the vast majority of first-time buyers. The majority of help-to-buy purchases have been above the average price. The office also stated that more than 40% of those who used the scheme already had the 10% deposit and did not need the scheme to be able to purchase a house. This is €18 million that will go directly or indirectly into the pockets of developers, but worse than that, it will increase house prices.
I welcome a reduction in the VAT rate on any day, especially given the high levels of the standard rate, but what we need in this country at this time is targeted initiatives. According to the Central Statistics Office, retail sales increased in June, despite many premises being closed. That is not to say that certain retail businesses do not need support, because they do, but what we needed desperately was a support for the tourism, hospitality, accommodation and food sector. That is missing in this legislation. We should be reducing VAT from 13.5% to 9% and stimulating that sector. It is where the lowest paid are, it is where the biggest hit has taken place, and it is the sector that will take the longest time to recover. I cannot understand why a reduction in VAT in that sector, which would be less than half of the reduction from 23% to 21%, was not considered or conceded by the Government. We have an amendment before the House that seeks to do just that. I hope that, given the low levels of money in the context of everything else, this measure in the region of €200 million will be considered. It could be a shot in the arm for the sector, its employers and its workers.
Caithfidh mé a rá go bhfuil mé buartha faoi todhchaí go leor de na ceantracha is iargúlta sa Stát seo. Bíonn na hoileáin amuigh ón gcósta ag brath ar turasóireacht, agus níl tionscal ar bith eile i mbailte beaga ar an gcósta. Tá siad ag brath ina iomláine ar thurasóireacht. Teastaíonn cinnteacht uathu go mbeidh airgead ag teacht isteach chucu láithreach. Is mór an trua í go bhfuil éiginnteacht fós ann i measc gnólachtaí agus teaghlaigh, fiú amháin tar éis seoladh an July stimulus agus an reachtaíocht seo.
I am concerned there is a lack of understanding of the economic reality of many families, as well as many communities. I think particularly of those businesses and the communities they sustain in areas heavily reliant on tourism. In concept, the stay and spend initiative is great but, unfortunately, the reality is way off the mark. It seems to be a copy of the Sinn Féin proposal for a voucher scheme gone wrong.
The Government has said that about 2.8 million people will avail of the stay and spend initiative but once again people have been left out. Sinn Féin has pointed out that many people do not pay income tax because they do not have enough of an income to incur a tax liability. Some of the lowest paid workers in the State do not earn enough to pay income tax so they are excluded. The Government has said that the credit could then be set against the claimant's universal social charge liability but as the Department of Finance's own ready reckoner shows, an estimated 715,600 taxpayers do not pay either income tax or USC.
There is a large cohort of people who are very uncertain about their financial future, including people who are currently out of work due to the Covid-19 pandemic and are in receipt of the pandemic unemployment payment, people who are working but are concerned that the company they work for may no longer be viable and small business owners who are deeply worried that they will have to close their doors. We should be realistic: waiting a year or two to claim back their tax is not an option for these people. They do not have money in their back pockets now, and even if they did, they do not know when they might need it for an emergency as there is so little financial security. Not only would a voucher scheme have allowed an immediate cash injection into local businesses, which in turn would have boosted the economies of many of our most rural and isolated communities, it would also have given much-needed relief to families, workers and all those who have struggled in recent months. They would have been able to go for a day trip with their children, a meal in a restaurant or even a staycation.
Sinn Féin also proposed a VAT reduction targeted to the tourism and hospitality sector from 13.5% to 9%. This sector, on which many of the most rural areas in the west and on the offshore islands are reliant, is on its knees. They are so reliant on this sector because successive Governments have failed to provide the infrastructure and investment necessary to build indigenous businesses or attract other industries. There is poor road, sewerage and water infrastructure as well as zero broadband in many communities.
Under the terms of the revised restart grant, support will also be provided for enterprises that were unable to access the original grant scheme. I do not doubt that this support has come about as a result of many Members highlighting their concerns. It means that non-rateable bed and breakfast accommodation providers or sports businesses will be eligible for a grant payment of €4,000. Non-rated bed and breakfast accommodation providers will be eligible to apply through Fáilte Ireland, with local authorities being the avenue for these other businesses. However, there has been no clarity on when the application process will open. These businesses need to access these grants immediately but the websites of the Department of Business, Enterprise and Innovation, Fáilte Ireland and many local authorities merely say that applications will open in due course. Will the Minister give a date, perhaps in writing, for when the application process will officially open?
Teastaíonn cabhair uathu anois. Teastaíonn cabhair ó mhuintir na háiteanna seo chun na pobail seo a choinneáil ag imeacht ionas go mbeidh na pobail sna ceantracha is iargúlta fós ann nuair a bheimid in ann an tír a athoscailt i gceart, agus nuair a bheidh turasóirí ag teacht ar ais go hÉirinn. Nuair a thagann na turasóirí sin, ní theastaíonn uainn go mbeidh na bailte tréigthe leis na daoine agus na teaghlaigh óga imithe go Meiriceá, chun na hAstráile nó chun na hEorpa mar a tharla i gcás chuile ghlúin roimhe seo.
We welcome many of the initiatives and many of the things that have been done in the Bill. However, the Minister has not explained why the voucher scheme we proposed was not accepted. It would have been a much better way. I hope the Minister would be mature enough not to dismiss it out of hand just because it was a Sinn Féin proposal. I think it was the best proposal because it gave an immediate boost to people and businesses. The failure to adopt this proposal suggests that the Minister misses the gravity of the financial situation that many families are in. Telling someone that they can reclaim something at the end of 2021 or 2022 misses the immediacy of what is happening here and now. Even with the long duration, I am also concerned that many of the entitlements in terms of rebates are not claimed. Many go unclaimed and many people do not avail of the rebates to which they are already entitled. Will the Minister clarify if the rebates are given for those who choose to take their breaks in the North of our island? If that were not to be the case, it would very much speak to the folly of partition, given that we all live on one small island.
I am also concerned that the Government's plan excludes many low income earners, such as pensioners, parents and students. The employment wage subsidy scheme has excluded those earning less than €151.50. This Government will have been noted to date as the Government of social and economic exclusion. Many pensioners and low income earners will not be able to avail of the money to spend on their breaks, which is fundamentally wrong. One of my colleagues put it well recently when they said they could sit at one table and be able to get a rebate for what they were eating, but that would not be the case for someone else on another table. That is the stark reality. Another example of this type of exclusion is the Government's willingness to enforce travel restrictions on some people. It is a very worrying path to go down.
The Minister should have listened to the hospitality sector and the supply chain because this affects not only the hospitality sector but also everyone who depends on it, such as the dry cleaners and the launderettes. We should have reduced the VAT rate from 13.5% to 9% for a defined period to allow for the income reductions for the whole sector and those dependent on it.
I welcome what the Minister has done with the option for farmers to step out of income averaging. It will help somewhat although there are very serious challenges to the sector and other aspects of that need to be looked at. I think there is an opportunity for the Minister to do the right thing by accepting some of the very constructive Sinn Féin amendments to this Bill.
I will be very brief. I wish to raise the help to buy scheme. There is a significant error in the legislation. I was contacted by a woman, Susan Brackett, and her partner who signed a contract in January 2020 under the new help to buy scheme. Her husband, like many other people, will not get his quarterly bonus as a consequence of the pandemic. Susan was on the PUP but has now gone back to work, albeit on a reduced income. The Covid-19 crisis stopped work going ahead which means they will have to rent for an additional four months. Will it be possible to backdate the increases for those affected by the pandemic for four months? They are at a distinct disadvantage. I have been told by a man in a similar position, Dean Grainger, that an extra 5% would be life-changing money for the likes of his family or Susan's people. Quite a small number of people are affected by this anomaly, but the change I have mentioned would make a huge difference to them.
The July stimulus, which was announced last week and is reflected in the measures we are considering today, was the first real test of the philosophy as well as the economic policies of this new Government. It was an opportunity to think and act big and to imagine a new economic model that would provide a better quality of life for all our citizens.
It could have been a belated first step towards a renegotiated social contract, one that ensured that working people could access a better quality of universal public services in, for example, healthcare, housing and childcare.
Some of the measures contained in the announcement last week are welcome. It would be churlish to suggest otherwise. In particular, I welcome in principle the 2% VAT cut and the reformed temporary wage subsidy scheme, TWSS. The Labour Party proposed those two measures in our alternative set of July stimulus proposals. In those proposals, and as I always said we would do in this Oireachtas, we sought to be helpful by publishing a number of distinct propositions. If adopted, they would have better targeted our available resources in order to achieve better social and economic outcomes in challenging times for our society and economy.
We will judge the package announced last week and reflected in some of this Bill's provisions on five separate terms. First, is it big enough to make a real difference, not just to the economic impact of the pandemic, but in the possible event of a no-deal Brexit? I would say "No". Our analysis suggests that what we needed was a cash injection into the economy of approximately €10 billion. Second, will it create good, sustainable jobs, particularly for young people, who have been disproportionately impacted by the effect of the crisis? We do not believe it will, at least not to the degree it should. Third, will it create a new and fairer economic model? It looks like it will not. It is more a case of meet the new Government, same as the old Government. There is no discernible difference in the economic direction being charted. Fourth, will it help to reduce income and economic inequality? It will not, given the no strings attached loans, the continuation of the no strings attached TWSS and the evolution of the employment wage subsidy scheme, EWSS. Fifth, will it strengthen the public services on which we all depend, for example, health and housing? It certainly will not if the signature piece on housing - the amended help-to-buy scheme - is anything to go by.
We welcome the transformation of the TWSS into the new EWSS. As the Minister knows, I have set out some amendments that would see strict social and employment conditions attached to access to those schemes. We support the move to the EWSS. I have been raising this matter in the House and the media since April. It is a natural evolution of the scheme. There will be employers who require such support to take people on as they dip their toes back into the water over the next few months.
However, the EWSS and its architecture will actively promote and subsidise in-work poverty and the profits of some bad employers and sectors that are addicted to precarity. The protection of workers is the raison d'êtreof similar wage subsidy schemes across the EU, but it does not even seem to be an afterthought in Ireland. For example, it will be more lucrative under the EWSS for some employers and sectors - the hospitality sector has traditionally focused on precarious working conditions and involuntary part-time work - to hire two separate minimum wage workers on 15 hours each as opposed to one whole-time equivalent. How could this be of any benefit in the longer term to any worker in the sector? These are predominantly younger workers and women, with a 2019 report from the Department of Public Expenditure and Reform on the quality of employment noting that the incidence of involuntary part-time work was concentrated among these cohorts, including those in sectors such as hospitality and parts of the retail sector. As such, it is not surprising that Ireland has more than 100,000 people in forced part-time work. People are underemployed simply so that employers with pooled labour have flexibility while workers are left with low pay and too much uncertainty.
Despite this, we now have a State-funded taxpayer bailout that will be taken up in large numbers by the hospitality sector, a sector that has refused to engage with the joint labour committee, which was a mechanism legislatively provided for in the 2012 Act to seek to set a minimum of pay and conditions in order to change the low-pay and precarious reality of those workers. According to an ESRI report published this week, those workers are the most at risk of Covid-19 and conditions that may cause increased complications.
Let us call a spade a spade. This is cash without conditions. It is a missed opportunity for the State to use its leverage to help get better outcomes for everyone. Instead of taking this opportunity to introduce reforms in low-paid sectors and move to a model based on high-quality services and higher levels of pay, it seems the Government has again chosen the low road, but now we expect taxpayers and workers to foot the bill. It is a case of us being back to the view that any job will do and at any cost.
As colleagues in Sinn Féin have asked, I wonder whether any of those who work in this sector will be able to afford the proposed staycation subsidy. Those who will predominantly benefit from that policy are the better off and, of course, the hospitality sector, which has to a large degree shown a blatant disregard for workers time and again. Not only will this dead weight policy increase prices for regular customers, but it could be a lose-lose situation all around for ordinary families and workers.
Fianna Fáil's dead weight help-to-buy policy is another Government giveaway to those least in need. It will simply push up developers' profits by using the taxes of ordinary people to subsidise home purchases. The Parliamentary Budget Office's analysis made that clear last year, but the Government has still increased relief under what is a failed policy in the middle of a pandemic, and all because of Fianna Fáil's ongoing obsession with and fetishisation of developers. What we really needed was investment in public and affordable housing to be fast-tracked, which would also have created badly needed jobs in construction.
I will briefly touch upon the bizarre increase in the cycle-to-work scheme, a sop to ABC1 greens. There is no economic rationale whatsoever for the increased limits proposed in the Bill, especially at this time. As a brief from the Department of Finance has shown, this will simply increase the number of people in the higher tax bracket availing of the scheme. It seems to be yet another policy on the hoof, one more about pleasing some Government partners than having a sensible stimulus policy. There is an incoherence in this matter. I would be interested in seeing what the average price of a bicycle is under the existing scheme, or even of a new bicycle. I am not sure who buys a so-called ordinary bike worth €1,250. Maybe if they are preparing for the Tour de France, but certainly not people who are commuting to work in Dublin and towns like Drogheda and Dundalk. This shows how out of touch some in the Green Party are with ordinary people when it comes to climate transition. They should instead be getting the basics right, for example, investing in the public bicycle scheme, which the Labour Party first introduced in Dublin under the then mayor, Mr. Andrew Montague. The measure in the Bill is yet another dead weight policy and taxpayer bailout of those least in need. It seems that there is one dead weight policy for every coalition partner.
Instead of change, we have seen a July stimulus package that continues to give cash without conditions to those least in need. It is a missed opportunity to change and reshape Ireland for the better. The Labour Party amendments, which I will speak to in detail later, seek to address some of those deficiencies in the Bill, particularly those pertaining to the EWSS, which is the most costly of the proposed measures at more than €2 billion. I agree with the Minister that the EWSS is necessary - it will be an important support for employers and workers - but it needs to be tweaked to ensure that we use this opportunity to shape a better outcome for working people and our country in the longer term.
I welcome the opportunity to speak on the Bill.
It provides for expenditure of in excess of €5 billion as well as some €2 billion in loan guarantees, and comprises 50 measures. It is very much a mixed bag. A number of elements of the plan are to be welcomed but I would seriously question a number of others. I welcome the support for the sectors that have been most impacted by Covid-19, particularly the hospitality industry, which has undoubtedly taken a huge hit during what is normally its very profitable season. The implications of that for many workers are enormous, not just for those employed in the sector itself but also for all of the spin-off jobs that come with a thriving tourism industry and hospitality sector. Even as things are opening up at the moment, from a Dublin perspective things are incredibly slow in the city centre. It is welcome that there has been some improvement in activity levels in local facilities, bars, restaurants and so on but certainly in the city centre, things are desperately slow and it will take quite a bit of time before they pick up again.
I welcome the support for employers and employees who have been struggling as a result of this virus, particularly our SMEs, which are so important to the domestic economy. It was interesting to look at the tax figures that were released a couple of weeks ago. The multinational sector and particularly the tech and pharmaceutical sectors have actually been doing well in the context of the virus. Many of those high-paying jobs are continuing to return significant amounts in income tax, whatever about corporation tax. Income tax receipts were relatively healthy considering what the country has come through in recent months. Clearly the SME sector and our own domestic economy have taken the brunt of the impact of the pandemic. For that and many other reasons which we have been talking about for some time, it is really important that there is some equivalence in terms of attention and supports for domestic SMEs relative to the enormous support and attention paid to the multinational sector.
It is crucial to ensure that the supports being put in place for domestic businesses and the hardest-hit sectors get money into the pockets of those who most need it effectively and efficiently. That is not necessarily the case in respect of the various measures. It should be the predominant, driving objective in this regard but I question a number of the decisions that have been taken. The employment wage support scheme is the strongest pillar of the July stimulus. It is good to see the temporary wage subsidy scheme converted into a longer-term plan. It makes absolute sense. If we can support workers with significant subsidy in their pay but also target funding to the recruitment and retention of employees in the companies affected, the scheme is the most sustainable way of doing this. It certainly gives significant support to employers.
Unemployment has a serious impact on people's self-worth and mental health and causes diminished quality of life. That is why it is so critical to ensure that people are facilitated in remaining connected to their original jobs, if possible, and to the workforce. For that reason, one must question the controversy in recent days over the Government's action in respect of the pandemic unemployment payment, PUP. To a large extent, that works against the objective of keeping people connected to their original job or company. A scheme supporting income keeps people employed, skilled and earning, which is a critical step in the direction of a more humane, person-centred economy. I would welcome a long-term version of this scheme which would provide a permanent buffer between a business being a success and unemployment for workers. Consideration should be given to the German example, for instance. I hope the Minister will look at that in the longer term.
I refer to the area of debt warehousing and reduced interest rates on tax debts. There is no point in placing further undue hardship on a business which has been severely negatively impacted in these rare circumstances. These are not normal times and they do not call for the normal approach to tax debts. I support the measures proposed under debt warehousing and reduced interest rates for tax debts to alleviate the pressure that some businesses are now under as a direct result of Covid-19. The hospitality industry and especially accommodation and food businesses which are targeted by this scheme have been among the worst impacted in this crisis.
The "stay and spend" proposal is a targeted, sector-specific measure and therefore is a better approach than the general VAT cut also provided for in the Bill. However, there are still serious issues from an economic perspective. The tax credit is structured in a way that rewards people who can spend more over those who can only spend a little or cannot spend at all. It is inherently unequal. It is not clear why this scheme is set up as a tax break rather than a voucher system when we know one third of the population will not benefit at all from a tax-back scheme. A voucher to the same value as the tax-back scheme, €125, could have been provided to every eligible person. That would have allowed far greater uptake by lower-income households while still preserving the same benefit for higher-income households. It would have been much more equal and fair. There is a further need to ensure that submitting receipts is easy and straightforward. It seems to be an extremely complicated and difficult system from a compliance perspective but also from the point of view of people who avail of it. Of course, they will not get any tax back for over a year. Accommodation must be registered with Fáilte Ireland to qualify for the scheme. I urge the Government to ensure there is clear information about registered accommodation for the public in order that they can easily follow the rules of the scheme. Overall, it does not seem to make any sense to do it this way. The Minister has not explained why he has taken this approach. A voucher scheme would be much fairer. It could be introduced straight away, which is when the hospitality and tourism industry needs the boost. We are talking about a July stimulus but it is actually a September stimulus to a large extent. The scheme excludes most pensioners, who are not paying tax, as well as people on welfare payments, disability allowance, and the one third of workers who do not pay tax. A large number of people are excluded from the scheme. It does not make any sense whatsoever. When he is responding, the Minister might just explain the thinking. I do not understand it. There was an opportunity to ensure there would be a fair system that would apply to everybody equally, would not advantage high earners over everybody else and that would provide an immediate fillip and stimulus to the hospitality and tourism industry. The way it has been done is deeply unfair and far less effective than it might have been.
How much time do I have left?
I appeal to the Minister again to rethink this scheme. She has time to do that given that her tax-back scheme does not come into operation until September or in the autumn. I am making a very strong appeal to her to reconsider because it excludes far too many people and it does not have the reach or impact it could potentially have if she took the other approach of a voucher.