Public Policy Bulletin, 2 October 2020

Oct 02, 2020

 

In this week’s Public Policy news, read about the economic forecasts underpinning Ireland’s Budget 2021 and the first meeting of the SME Growth Taskforce; how Irish employers are not prepared for changes to pensions law; how Northern Ireland social enterprises can apply for grants of up to £75,000 under a new COVID-19 fund; and how the EU Commission has adopted guidelines to help EU Member States reduce greenhouse gas  emissions. 

Economic forecasts underpinning Budget 2021 published 

This week the Department of Finance published its Budget 2021 forecasts. The forecasts predicted a 2.5 per cent fall in GDP in 2020, with minimal recovery (1.4 percent) in 2021. Unemployment is predicted to fall 13.8 percent this year, with limited recovery (7 percent or 145,000 jobs) expected in 2021.

The domestic economy has been severely hit by COVID-19, although the impact on GDP is less than had been expected in the Spring, mainly due to the strong performance and contribution of the multinational sector. Modified domestic demand, which was described as “perhaps the best indicator of domestic economic conditions”, is projected to fall by 6.5 per cent in 2020.

These macroeconomic forecasts that will underpin Budget 2021 assume that:

  1. trade between the UK and the EU will be WTO terms, due to a disorderly end to the Brexit transition period; and
  2. a widespread vaccination for Covid-19 vaccine will not be available.

Minister for Finance, Paschal Donohoe said that the Budget will prioritise management of the COVID-19 crisis and Brexit, with any further measures targeted at the three priorities in the Programme for Government – health, housing and climate change. 

SME Growth Taskforce meets to plan long-term strategy

The first meeting of the new SME Growth Taskforce has taken place, chaired by Tánaiste, Leo Varadkar.

The Taskforce formed in order to design a ‘National SME Growth Plan’. This SME Growth Plan will ultimately form part of the National Economic Plan, which will be published in November.

Committed to in the Programme for Government, the Taskforce aims to map out an ambitious long-term strategy for SMEs and entrepreneurs beyond COVID-19. Its work – and that of its focused sub-groups – will draw upon an OECD Review of SME Entrepreneurship Policy in Ireland. Published in October 2019, this report contained recommendations on how Ireland should respond to the long-term challenges faced by SMEs, namely how to: raise productivity levels; increase business dynamism and start-up rates; facilitate entrepreneurship among women, youth and migrants; scale up micro-enterprises and generate more medium-sized firms; and increase SME activity on foreign markets.

Read more about the Taskforce here. 

Irish employers under-prepared for changes to pensions law 

A survey published this week by professional services firm Aon Solutions, found that many Irish pension schemes are underprepared for auto-enrolment and other pending legal requirements. The survey, ‘Getting the measure of DC pensions in Ireland’ found that:

  • the State’s pension age of 66 is due to rise to 68 from 2028 – however, 88 per cent of the schemes covered in the survey have a normal retirement age of 65;
  • over 25 per cent of employees eligible to join their employers pension schemes have not done so;
  • many who have are not paying the maximum contribution, thereby not capitalising on their employers’ potential matching contribution;
  • most defined-contribution pension schemes are not ready to automatically enrol workers in their pension schemes, despite the State’s plans to require them to do so from 2022, nor are they prepared for IORP II, a directive soon to be part of Irish law;
  • trustee boards are increasingly measuring their performance, and 60 per cent are now using a risk register, suggesting an increased focus on governance and compliance. 

Speaking about the survey AON CE Rachael Ingle urged Ireland to work together and act quickly so as to avoid the ‘accelerating pension time bomb’. 

Northern Ireland social enterprise fund opens for applications

Social enterprises – businesses which reinvest their profits for social and/or environmental purpose – will be eligible to apply for grants of £75,000 through a new scheme co-designed by Social Enterprise NI and Community Finance Ireland.

The Department for Communities DfC Covid Social Enterprise Fund of £7 million aims to help social enterprises stabilise and manage cash flows, during the COVID-19 period, avoid closure and the subsequent loss of employment and key services, and ensure that the sector was “fit for purpose for the future”, according to Communities Minister Carál Ní Chuilín.

Applications will be accepted until October 23. 

EU Commission adopts revised EU Emission Trading System State aid Guidelines

In line with the EU’s plans to become the first climate neutral economy by 2050, the EU Commission has adopted the revised EU Emission Trading System State aid Guidelines (“the ETS Guidelines”). They will enter into force with on 1 January 2021 and will replace previous guidelines adopted in 2012.

European Union Emissions Trading System (or EU ETS) is a system to help EU Member States achieve commitments to limit or reduce greenhouse gas (‘GHG’) emissions in a cost-effective way. It does this by allowing participating companies to buy or sell emission allowances. Companies in the EU ETS must report on their GHG emissions each year and purchase an ‘emissions allowance’ for every tonne of CO2 equivalent they have emitted.

The EU ETS was the first large GHG emissions trading scheme in the world and remains the largest. 

Read all our updates on our Public Policy web centre.