Workers will bear the burden as welfare schemes for bosses come to a close

By Dan O’Rourke

Mainstream economists and large accountancy firms have warned of the potential of a wave of bankruptcies and layoffs as Covid-related government supports for businesses are wound down. 

The welfare schemes for bosses, the ‘Employment Wage Subsidy Scheme’ (EWSS), and Revenue’s ‘Debt Warehousing Scheme’ (DWS) will both come to a close at the end of the month and the end of the year, respectively. 

While the PUP came under persistent attack from bosses, the right-wing press and politicians, similar handouts for businesses have been lauded as a great success by lobby groups IBEC and ISME. 

Combined, the schemes represent at least €9.8 billion in support for mostly healthy businesses. Media and political scrutiny of the schemes was lacking, particularly when the cost of the over scrutinised PUP is taken into account. The PUP support for workers cost €9 billion and was wound up long before the comparable support for bosses. 

Corporate welfare

While it is claimed that the EWSS scheme is beneficial to workers, it is clear the main beneficiaries are the business owners. In December last year, one luxury car dealership took €1.8 million in handouts from the government, only to pay out the same amount to shareholders.
European countries with similar schemes did not allow this. Irish companies found to be handing out dividends to shareholders have yet to be asked by the government to pay the money back.

In addition, businesses have been supported by Revenue’s ‘Debt Warehousing Scheme’, which has allowed businesses to postpone the payment of tax debt on a zero-interest basis until the end of this year. Currently, €3 billion is ‘warehoused’. A softly-softly approach will be taken to reclaiming tax debt once the scheme ends, and interest will be a tiny 3%. The axiom of ‘money now is worth more than money later’ means this is effectively a tax break for companies. 

Layoffs coming?

These two schemes have meant an historic low in the number of businesses claiming insolvency or going bankrupt. The result of this artificial propping up of businesses could result in a wave of sackings and bankruptcies

Research by ACCA and Grant Thornton has found that 15% of SMEs are expecting to lay off staff when the employment wage subsidy scheme comes to an end. A PwC published in early April, noted that a ‘wave’ of insolvencies has yet to hit Ireland, describing the current low rate of insolvencies as ‘artificial’.

Currently, businesses are using the subsidy to pay 250,000 people. Many bosses will choose not to impact their profit margin and sack employees instead. If a nominal amount of 20% are sacked when the handout is shut off, that would represent 50,000 people unemployed in a short space of time.

Unions must defend workers’ interests

As the schemes come to an end, and various crises of capitalism converge on the global economy, workers will again be expected to bear the burden. This time around it must be different, and a fightback has to be organised by workers and unions to pre-empt another attack on those least able to pay. 

The trade union movement must demand that the books of job-shedding companies are opened for scrutiny by their workforces to see where they’ve siphoned off the monies they received via corporate welfare from the state. Instead of handing out billions more to businesses in Ireland the state must directly step in and create jobs via a major public house building and retrofitting programme, along with the building of green energy infrastructure, new schools, hospitals and creches. Companies that lay workers off must be brought into public ownership, under the control of their workforces. 

In fighting for this programme, unions should follow the example of the Debenhams workers who courageously fought a battle for well over a year when they were sacked from their jobs. We cannot accept a trade union movement that stands idly by while our living standards are attacked by a new bosses offensive.

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