Covid-era supports should not set the benchmark for every crisis, panel told

The billions of euro in “exceptional” supports provided at the time of the Covid-19 pandemic should not become the benchmark response to every crisis, the director of the Economic and Social Research Institute (ESRI) think tank has said.

An expert-led discussion on future preparedness was hosted by the Covid-19 evaluation panel on Monday, at which the pandemic was described as an “extraordinary test on the resilience of the Irish people” and the economy.

ESRI director Martina Lawless said the pandemic raised “fundamental questions of how we prepare for future shocks”.

Ireland entered the pandemic in a strong fiscal position, she said, and this gave the State considerably more scope to respond to the sudden economic disruption.

Lawless noted the “substantial” scale of the response, with government spending increasing by close to €18 billion in 2020 due to interventions to support households and businesses.

She said these supports helped to cushion the “immediate shock” and also contributed to a relatively rapid recovery in employment and economic activity as restrictions were lifted.

Although maintaining financial reserves can appear less attractive than increasing expenditure or reducing taxation, Lawless said the pandemic demonstrated the “considerable value” of having “fiscal space available when circumstances change unexpectedly”.

“That’s particularly relevant for Ireland at the moment, given we are running large surpluses, but those are increasingly reliant on highly-concentrated and potentially very vulnerable corporation tax receipts,” she said.

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“Building financial reserves and avoiding permanent expenditure commitments based on potentially temporary revenues are not simply matters of fiscal prudence, they’re also investments in our ability to respond to future shocks.”

The pandemic response also raised questions about the expectations of State intervention, Lawless said.

“The exceptional supports provided during Covid were appropriate to an exceptional shock, but they should not necessarily become the benchmark as the response to every future economic difficulty.”

Another point made by Lawless, “perhaps one with the greatest relevance to Ireland’s current challenges”, was that resilience depends on the underlying capacity of the State’s economy and public services.

Noting that Ireland is already facing significant capacity constraints, particularly in housing, transport, water and energy infrastructure and healthcare, she said such constraints have economic and social costs, affecting investment and living standards.

“An economy in which housing supply is constrained, infrastructure is operating at close to capacity and key public services are facing workforce shortages, has a lot less flexibility to adapt when unexpected pressures arise,” she said.

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However, Nat O’Connor, an assistant professor of social policy at University College Dublin and a member of the evaluation panel, said investment in long-term resilience will “cost money”.

Describing a “short-term versus long-term problem”, he added: “There’s never enough money in the budget, there’s always people disappointed, and the politicians will hear all about it.

“So if they put the investment into the long-term planning ... then they don’t have that money for short-term political cycle need, so that is a huge challenge for us. I think there is something needed in terms of how do we explain that to public,” he said.

Caroline McMullan, who has worked on Ireland’s national risk assessments, said information on general risks should be “shared much more widely”.

“The thing that I’m most sort of worried about is that there is so much happening and people don’t seem to know it’s happening,” she said.

As an example, she said in the 2026 risk cycle, 404 risks were proposed by Government departments and agencies, between 30 and 35 of which were “deeply assessed”.

“This work is happening, but we need to share it much more widely,” she said, adding that the public “want more information”.

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“It’s not that we’re scaring them if we tell them. I think they’d be more frightened if they think we’re not doing it.”

Monday’s discussion was the final roundtable of the Covid-19 evaluation panel’s work programme. The independent assessment of the State’s handling of the Covid-19 pandemic is due to conclude by the end of this year.