Ruling Party Reiterates Nationwide Disaster Relief Fund Demand... Government Emphasizes Focused Support for 4th Stage Affected Industries

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] As the COVID-19 outbreak led to the implementation of Level 4 social distancing measures in the Seoul metropolitan area, discussions about the national disaster relief fund are once again likely to focus on covering 80% of the population. The trend is toward providing stronger support to vulnerable groups affected by stringent quarantine measures, such as small business owners, while reducing the scale of the disaster relief fund or at least postponing its payment timing to avoid posing risks to quarantine efforts.

According to the government and the Democratic Party on the 11th, after the government’s second supplementary budget bill, which includes a 10.4 trillion won plan for the fifth disaster relief fund, was submitted to the National Assembly, the rapidly changing quarantine situation has brought the debate over the national support fund into a new phase.

Initially, the ruling party and government agreed to provide 250,000 won per person to the bottom 80% income bracket, but since the Democratic Party’s caucus meeting on the 7th, voices have emerged demanding payments to all citizens. Since the purpose of the disaster relief fund is not only to stimulate consumption and revitalize the economy but also to comfort the people, it is argued that support should be provided to all citizens for national unity and to end unnecessary selective debates early.

For universal payment methods, options include a uniform lump-sum payment, income-based differential payments, or a uniform payment followed by year-end tax adjustments to reclaim funds. However, differential payments could spark new selective controversies, and the year-end tax adjustment method is difficult to design, so it is somewhat distanced from the options.

The Democratic Party’s push for universal payments is underpinned by expectations that additional fiscal capacity is being secured due to higher-than-expected tax revenues. Earlier, the government planned a second supplementary budget of 33 trillion won, utilizing an expected excess tax revenue of 31.5 trillion won this year. However, since tax revenue collected from January to May increased by 4.36 trillion won compared to the previous year, the Democratic Party argues that conditions have been created to expand the disaster relief fund to all citizens, anticipating even more tax revenue than when the second supplementary budget was drafted. Nonetheless, there is analysis that the government is unlikely to agree to universal payments.

Within the party, there are also calls to withdraw the credit card cashback policy (1.1 trillion won), which was prepared to stimulate consumption, and use those funds to provide disaster relief payments to all citizens. A ruling party official said, "We will consider both increasing the supplementary budget and restructuring the existing budget."

The government’s position is that, given the worsening quarantine situation, the focus should be on providing stronger support to groups most affected. It is necessary to consider ways to provide more support to small business owners who have suffered practical business restrictions due to bans on gatherings of three or more people.

The supplementary budget includes a plan to provide Hope Recovery Funds worth between 1 million and 9 million won (3.25 trillion won) to small business owners who have been subject to government business suspension or restriction measures or belong to industries facing management crises. Although 600 billion won was allocated for small business loss compensation under the Loss Compensation Act?200 billion won per month for three months from July to September?these amounts were all calculated without anticipating the current high-level quarantine measures. Therefore, the government’s stance is that expanding the disaster relief fund to all citizens is not feasible if support for small business owners is to be increased.

Another issue is that providing disaster relief funds encourages face-to-face consumption, which increases the risk of COVID-19 transmission. Questions are being raised about whether it is appropriate to provide consumption-stimulating support funds to all citizens while Level 4 social distancing is in effect in the metropolitan area.

Some Democratic Party presidential candidates also share this direction. Candidate Lee Nak-yeon stated on Facebook, "The supplementary budget submitted to the National Assembly was prepared assuming a stable COVID-19 situation, considering consumption stimulation and economic revitalization. The disaster relief fund is a representative example," adding, "We need to reconsider the supplementary budget with a greater focus on damage support in line with the changed situation."

The ruling party and government plan to discuss the direction of the second supplementary budget through a high-level party-government meeting held that day and then proceed to a full review of detailed methods.

This content was produced with the assistance of AI translation services.