THE GOVERNMENT should limit cuts in the 2012 budget to the €3.6 billion already expected because anything beyond this would damage consumer confidence too much, Ibec has said.

The business group argues that €3.6 billion will be sufficient to bring the State’s deficit down to the bailout target of 8.6 per cent of GDP next year. The Government needs to stick with the figure because it is already in the “popular imagination”, according to Ibec director general Danny McCoy.

Delivering Ibec’s pre-budget submission, Mr McCoy said Irish people were already coping with a €20 billion austerity programme and needed “certainty” if they were to resume spending and help to boost the economy.

Ibec forecasts nominal GDP growth of 3.5 per cent next year, but Mr McCoy said even 2 per cent growth would allow targets under the bailout programme to be reached.

The €3.6 billion reduction should be split between €2.7 billion in spending and the remainder in taxes, Ibec says.

Minister for Finance Michael Noonan has flagged budgetary cuts up to €4 billion, while commentators including Goldman Sachs chairman Peter Sutherland have argued that greater short-term austerity would boost the Republic’s reputation.

“Our view is that Main Street is as important as Wall Street,” said Mr McCoy yesterday.

Ibec’s vision for the 2012 budget is styled as “a plan for growth”, which the association argues will allow the Republic to emerge from the bailout “harder, faster, quicker”.

Within this, it sees reducing the growing savings ratio and unlocking consumer spending as crucial in getting the economy moving again.

In the housing market, Ibec is calling for a two-year “window of opportunity”, during which potential homeowners would be encouraged to enter the market. Such measures would include the announcement that stamp duty would increase to 3 per cent after 2013 and an exemption from any new property tax for homes bought in the next two years.

On unemployment, the association wants “conditionality” to be applied to dole payments, whereby benefits might be cut if, for example, a job is offered and not taken up.

The association does not advocate wage cuts in the public sector, but is “puzzled” as to why €250 million is still being paid in annual increments. Pay levels are “still high in an international context”, according to Ibec, with greater productivity needed.

The employers’ group also suggests that the “economic impact” of some welfare payments such as child benefit should be maximised through the introduction of a retail and services payment card to replace payments into bank accounts.

This would, Ibec argues, see medium- and high-income parents spending locally and more immediately. At the same time, parents opting to take cash payments would accept a 25 per cent reduced rate for the privilege.

IBEC MAIN POINTS

-Do not exceed €3.6 billion in cuts in the 2012 budget.

- No more income tax rises, taxes on business or VAT hikes.

- Reform pensions so that up to 25 per cent of AVCs can be drawn down for a period without penalty.

- Introduce a new smart card for welfare payments to ensure they are spent rather than saved.

- Incentivise homebuying for two years through stamp-duty and property-tax initiatives.

- Improve the Republic’s appeal for mobile investment through tax measures such as improved RD tax credit.

- Bring in conditionality for dole payments.

- Deliver reform to encourage public-sector efficiency.