IBEC, THE business and employers’ organisation, yesterday recommended a two-pronged approach to Budget 2009 when it called on the Government to use it to stabilise public finances while at the same time promoting competitiveness and enterprise.
Commenting on the association’s pre-budget submission, Danny McCoy, director of policy with Ibec, said that he would like to see a “counter-cyclical expansionary budget”, whereby the Government cuts back on public spending in order to restore stability to the public finances but also gives the economy an “expansionary push” by maintaining capital expenditure.
“The only sustainable route back is to foster enterprise, not by taxing to balance the books,” said Mr McCoy, adding that an increase in taxes will lead to a corresponding decrease in activity and an exacerbation of the problems currently facing the country.
Although the association recognised the need to cut current spending, it recommended a relatively modest current spending cut of € 2.5 billion from that currently planned for 2009.
It also called for a 5 per cent cut in the public sector wage bill, which it said could be achieved by a reduction in public sector job numbers by about 10,000.
These job cuts could be attained by natural attrition, a recruitment freeze or a redundancy programme.
Ibec’s proposals to encourage enterprise included specific tax measures such as the introduction of an income tax scheme to help attract skilled overseas employees and enhancing the attractiveness of the research and development tax credit scheme, as well as introducing an innovation support scheme for the services sector.
Moreover, the association said that cutting back on the National Development Plan should be a “last resort” for Government, and instead proposed that the ambitious programme of capital investment is maintained, “as this will help cushion some of the slowdown experienced elsewhere in the construction sector and address serious deficits in the country’s infrastructure”.
If the Government must cut back on capital expenditure, Ibec argued that it should re-prioritise the plan to maximise return on investment.
Apart from agreeing with the proposal to reintroduce university fees on a means-tested basis, which could be construed as a revenue generating measure, Ibec was firm that the Government should not increase taxes and in its submission, proposed no measures aimed at increasing tax revenue.
In particular, the organisation argued that the budget should have a strong anti-inflation remit, and should not include any increase in indirect taxes such as VAT or excise.
“Ireland’s recent economic history has shown the folly of increasing taxes in order to sustain excessively high levels of current expenditure,” Ibec said in its submission.
Instead, Ibec recommended that the Government should borrow its way out of current financial straits. “Let borrowing take the strain,” said Mr McCoy.
