Ibec says €6 billion figure 'about right'

BUSINESS REACTION:BUSINESS GROUPS were quick to respond yesterday to the Government's plans to frontload €6 billion of its planned €15 billion four-year adjustment into the budget for next year.

Employers’ body Ibec described the plan for budgetary adjustment over the coming four years as a “proportionate and credible response to the budget deficit”.

Ibec director general Danny McCoy said: “The €6 billion figure for budget 2011 is about right. It will bring the budget deficit for 2011 below the 10 per cent psychological threshold and puts the public finances on track to reach the 3 per cent deficit target by 2014.”

Mr McCoy described the Government’s forecasts for economic growth over the period as “prudent” and as “leaving some room for upside, which may ease the adjustment burden as we approach 2014”.

However, he warned that households will “wonder what exactly the adjustment will mean for them in taxation terms and this is likely to create uncertainty” between now and budget day.

Chambers Ireland, which represents more than 13,000 businesses across the State, said it was imperative that the Government’s economic strategy realised savings on current spending rather than on the back of capital spending – which it said was “vitally needed to sustain a functioning wider economy”.

In a statement, Chambers Ireland deputy chief executive Seán Murphy said: “Despite the lack of specifics contained in the Economic and Budgetary Outlook document, we hope that we have the time to convince the bond markets post-budget 2011 that these plans are credible.”

Mr Murphy continued: “It is critical that the interest paid on future Government debt contracts falls, as paying interest rates of 7 per cent plus will not be financially sustainable.”

Mark Fielding, chief executive of Isme, which represents 8,500 small and medium businesses, said “the front-ending of measures should lead to confidence in the business sector, creating the perception that the Government is serious about tackling the issues”.

The challenge, he said, would be “the ratio between cutbacks and tax increases. Tax increases are likely to have a negative effect on business”.

Speaking last night, Mr Fielding said: “If there are cutbacks, we would call for these to be made in the public sector.” In addition to cuts, the Government would have to include “some form of stimulus package to get small to medium businesses moving again”.

He said such moves would not only “instil business confidence at home but also confidence amongst lenders and bondholders.”