Building sector calls for new service charges in budget

 

Tight controls on public spending and the introduction of new local service charges have been sought by the Construction Industry Federation in its pre-budget submission to the Government.

It also wants a "full-scale review" of stamp duties, and a continued high level of funding for infrastructural projects.

It would be a mistake, the submission claims, for the Government to tackle its current fiscal problems by increasing taxes or cutting back on capital expenditure. Instead, it calls for recent "unsustainable" increases in current spending to be "decisively reversed".

The federation says that tax cuts contributed to the State's improved economic performance during the years of the Celtic Tiger.

A resumption of tax-and-spend policies, it argues, would threaten the gains made in that period.

"The first element in a tax strategy is the control of current spending, the principal purpose for which taxes have to be raised," the submission says.

"There is, we believe, plentiful scope for economy in the light of the enormous increases in spending in recent years. The federation's specific fear in this context is that, given the Government's commitment to continuing moderation in tax burdens, any failure to reimpose control on current spending will result in cuts to the capital programme."

Mr Liam Kelleher, director-general of the federation, said yesterday that about 80 per cent of current spending was accounted for by public-sector pay.

It was, therefore, vital that the budget should not contain inflationary measures, such as further increases in the VAT rate.

The CIF would be joining other social partners in negotiating new pay rates early next year, and it was essential that inflation was kept under control in the meantime, he said. The federation says stamp duty, in addition to VAT, should also not be increased in the budget.

Stamp duty on second-hand homes, it says, inhibits residential mobility and serves no useful purpose other than to raise revenue.

In the non-residential market, stamp duty was a "powerful disincentive" to potential investment.

"Stamp duties are not, it must be stressed, taxes on property; they are rather taxes on transactions in property. They have quite different economic effects, and in our view these effects are undesirable."

On service charges, the submission says local authorities, faced with expanding cost bases and few fund-raising options, are relying more and more on increases in development levies.

In Dublin City and Fingal County Councils, for example, levies had recently increased to €10,500 and €21,000 per residential unit respectively.

These levies "are eventually passed on to the consumer, driving house prices higher".

If local authorities are to have sufficient funding, prices should be introduced for services to reflect the "true cost of their provision", the submission says.

"The latter include user charges for certain types of infrastructure like water, sewerage and waste charges."

On infrastructural spending, the federation says the momentum generated by major projects such as LUAS and the Dublin Port Tunnel should be maintained, and the expertise developed as a result used in further projects. It calls on the Government to maintain funding for capital projects at 5 per cent of GNP, and suggests public-private partnerships and investments by the National Pension Reserve Fund.