Ibec says plan has growth strategy

Employers' body Ibec welcomed the Government’s four-year fiscal adjustment plan by saying it recognised the importance of a growth strategy for the Irish economy.

The group said that while nobody in the country wanted to be in the current situation “it is vital that a pro-enterprise budget is now passed, so the country can move forward”.

Director general Danny McCoy said: “The focus must remain on improving competitiveness and creating jobs.

“It will be a challenge to achieve the growth targets, while at the same time dramatically reducing expenditure and raising tax revenue."

Ibec warned that certain measures in the plan had the potential to damage enterprise and employment including the reduction in the capital expenditure budget, the proposed increase in VAT and changes to the PRSI ceiling.

Small and medium sized business association Isme described the plan as a “mixed bag” saying it lacked 'fresh ideas' for a business stimulus package.

It said the decision to reduce social welfare and the minimum wage “while regrettable, is unavoidable” but described the cuts in private sector pension reliefs as a “mistake”.

“At the minimum we now have a medium term economic blueprint, which, warts and all, should assist in drawing a line in the sand and revive badly needed confidence,” the group added.

Small Firms Association director Avine McNally said “It is essential that the focus remains on restoring cost competitiveness to the small business sector…[as they] will be the “engines of recovery."

“However, without access to credit for viable small firms - growth will remain a challenge.”

She welcomed the announcement to extend the 15-day prompt payment rule from Government departments to the wider public sector as it will “assist greatly” with cashflow.

But she said some elements of the plan will cause concern including the proposed increases in VAT; changes to the PRSI ceiling and tax treatment of pensions.

Chambers Ireland said while there are many constructive measures outlined in the plan the Government has shied away from cutting significant costs out of the public sector pay and pensions bill.

Deputy chief executive Seán Murphy said: “In the absence of additional savings arising from the Croke Park Agreement the Government will have to return to cuts in this spending line item.”

Mr Murphy also welcomed the reduction in the minimum wage by calling it an “important move” that will support the economy’s ongoing reduction in the unit cost of labour.

He said although the rise 2 per cent rise in VAT by 2014 is “disappointing” the fact Britain is raising its rate next year should reduce the “pull-factors for Irish consumers going north of the border.”

Mr Murphy also welcomed the retention of the corporation tax at 12.5 per cent.

This was echoed by the American Chamber of Commerce in Ireland which welcomed clarification on the rate.

Its chief executive Joanne Richardson said the removal of uncertainty around the rate and clarification that it is protected in an EU context would reassure corporations planning to invest in Ireland.

“It is estimated that global [foreign direct investment] will grow by 30 per cent in 2012 and with the existing strong base of multinational companies here, this offers Ireland significant new investment opportunities,” Ms Richardson said.

She said the low tax rate, which has been criticised by international competitors during discussions of an EU/IMF loan for the State, would be the driver for export and employment growth.

The Construction Industry Federation said the public capital investment programme will bear a disproportionate burden of the total fiscal adjustment under the plan.

CIF director general Tom Parlon said the cost will have “significant implications” for employment in the industry and cause over 50,000 job losses.

The Irish Hotels Federation said the reduction of the minimum wage will be of “major help” to the sector.

President Paul Gallagher called on the Minister for Enterprise, Trade & Innovation to abolish the “antiquated bureaucratic” statutory wage setting system which adds further to labour costs in hotels affected.

“Tourism and the hospitality industry will have a major contribution to make to our national recovery but it can only achieve its full potential in a business friendly competitive economic environment,” Mr Gallagher concluded.

The Restaurant Association of Ireland welcomed the reduction in the minimum wage and the review of the employment regulation orders.

Joe Carr of accounting firm Mazars said while the document is probably the “most strategic plan” on the funding of the public sector ever seen, it fails to set out a roadmap for stimulating the economy and does not address the “elephant in the room” that is the banking crisis.

“All three issues need to be addressed if we are to get a clear strategy and vision for Ireland's economic recovery," he added.

Irish Life said while it understands the need for the pensions industry to play its part in tackling the financial situation they will be seeking to engage with the Government on alternative means of raising the proposed tax changes.

Chief executive of Irish Life Gerry Hassett said increasing private pension provision is itself a priority and the group will seek alternative means of raising the proposed €700 million so as not to discourage private pension provision.