IBEC budget submission calls for growth strategy

Publishing its pre-budget submission, Reform and Renewal: a growth strategy for Ireland, IBEC calls for a radically new approach to economic policy.

Alongside the current plan for austerity, IBEC is calling for a clear strategy to grow the economy.  This is what will ultimately give confidence to the international markets and Irish consumers that we are on a credible, sustainable path to recovery.

Speaking at the launch IBEC director general Danny McCoy said: "A significant budgetary adjustment is still required, but this should not exceed the €3.6bn already targeted. We believe that there is no requirement for the Government to increase the €3.6bn austerity figure as this is enough to meet our international obligations and hit the 8.6% deficit reduction in 2012. While appropriate austerity is necessary, we also need a number of specific initiatives to drive the domestic economy. The focus should be on significantly reducing spending by €2.7bn, with €900mn on tax increases, implemented in a way that is least damaging to growth.

For its part and in consultation with its members, IBEC has proposed a number of innovative ideas to help restore confidence and encourage consumer spending including:

  • Reform of pension rules to allow people draw down up to 25% of the value of AVC's without penalty and at the standard rate of tax. Irish pension funds are currently worth €70bn.
  • A new social welfare smart card system to ensure that payments and benefits spending are promoted in the domestic economy.
  • Stamp duty and property tax incentives for first-time buyers to get transactions in the property market moving again. Every house sale generates €20,000 in ancillary services. A normalisation of transactions would generate approximately €600mn per annum for the domestic economy.
  • A pro-active and comprehensive communications strategy to give consumers the confidence to spend again.

"Tax and social welfare need a major overhaul. Benefits need to be targeted at those who need them most and the entire system re-designed to incentivise work. There should be no more income tax rises, taxes on business or VAT hikes. Global economic headwinds remain, but Ireland has come a long way. International markets recognise that major progress has been made, but this optimism is not yet reflected in the domestic economy. All budgetary measures must be judged on their impact on the domestic economy. Only then will more normal spending and saving patterns resume.

"While the export economy is performing very well, we need to ensure that we achieve balanced economic growth. This means improving Ireland's attractiveness for mobile investment, specifically in relation to the taxation treatment of intellectual property and mobile talent. It also requires a continued focus on enhancing the environment for indigenous business and addressing the funding difficulties facing the sector," concluded Mr McCoy.

Article Published: 30/09/2011