Private sector pension issues must be addressed

Launching its pre-budget submission, the Institute of Directors in Ireland (IoD) called on the Government to prioritise supporting the domestic economy, through creating the right conditions for job creation and putting in place measures to support business.

Boost domestic economy

Recent research conducted with members of the Institute of Directors in Ireland, found that two-thirds (65%) of directors surveyed believe the Government's communications strategy surrounding Budget 2012 is having a negative impact on consumer confidence. The Government needs to commit to a strategy as to how the deficit target of 8.6% of GDP will be achieved, as speculation regarding potential increases in the level of adjustment required to achieve this target, will only add to already weak consumer confidence.

When asked how the required adjustment might be achieved, 4 in 5 (81%) directors called for cuts in spending rather than increases in taxes. Further taxes and levies on pay will force many of Ireland's most qualified and experienced workforce into seeking work abroad. Ireland's highly skilled workforce is a key attractor for foreign direct investment and should not be jeopardised by short term gains associated with introducing additional taxes and levies on pay.

It is also imperative that the Government acts strategically with regard to any changes in the VAT rate. Three in 5 (60%) directors surveyed believe that the potential gains achieved through planned increases in the standard rate will be offset by potential losses in revenue incurred through cross-border purchasing, given the significantly lower rate of VAT in Northern Ireland.

Support business

70% of directors surveyed consider access to funding as the primary issue affecting SMEs. The Institute of Directors in Ireland suggests that the creation of a dedicated business bank should be considered, similar to the former State-owned ICC bank, with the primary function of supporting SMEs through providing working capital, credit management solutions and assistance with business planning.

In addition, over 3 in 4 (79%) directors surveyed would like to see an SME Bond Scheme set up, whereby a pool of money could be ring-fenced and made available to SMEs through a Government backed savings bond.

Almost 3 in 4 (72%) directors surveyed believe that the Government does not have enough support measures in place to assist small businesses to move beyond the start-up phase in order to scale up and develop. A further 70% consider the current tendering process for awarding public procurement contracts as favouring large international companies over indigenous SMEs.

The Institute of Directors in Ireland is calling for the introduction of a transparent ratings system of companies that have been granted public procurement contracts, in order to identify those offering value for money, quality and efficiency and those which are performing poorly.

Job creation

The Government must safeguard the substantial investment placed in third level education by providing opportunities for graduates to remain in Ireland. Two-thirds (66%) of directors believe that not enough is being done to support graduates who wish to stay and work in Ireland.

Four in 5 (83%) directors surveyed believe that current social welfare structures are creating a barrier to employment. The Government should consider subsidising the salaries, for an agreed period, of people recruited directly from the live register into new roles within the private sector. This measure, which over 4 in 5 (80%) directors surveyed indicate they would support, would reduce unemployment, create jobs and support businesses that may not otherwise have the financial resources to expand their workforce.

Private pension levy

No further taxes or levies should be incurred on private sector pensions. Any further measures to draw from pensions will prove counter intuitive as disincentives to save will contribute to long term problems of shortfalls in pension funds that the Government may not be able to meet in the future. The current uncertainty of the legislative environment surrounding pensions is contributing to significant unrest in the industry.

The Institute of Directors in Ireland is calling on the Government to clearly communicate exactly how the €457 million in revenue gained from the private pension levy is being invested in the jobs initiative from a cost / benefit perspective.

The Government must also examine the true extent of the affect that the private pension levy is having on pension providers. There needs to be certainty that measures to fund a jobs initiative is not in itself contributing to job losses.

Balanced regulation

There is a general acceptance that increased regulation is an inevitable consequence of recent regulatory failures in the financial services sector. However, Government must ensure that regulation within the financial services sector does not go beyond that which is appropriate and necessary; as there is a danger that such a perception will impact on competitiveness and our ability to attract business.

The aim of regulation should be on increasing the level of transparency of board operations and we must be careful not to create a situation where the focus becomes solely on conformance rather than performance. The IoD recommends that a structured process be put in place to allow for regular review of newly introduced regulation to ensure that any "unintended consequences" of such regulation are identified and addressed.

Commenting on its pre-budget submission, Maura Quinn, Chief Executive, Institute of Directors in Ireland, said: "Budget 2012 will be one of the most crucial that Ireland has ever had. It is therefore essential that the necessary steps are taken to stimulate the domestic economy through creating an environment that supports viable businesses and creates jobs.

"The Government must avoid the propensity to seek short term gains which may result in losses to the economy in the longer term. A commitment to tackling the country's problems head on, through appropriate and balanced measures, will be vital to rebuilding consumer confidence and getting the economy back on track."

Article Published: 01/11/2011