Budget 2015 represents the turning point in the level of tolerance for further austerity measures

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Budget 2015 represents the turning point in the level of tolerance for further austerity measures

3 in 5 directors argue that €500 million provision under Strategic Banking Corporation of Ireland will inadequately address SME access to credit issues

Launching its pre-budget submission, the Institute of Directors in Ireland (IoD) said that Budget 2015 marks a turning point in terms of the level of tolerance for austerity among directors in Ireland.

Research conducted with members of the Institute of Directors in Ireland in relation to Budget 2015,* shows that while a majority (61%) of directors describe the austerity budgets implemented in recent years as a necessary response to address Ireland’s economic difficulties, opinions diverge with regard to the level of austerity still needed, with 48% of the view that an adjustment of €2bn should be maintained in Budget 2015, while 44% of those surveyed are calling for a smaller adjustment.

The IoD supports the Government’s overall approach to determining the required adjustment on the basis of achieving a deficit of 3% of GDP by 2015, but is calling on the Government to focus on Ireland’s longer-term economic future in Budget 2015 and to use it as an opportunity to establish a vision of how Ireland wants to position itself for the future.


There is overwhelming support among directors for a reduction in income tax in Budget 2015, with 77% of those surveyed calling for income tax to be reduced. Of those, 4 in 5 (81%) cite an increase in the tax band ceiling of €32,800 as the top income tax priority in Budget 2015. Widening the €32,800 tax band ceiling would provide a much needed boost in public confidence and Ireland’s domestic economy would directly benefit through the increased availability of disposable income.

Worryingly, the majority (79%) of directors surveyed consider Ireland’s income tax rates and levies on pay as a barrier to attracting and retaining talent and similarly, 61% of directors surveyed rate current income tax and levies as the top threat to Ireland’s competitiveness as a place to do business.

Business sentiment and Government stability

It is encouraging to see that there has been a marked increase in the level of optimism among those surveyed in relation to their business. Over two-thirds (67%) of directors are optimistic or very optimistic for the future of their business, compared to 59% in 2013. A majority (67%) of directors also report an increased level of confidence in the Irish economy over the past twelve months.

Worryingly, 90% of directors surveyed cite the stability of the Government as one of the biggest issues facing Ireland and three-quarters (75%) of directors are of the view that the results of the recent local and European elections represent a negative shift in Ireland’s political landscape.

Supporting SMEs

Lending to SMEs remains a particular concern and while the proposal to create the Strategic Banking Corporation of Ireland is to be welcomed, 3 in 5 (59%) directors argue that the initial provision of €500 million is insufficient to adequately address the ongoing issue of access to credit for SMEs.

In addition, half (53%) of those surveyed rate the Government’s support in terms of improving access to credit for SMEs as poor to very poor. SMEs are the lifeblood of the Irish economy, providing almost 70% of jobs in Ireland** and it is vital that they are fully supported and afforded every opportunity to grow and to create further employment.

Safeguarding the cornerstones of Irish society

The IoD is calling on the Government to ensure that every effort is made in Budget 2015 to safeguard the cornerstones of Irish society - education, employment, health and housing. Two-thirds (66%) of directors surveyed argue that the Department of Education and Skills and the Department of Jobs, Enterprise and Innovation, should face no further budget cuts in Budget 2015.

Ireland prides itself on the quality of its highly skilled and educated workforce, which is vital for attracting foreign direct investment and must be safeguarded. Greater coherence is needed between education and enterprise and our education system must be flexible and adaptable to change as the demand for skills changes, particularly in growth sectors such as technology.

The changing demand for skills is also an area that needs to be examined in the case of the long-term unemployed. While it is a significant achievement for Ireland to record the fastest employment growth rate in the OECD, with 60,000 jobs created in the past year,*** further focus is needed on the education and training of the long-term unemployed to ensure that they are afforded up skilling and education opportunities to compete in the labour market, particularly in growth sectors.

Issues in relation to the health system continue to be of concern and the Department of Health is rated as the poorest performing Government department by 82% of directors surveyed.

The private health insurance levy, which has increased by 149% since its introduction, combined with a reduction in tax relief on premiums, is leading to declining numbers subscribing to private health insurance, putting pressure on an already struggling health system and these issues must be addressed through long-term, viable solutions.

Problems in the housing market and housing security were identified by over 4 in 5 (83%) directors surveyed as one of the biggest challenges facing Ireland. The IoD is urging the Government to ensure that measures to address housing issues are carefully considered. The proposal to boost the construction sector through the introduction of a mortgage guarantee scheme for first time buyers is of significant concern, with 64% of directors not in favour of it, arguing that such a strategy would fuel demand where there is a lack of supply and create future affordability issues for first time buyers.

Continuing rising rents in key urban areas is also creating affordability concerns and putting vulnerable families at risk. As the biggest tenant in the private rental sector, the Government must address Ireland’s housing needs through affordable and social housing schemes.

Commenting on Budget 2015, Maura Quinn, Chief Executive of the Institute of Directors in Ireland, said: “We have experienced a period of tremendous economic difficulty which has seriously impacted some of the most vulnerable sectors in our society. While we recognise that the difficult budgets in recent years have been necessary in the context of economic recovery, we are now at a turning point in terms of the level of tolerance for further austerity measures.

Ireland is a uniquely placed, flexible and open economy that can again flourish under the right conditions – conditions that support investment, drive the availability of talent, encourage entrepreneurship and leverage the value of the SME sector."

As we look to Budget 2015, with increasing pressure on the coalition, impending cabinet reshuffles and a leadership race in the Labour party, the Government must remain steadily focused on the core task in hand – rebuilding, renewing and reinvigorating the Irish economy.”

Article Published: 19/06/2014