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News : Irish Economy Last Updated: Dec 7, 2010 - 6:47:39 AM

Ireland Budget 2011: IBEC says Budget should include labour market reforms; Silent on reform of sheltered Irish private sector
By Michael Hennigan, Founder and Editor of Finfacts
Dec 6, 2010 - 7:53:38 AM

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Evie Hone Window, Government Buildings, Dublin, Ireland.

Ireland Budget 2011: IBEC, the Irish business representative group today set out the criteria against which business will judge the Budget. The group said the budget must put the public finances onto a more sustainable footing, reform labour market rules to help create new jobs and ensure that all measures support enterprise in delivering growth and jobs for the economy. The group strangely avoids calling for reform of the sheltered Irish private sector where among the big professional firms and the legal sector, fees remain at bubble-time levels.

Budget 2011 will be presented to Dáil Éireann on Tuesday, Dec 07 at 3:45pm.

IBEC also called for more investment in the so-called 'smart economy' project.

The Budget is not a typical mechanism for an announcement of labour market reforms. As for more investment in university research, at a time of a public finance crisis, without providing some facts to support its case, it is a foolish proposal. IBEC is simply being a cheerleader for a misguided public policy.

While the group promotes labour market reforms it avoids the issue of opening up the sheltered private sector to competition.

Last week the State agency, the National Competitiveness Council said there is not a strong appetite in Ireland to tackle high costs in sheltered sectors. It recommended that the State should use its purchasing power to exert downward pressure on professional fees - -  again, this was a proposal from a State agency not from IBEC.

There is a strange situation in conservative Ireland where the unions through ICTU, the trade union congress, and IBEC are both resistant to change, leaving the prospect of reform in the hands of the IMF. 

The IBEC administrators are afraid of angering members such as the pharmaceutical companies, who could be impacted by further cuts in the State's drugs' bill and payments to pharmacists; during the boom, they were in a similar position in relation to the banks.

IBEC director general Danny McCoy said:“We know the scale of the budgetary adjustment required, but how it is achieved is just as important. We have choices. The focus must be on cutting expenditure rather than raising taxes and ensuring that, when revenue is raised, it is done in a way that is least damaging to growth. Ireland will not recover without growth and only enterprise has the capacity to deliver this."

The Budget must:

  • Give confidence to consumers that additional fiscal adjustments will not be required over those already flagged. Consumers remain too afraid to resume normal spending and saving patterns and the Budget must address this.
  • Ensure that the cost of doing business in Ireland is reduced. Business is concerned about energy costs; Government charges; and labour costs.
  • Involve structural reform of the labour market so Ireland can regain lost competitiveness. The outdated system of employment regulation orders (EROs) and registered employment agreements (REAs) is at odds with the economic needs of the country and should be abolished.
  • Ensure that cutbacks in agency and departmental budgets do not see higher costs passed onto business.
  • Ensure that the introduction of a new universal social contribution does not give rise to a higher marginal tax rate. Businesses are finding it increasingly difficult to attract and retain internationally mobile skilled employees, and the recent damage to Ireland's international reputation has exacerbated this situation.
  • Continue to deliver the building blocks for the smart economy through increased support for R&D and investment in appropriate education and up-skilling initiatives.

Finfacts Budget 2011 Page

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