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News : Irish Economy Last Updated: Feb 9, 2011 - 7:31 AM


Irish General Election 2011: IBEC Jobs Manifesto calls for public sector and welfare reform; Thin gruel on inspiring ideas for jobs
By Michael Hennigan, Founder and Editor of Finfacts
Feb 8, 2011 - 5:39 AM

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Irish General Election 2011: IBEC, the principal Irish business lobby group on Monday launched its Jobs Manifesto for Election 2011 (pdf) and called for public sector and welfare reform while providing thin gruel on inspiring ideas for jobs.

IBEC director general Danny McCoy  said: "A new government must reform how the country and the economy is governed. We must learn from our mistakes and ensure that they are not repeated. The economic crisis demands an overhaul of the welfare system and labour market rules, major reform of the public sector, and a definitive solution to the banking crisis. Only then can we hope to restore our international reputation and move forward with confidence."

It may seem strange that given the ostensibly pious aspirations for reform of both the "the country and the economy," that the former Economic and Social Research Institute (ESRI) economist would avoid the issues of reform of the protected private sector which imposes more cost burdens on business than for example commercial rates.

The health area for example straddles both the public and private sectors in regard to the need for reform.  

Health insurance premiums have been rising at significant real rates for years as have GP charges - - you pay your doctor twice; directly for a consultation and also for the payments made to him or her from tax funds; follow-up consultations are usually charged at full rate and it's likely that many drugs are included in the medical prescription system to provide income support for the various intermediaries in the process.

The cost of Irish State financed drugs schemes doubled from 2002 to over €1.6bn in 2008. Fees and other income earned by pharmacists doubled accordingly. It cost the taxpayer an exorbitant €640m to get €1bn of drugs from factory gate to patients in the community in 2008.

A 40% drop in the price of up to 300 commonly prescribed drugs coming off-patent, came into effect in Ireland on February 01, 2010 and was expected to save the State up to €94m in a full year.

However, some generic drugs are now 50% more expensive than their branded equivalents - - a situation "unique in Europe," the Clinical Director of the National Centre for Pharmacoeconomics told the Irish Medical Times.

Describing this as "an extraordinary situation," Dr Michael Barry stated that while GPs were prescribing generic medicines, the patient would pay a premium for the generic product.

“Doctors are encouraged to prescribe generics on the basis that it enhances cost-effectiveness, but this is no longer the case. It is ridiculous: there is no other country in Europe where the original proprietary drugs are cheaper than the generic equivalents,” Dr Barry told Irish Medical Times.

Minister for Health Mary Harney told the Oireachtas Joint Committee on Health on February 09, 2009 that as a result of the new agreement reached with pharmaceutical producers, some generic products would now be more expensive than the products that come off patent.

Generic drugs had traditionally been priced, on average, between 5-10% below their branded equivalents (which in itself was ridiculous). However, the 40% price cut on off-patent medicines has meant many generics are now considerably more expensive than the brand products.

The Irish Pharmaceutical Healthcare Association (IPHA), which represents the big manufacturers agreed to cut off-patent drugs prices after Minister Harney agreed that the State wouldn't interfere with the cost of their proprietary or branded drugs for another 18 months. The new deal takes the IPHA up to March 2012.

A 2006 Irish agreement provides that the price to the wholesaler of any medication will not exceed the average wholesale prices in Belgium, Denmark, France, Germany, Netherlands, Spain, Finland, Austria and the UK.

The Minister said she was appealing to the manufacturers to reduce their prices.

In 2009, the Government introduced cuts of up to €133m in payments to pharmacists over a 12-month period by reducing from 50% to 20% the retail mark-up payable under the community drugs schemes.

Drugs companies claim that high prices are necessary to promote innovation. However, research published in the American Journal of Public Health disputes it.

And so the litany could go on...

Last week, we reported on the Irish legal fees' bonanza, supported by up to €500m from the State annually, when the Dublin Chamber of Commerce called for 'root and branch' public sector reform but being apparently myopic to issues under their noses.

No wonder it's confusing as to who are the socialists these days and we haven't touched on the farming sector and their bonanzas from land rezoning  -- which is another stealth tax!

The reason why Danny McCoy is selective in his calls for reform can be explained by IBEC's silence when the banks were heading to hell on a handcart.

 IBEC includes the Small Firms' Association and the staff of such a vested interest cannot put the common interest above the coalition of interests it speaks for.

  • IBEC's Jobs Manifesto for Election 2011 proposes that in the first 100 days the incoming government should:
  • Empower a senior minister to drive the jobs agenda across government;
  • Get credit flowing to business by introducing a loan guarantee scheme for SMEs;
  • Reform the welfare system to incentivise work;
  • Review the system of regulated wage agreements and maintain the national minimum wage at €7.65;
  • Introduce a property tax to fund local authority services thus enabling a reduction in commercial rates; amend legislation relating to unsustainable commercial rents;
  • Enhance Ireland’s attractiveness as a location for inward investment and reiterate a commitment to the corporate tax rate; and
  • Commence an audit of all planned infrastructure projects and prioritising those that may be funded through PPPs or other non-Exchequer sources.

We have been long-term advocates of political and economic reforms.

This is a Finfacts report in 2007 of surprising unemployment levels in 2006 -- the craziest year of the bubble:

Irish Census 2006 - Principal Economic Status and Industries: Ballina, County Mayo had the highest unemployment rate among large Irish towns with 15.8% unemployed; Tralee: 14.2% and Dundalk: 13.9%

Economic Forecasts

On the economy, IBEC projects GDP growth of 1.8% this year,  but suggest GNP recovery will be more muted. It said Irish firms are currently benefiting from a marked improvement in export conditions as a result of further recovery in the global economy and a substantial improvement in Irish competitiveness. With regard to employment, IBEC said the labour market will remain very weak this year with new employment struggling to offset the impact of further job losses.

IBEC chief economist Fergal O'Brien said: "After the exceptional resurgence in global trade last year, Irish exports will be the main driver of economic recovery this year. Export growth will be close to 6% in 2011 and 4.5% in 2012. Importantly, Irish firms will continue to increase their share in global markets.

"The ongoing decline in construction activity means that investment will continue to drag a little on growth, but nothing like at the level of what we experienced in recent years. Encouragingly, firms look set to increase their investment in machinery and equipment, as many postponed investments in recent years and some are now facing capacity constraints.

"The cost and availability of credit remains the single biggest challenge facing the employment-intensive SME sector. A new government should prioritise this issue and also take further steps to strengthen Ireland's competitiveness position."

Economic Outlook (pdf)

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