Infrastructure deficit is leading to lost opportunities, Ibec warns
Ibec has warned that Ireland is currently losing out on business opportunities because of constraints in capacity in the economy, including around housing.
The employers’ organisation claims the Government must focus on creating greater economic capacity in October’s budget, through both expanding infrastructure and boosting social investment.
Launching Ibec’s pre-budget submission, Executive Director of Lobbying and Influence Fergal O’Brien said the mood of businesses here is generally very positive with most in expansion or with expansion plans.
But he said the number one issue facing firms is the question of whether there is capacity in the economy to deliver on those plans, as frustration grows around the speed of delivery of the National Development Plan.
“We have no doubt that Ireland is losing out on opportunities at the moment because of our capacity constraints,” he stated.
In particular he pointed to housing as a big concern among employers everywhere.
“That is in every region and every town in the country and it is just a real practical everyday headache for employers in trying to resource positions, in trying to attract but crucially retain staff as well,” he said.
“We see so many of our members, they actually manage to attract but they can’t do the retention piece because of the housing constraint.”
As a result, Ibec wants budget measures to ensure continuous investment in infrastructure regardless of economic conditions, through the establishment of a National Infrastructure Fund.
This would be funded from a substantial portion of the budget surpluses over the coming years.
Specifically, the employers body wants an additional €30 billion to be invested in infrastructure between now and 2030.
The organisation does not think surplus corporation tax receipts should be used to meet the future pension costs of Ireland’s ageing population, through a sovereign wealth fund.
“That’s going to require higher taxes and there’s going to need to be hard decisions that will need to be made in the short-term, not just in the long-term,” Mr O’Brien said, adding that businesses accept that reality.
Ibec also thinks there are other practical things the Government could do to ease the housing crisis, including reducing taxes on new houses, delivering on off-site construction and reforming the planning system.
It therefore recommends that €125m should be allocated to boost capacity in public regulatory and delivery services responsible for improving infrastructure, like An Bord Pleanála.
Ibec is also concerned about the erosion of cost competitiveness as the economy reaches the top of the cycle, capacity becomes constrained and inflation remains high.
“Because we will be faced with that in the downturn and very quickly we could go from a position of full-employment to rising unemployment again, and that would be a significant risk,” Mr O’Brien said.
It says a range of Government policies, such as the introduction of pension auto-enrolment and a living wage, will push up operating and employment costs.
The body is therefore seeking measures to counteract this pressure, such as an offset mechanism to balance the impact of increasing regulated employment costs, the indexation of tax rates and bands and preservation of the 9% VAT rate for the experience economy.
It also warns that the budget must set out a plan to ensure the introduction of a living wage does not interact with the tax and welfare system in such a way as to impact on people’s incentive to work.
On innovation and productivity, Ibec is also calling for measures to future-proof the talent pipeline in key digital and climate action areas through the use of the €1.5 billion surplus of the National Training Fund.
“We need to put that to work in the economy for re-skilling, up-skilling having a much stronger focus on life-long learning,” Mr O’Brien said.
It says there should be a €710m investment in research, innovation and digital capacity, as well as €307m for university funding.
A further €225m should be deployed to assist the growth of Irish exporting businesses, Ibec says, including changes to the entrepreneur relief.
It also recommends that €650m be used to advance net zero carbon goals and that €500m from the National Training Fund be put towards measures that would promote workforce development over the coming years, to boost participation as the economy hits full-employment.
Mr O’Brien said businesses are also anxious to maintain social cohesion so they can demonstrate the rationale for future investment.
Ibec is therefore recommending €200m be allocated to expand childcare accessibility, including increased subsidies, and assistance for carers, workers with disabilities, and the introduction of an Access Employment Programme.
It is also seeking €700m to enhance housing delivery of social and affordable homes.