Increases to jobless benefits leads to ‘optional unemployment’, says ISME

Increases in employment benefits in previous budgets have led to a rise in “optional unemployment”, according to ISME, which has also accused the Government of “abject policy failure” in relation to the flight of landlords from the rental sector.

ISME, which represents small and medium-sized enterprises, published its submission to Minster for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath for the autumn’s budget on Tuesday.

While it admits the issue of “optional unemployment” is a “difficult and contentious issue”, it adds: “We believe it exists, especially where there is a capacity to work in the grey economy.”

The submission suggests a 22 per cent increase in unemployment benefit in Budget 2002 was followed by a one-year rise of 13 per cent in unemployment. “We must conclude that at least some element of this increase was unforced by economic circumstance,” it adds.

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On the issue of rents, ISME says the flight of landlords from the rental market “is no longer in question, it is a fact”. It says a 96 per cent decline in rental stock over the past decade “cannot be considered as anything other than abject policy failure”.

“We continue to see the social demonisation of landlords, and every legislative proposal originating from the Oireachtas appears calculated to eliminate the dwindling supply of private rental accommodation,” it says.

“The issue has become so critical for many businesses that they have resorted to renting or purchasing houses and apartments for workers, and are letting them either rent-free or at sub-market rates.

“Buying housing is a really bad, unproductive use of a business’s working capital, but banks are happy to lend for it because it’s buy-to-let, and they have good security over the asset if the loan goes bad.”

ISME is also critical of the proliferation of data centres and the effect this has on emissions targets as well as energy consumption.

“We should consider if all of that future power demand is necessary or appropriate,” it says. “Should Ireland invest in substantial energy generating capacity simply to permit the long-term storage of cat videos and TikToks?

“Would it not be more appropriate, as the European headquarters for so many digital media companies, to encourage the adoption of data retention policies which discourage the amassing of digital media?”

On tax reform, ISME says the “early progressivity” of our marginal tax rates above the average industrial wage “discourage personal advancement, upskilling and promotion”.

It adds: “While ISME understands the fiscal and political difficulties with raising the marginal rate thresholds, Irish workers are taxed at marginal rates at far too low a level of income, even by comparison with Scandinavian exemplars.”

Among the other main measures, the group calls for a “solidarity USC levy” of 3 per cent on all PAYE workers earning over €100,000 annually. It suggests this would yield more than €300 million a annum for the exchequer.

It also calls for the lowering of capital gains tax to 25 per cent, which it says would yield an additional €500 million annually.

Meanwhile, given our significant rates of consumer inflation at the moment, it says the case for a permanent reduction of the “punitive” 23 per cent rate of VAT to 21 per cent “has never been stronger”.

“If it has the impact of stimulating consumer spending, the net impact on public finances will not be significant as the VAT take will increase overall if spending is increased,” it says.

The submission also brands any raising of the minimum wage as “a political cop-out from the more difficult issue of controlling the cost of living in Ireland”.