There is “limited” space for the Government to deliver a “giveaway budget” this year, employer’s Irish Business and Employers Confederation (Ibec) lobby group has said, due to existing spending commitments and its self-imposed spending rules.
In its pre-budget submission, published on Wednesday, the lobbying group also warned that the Republic is facing stiffer competition for foreign direct investment due to shifting political priorities in Europe and abroad.
With the focus in the US and the UK increasingly moving towards the protection of domestic industries, “trade uncertainty” is intensifying amid “aggressive competition for investment by big states”, Ibec said.
“Throughout most of the last 40 years, the use of industrial policy, where governments overtly backed specific industries, has played second fiddle to open markets,” the report’s authors said. “That is changing.”
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Against this backdrop, Ibec has called on the Coalition to prioritise competitiveness in Budget 2025. Among other things, it recommends the introduction PRSI rebate for employers “based on the number of lower-earning workers on a company’s payroll, relative to the increases in weekly labour costs” over the next three years.
Ibec has also called for the re-establishment of a “better regulation unit” with the Department of the Taoiseach to assess and help reduce administrative burdens placed on businesses by new regulations.
[ Central Bank warns Government against pre-election budget giveawayOpens in new window ]
Speaking to reporters on Wednesday, Ibec chief economist Gerard Brady said there was a “lack of coherence” and co-ordination between Government departments in the implementation of new rules affecting companies.
Overall, Mr Brady said the fiscal space available to the Coalition in the forthcoming budget is “very tight”. He said about half of the resources available have already been committed in one form or another, leaving Minister for Finance Jack Chambers and Minister for Public Expenditure Paschal Donohoe with an additional €4.5 billion to spend next year if it sticks to its own spending rules.
“The Government has a very tight budget to be able to deliver even a kind of a standstill, versus maybe the narrative out there that there’s tons of money available to them,” Mr Brady said.
With more women in the workforce than ever and unemployment rates still at historic lows, the economy is “running out of additional sources of labour”, said Hazel Ahern-Flynn, senior economist at Ibec.
The Government should look to remove barriers to work by investing in childcare, she said. “What we are looking for is an additional €220 million to go into the care sectors, particularly focused in childcare. That would both increase the individual subsidy towards childcare for each child in the system and also the extension of that to the under-twos as well.”
Investment in recent budgets and various reforms implemented by the Government have “injected some capacity” into the childcare sector, Ms Ahern-Flynn said. “But on the other hand, we’re seeing the pressures increase very, very rapidly.”
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