THE GOVERNMENT should reduce jobless benefits the longer a person is out of work and make receipt of benefits dependent on the acceptance of training offers, among other measures, a report has recommended.
The new report on Ireland by the Organisation for Economic Co-operation and Development (OECD) also recommends the ending of subsidies for apprentices in the early phases of the construction industry and systematic evaluation of teachers’ performance.
Wading into the debate on the size of the fiscal adjustment in the forthcoming budget, the OECD says the Government should reduce the deficit faster than required under the terms of the EU-IMF bailout package “if economic growth permits”.
On the composition of the budget adjustments, it says the emphasis should be on spending cuts over tax increases.
The report is broadly supportive of the Croke Park agreement, saying it “has contributed to social cohesion by providing a collectively agreed basis for reform in the [public] sector”.
It describes the banking recapitalisation of last March as a “turning point” in addressing the domestic financial crisis but warns that a recent proposal by Nama to stimulate the residential property market risks exposing the taxpayer to losses. Any such programme by Nama should be “transparent and of a small size”.
The 2011/12 economic forecasts underpinning the analysis differ considerably from those of other international organisations and the main domestic public forecasters.
The OECD expects gross domestic product to grow by 1.2 per cent this year. This is a stronger rate of growth than most forecasters predict. But, by contrast to other forecasters, it expects a deceleration of GDP growth next year, to 1 per cent.
Despite this slowdown, the OECD forecasts that the Government’s budget deficit will meet the 8.6 per cent of GDP target set out in the EU-IMF bailout.
The report makes implicit criticisms of some recent Government decisions, including the restructuring of the ESB and the failure to introduce civil fines for breaches of competition law.
In a detailed 136-page report on the Irish economy and the policy challenges facing the Government, the Paris-based think tank makes a long list of recommendations across a wide range of areas.
Its three main chapters cover budgetary, banking and employment issues respectively. The longest of the three covers jobs issues, taking in welfare reform, education and training, and support measures for small- and medium-sized businesses.
The report broadly welcomes the Government’s jobs initiative, launched in May but says more needs to be done. It warns that social cohesion could be threatened if high levels of long-term unemployment persist and notes that emigration among Irish nationals has tripled.
It advocates a three-pronged approach to the jobs crisis, focusing on welfare reform, better training and job search assistance, and a sustained reduction in unit labour costs.
The report lauds Ireland’s low rate of corporation tax but says the base should be widened adding that “strict implementation of OECD guidelines on transfer pricing [are necessary] to prevent artificial profit shifting”, a reference to the contentious tax avoidance practice used by some multinationals operating in Ireland.
More generally it finds many strengths in the Irish economy, including “flexible product and labour markets, high levels of human capital, low and stable corporate taxes, favourable geographical and cultural factors, and low regulatory burdens on business”.
