The Irish Business and Employers Confederation and the Construction Industry Federation have called on the Government, in separate pre-Budget submissions, to press ahead with the National Development Plan - regardless of the pressure on the exchequer .
IBEC has said that day-to-day Government spending should increase more slowly, allowing room to implement the National Development Plan.
The body, which will meet the Minister for Finance Mr McCreevy this morning, has called for the use of radical and large scale compulsory purchase orders to speed up projects delayed by objectors. It also recommends the fast tracking of key infrastructure projects.
The CIF will also meet the Minister for Finance today and will tell him that it is imperative that the economic downturn and any deterioration in public finances does not lead to a dilution of the infrastructure investment programme in the National Development Plan.
"Those projects are central to the future of the economy and they should not be long-fingered," according to Mr Liam Kelleher, the director general of the CIF.
"There is a real opportunity to catch up on the infrastructure backlog because the industry has capacity and will have capacity over the next year," he said.
Investment in infrastructure would help sustain the momentum of the construction industry, Mr Kelleher pointed out.
IBEC will also press the Minister to deliver cuts in employers' PRSI. The employers' group is demanding that the Minister reduce employers' PRSI from 12 per cent to 9 per cent in the upcoming Budget, a move that would cost £400 million (€508 million). This would compensate for the removal of the ceiling on the levy in last year's Budget, according to IBEC.
The organisation said yesterday that the decision to remove the employers' PRSI ceiling was inexplicable at the time it was taken and is now "completely at odds with the needs of an economy undergoing a dramatic slowdown in activity".
Mr Brian Geoghegan, IBEC's director of economic affairs, said he had never heard such anger and dismay from employers following last year's Budget.
He pointed out that the change was made without any consultation, and directly followed negotiations amending the Programme for Prosperity and Fairness (PPF), where employers faced the prospect of an additional and unanticipated 2 per cent increase in payroll costs in 2001. "This was a huge embarrassment for firms here and presented them with great difficulties when Ireland was being compared in terms of labour costs with other countries," he added.
According to IBEC's pre-Budget submission, which focuses almost exclusively on the issue, the effect of this shock on business should not be underestimated. "Given the adverse effect on those very businesses being targeted by Government policy and agencies, it is inconceivable that a compensating measure would not be introduced before the additional costs really bite in the next tax year."
According to Mr Geoghegan, the worst affected are likely to be high tech firms and food companies which employ large numbers. He added that the removal of the ceiling will increase payroll costs across the economy by 1.5 per cent. If the benefit to the Exchequer of removing the ceiling is taken into account, the cut to 9 per cent would cost £400 million.
However, if it is excluded it would cost £600 million, a sum that is likely to prove excessive for the Minister in what will be a tighter Budget than last year.
The CIF will also raise the issue of PRSI. "We felt the PRSI move was a wrong decision. It sent a negative signal," said Mr Kelleher.
Mr Kelleher will also tell the Minister that there is an urgent need for a positive policy response to restore both housebuilders' and housebuyers' confidence in the housing market. He has called for an immediate reversal of the policy decision which removed the deductibility of interest for tax purposes for landlords in the residential investment market.
As a result, investors have moved to overseas markets, he said. One estimate has placed overseas investment by Irish investors in the region of £900 million, which represents a substantial loss to the Irish Exchequer, Mr Kelleher said. Combined with the Government's 20 per cent social housing policy, this has led to a slowdown in the number of house starts, according to Mr Kelleher.
"It makes financial sense for a Minister for Finance and it makes good market sense in terms of balance in the market to make a real effort to increase the number of house starts by bringing the investor back into the market," he said.
While the CIF was in favour of lowering tax rates over the long term, Mr Kelleher said the organisation does recognise the budgetary arithmetic is tighter this year than in previous years, and that tax cuts may not be achievable.
