Freeze on benchmarking payouts urged

EMPLOYERS' group IBEC has called for a freeze on benchmarking payments to the public sector to ease pressure on finances as the economy stagnates.

It has also demanded a radical review of Government spending and for public sector jobs to be hived off to ensure public spending is kept under control.

Up to 10,000 jobs should go in an effort to put a brake on spending, it said.

IBEC has also warned against any increase in taxes in the next budget.

Such a move would make a bad situation worse, warned David Croughan, chief economist, and editor of IBEC's Quarterly Economic Review.

The review, which has just been published, says slower-than-expected global economic recovery is making life difficult for the domestic economy.

The result was seen last year in virtually zero GNP growth with only a modest pick-up forecast this year to a GNP growth of 1.8%, rising to 2.8% in 2004.

IBEC forecasts are slightly lower than the ESRI's, but its main concern is about how we manage the slowdown. Mr Croughan said the figures from the CSO confirmed the sharp slowdown in the economy last year.

To cope with this new near-stagnant economic situation, the Government has to make sharp adjustments to the new reality, he said.

In the present environment the Government can borrow more, increase taxation or cut spending.

"In truth, the Government should borrow more to finance essential infrastructure projects at current low interest rates as they had a pay-back, but current spending was a different matter. The only viable option was to curtail current spending to meet the new economic conditions and to adjust to the overshoot of the last two years."

All current spending has to be put under the microscope, with a thorough examination across all spending heads.