Mixed response from industry

ANY comments on the budget’s contribution to improving the business climate has to be set against the banking crisis.

In that sense, business has already been well supported by the Governments’ decision to underwrite the banks to prevent them from going under.

Much more may be required in capital investment before that saga is over, with some forecasters saying the Government will have to take investment stakes in the banks who may need to raise up to €14 billion to stay alive in the coming years.

The budget has made it clear that government is determined to make the stabilisation of the national finances a key priority in the years ahead. From a business or any other perspective anything less would have been unthinkable as the country and the economy faces its biggest crisis since the mid-1980s.

The major employer body IBEC said before the budget that ensuring the financial stability of the economy was the most important issue facing the finance minister in the run up to the budget.

In response IBEC was less enthused by the minister’s overall package than the construction sector, and listed many disappointments.

In his opening comments, Turlough O’Sullivan, director general of IBEC, said business recognised the need to take corrective measures to stabilise the public finances.

But he added that employers “would have preferred a greater emphasis on cutting current expenditure rather than on increasing taxation. We support the moves to stabilise our finances over a three-year period.

IBEC welcomed the significant capital investment programme and the improvement in the Research and Development tax credit scheme which had been the subject of criticism for quite some time from the employer body.

The commitment on education was also welcomed, as was the pledge to bring about greater energy efficient measures.

It condemned increased taxation on work, investment, savings and on consumption, and the lack of a more determined effort to reduce the public service pay bill.

It is often lost sight of that public sector pay and pensions account for about 50% of current spending.

And from a general business perspective, the introduction of benchmarking, which adds about €2bn annually to the public sector pay bill — for which there has been no tangible benefits in terms of better or more efficient services — is something which IBEC as well as the Government have been complicit.

Those heavy demands become more oppressive when times are tough, and that €2bn, if it was available to the state, could have an enormous impact on creating a more competitive business environment, which will be a key issue going forward as export markets become even more competitive.

At the other end of the business spectrum ISME, which represents indigenous Irish industry, was less than enthusiastic with the budget.

It did little to reward entrepreneurial activity or promote risk-taking at the individual small firm level.

And in one telling line Mark Fielding, chief executive ISME, concluded that both business and the public are now paying for “the mismanagement and profligacy of government”.