‘Investment is needed before any wage hikes’

Employers body Ibec has said increased wages for low-paid workers — as proposed by Labour — will have to wait until more investment is first pumped into the economy.

Despite unprecedented growth figures for the economy this week, Ibec also ruled out a return to social partnership with workers and trade unions.

Speaking after a private meeting with Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin, officials outlined their demands for next month’s budget.

Newly appointed president Larry Murrin said Ireland was not out of the crisis yet but rather at the beginning of the end.

Issues like infrastructure in housing and transport need to be addressed in the budget to help boost employment, he said.

The supply of credit for small and medium enterprises is also still an issue.

His comments come after figures showed the economy is growing at its fastest rate since 2007. The Government believes the growth rate for this year could reach 4.5%. Earlier this year, it had predicted just 2%.

Ibec chief executive Danny McCoy yesterday went further: “We see the potential growth rate in the Irish economy as 3% to 4% volume growth per year for the next 20 years.”

The group warned there is still a need to see several quarters or periods of sustained growth.

Wage expectations and calls for low pay to be increased are better addressed by tweaking income tax arrangements, Ibec said.

No type of “widespread” social partnership is expected either, officials said.

It also warned that the OECD had signalled that it was “inevitable” the double-Irish tax regime, which helps companies pay lower taxes, would be closed down.

It was better that Ireland preempted this and adapted new rules for taxes for companies ahead of any enforcement, Ibec said.

Ibec also wants a change in the level at which workers begin paying 41% in tax. It said there is also space to reduce the 52% rate.

But think-tank TASC said such a move would not help middle-income earners.

“Cuts to the higher rate of income tax will only help the top one in six earners” said research director Nat O’Connor.

“The repeated claims by senior members of government that the 52% marginal tax rate needs to be cut to help middle- and low-income families is misleading.

“TASC’s research, backed-up up by official government figures, shows that only 17% of those paying income tax are paying at the higher rate.

“A cut to the 41% tax rate really benefits those on the highest incomes.”

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