Ibec calls for budget boost for infrastructure

Michael Noonan is being urged to spend big on transport, schools and telecoms to help close the gap between the roaring Dublin economy and less vibrant regions.

The Irish Business and Employers’ Confederation (Ibec) says that the economy now needs an annual €2.5bn to be spent on infrastructure if growth is to be sustained and prosperity is to be secured. The business group says that the long years of cutbacks on capital spending have taken their toll.

In a pre-budget submission, Ibec says capital spending plans are not enough to meet the needs of an economy now growing.

The Government will need to invest €1bn more in each of the years to 2020 in transport, schools, healthcare, homes, including social housing and in telecommunication programmes such as broadband to help close a “desperate” shortfall in capital spending. The private sector should be encouraged to deliver a large slice of the investment.

Ibec says the national roads programme linking regional cities needs to be finished, and calls for “an immediate start” to the Cork to Limerick motorway. Ibec, however, says that the EU’s strict fiscal spending rules currently constrain the Government from investing the amounts required.

That means the Government will have to take the fight to Brussels to allow the investment “strait-jacket” to be loosened, it says.

“We are very concerned that we will hit pinch points if we do not invest now. Europe’s fastest growing economy needs more investment,” says Ibec.

“If they stick to the fiscal strait-jacket, they will fall short of what the economy desperately needs.”

International think tanks have also expressed concerns that EU’s fiscal rules could scupper much-needed capital projects.

Business groups like Ibec have long pointed out that the investment plans championed by European Commission head Jean-Claude Juncker have been accommodated outside the fiscal spending rules.

The Dublin economy is “leading the charge” in posting strong growth because the capital city was not as badly hit as other regions by the construction collapse. And Dublin has benefited more than most in recent years by what Ibec describes as foreign investments of “very high quality”.

Infrastructure spending could boost growth outside Dublin.

In its submission, Ibec also reiterates its call on Finance Minister Noonan to cut the marginal rate of income tax by 1% in October’s budget “and continue cutting it over the coming years”. Ibec says that such cuts would deliver better rewards for work and attract “mobile talent, including recent emigrants” to return to Ireland.

Ibec says the solution to the housing crisis in Dublin is for local authorities to reform planning rules. Childcare provision could be financed by reforming the child benefit system. It also wants reforms to the tax code for the self-employed, and improved research and development incentives.

“We have the fastest growing population in Europe, but the second lowest level of capital investment in the EU,” said Ibec chief executive Danny McCoy.

“Yes, we need to keep a firm grip on current expenditure, but we must ensure the country has the transport, education, housing, and broadband infrastructure it needs to prosper,” he said.