Construction Industry Federation slams ESRI

The Construction Industry Federation (CIF) has hit out at the Economic and Social Research Institute (ESRI) for advising the Government to go beyond agreed fiscal austerity by further reducing "the already limited capital investment" in the economy and increasing taxes on income.

CIF director general Tom Parlon said proposals outlined today by Joe Durkan of the ESRI on Morning Ireland about restoring the State’s finances to good health wouldn’t work.

It was extremely worrying that the think tank’s policy for restoring confidence in the economy was to cut capital investment and increase taxes on consumers over and above levels already provided for in the country’s four-year plan for the public finances.

“It beggars belief really that this is the ESRI’s response to recent figures showing a significant decline in domestic economic activity in the first quarter of 2011 and continuing increases in job losses and long-term unemployment.

“This approach, if adopted, would ‘suck the remaining life out of the economy’ and make it impossible to achieve the very objective the ESRI wanted to achieve: stability in the public finances, ” Mr Parlon said.

The public capital programme had already been substantially scaled back during the economic crisis, bearing a far disproportionate burden of the fiscal adjustment to date.

The four-year plan announced by the previous Government envisages a 60% reduction in Exchequer capital investment in 2014 from its peak in 2008, reducing total funding to less than 2% of GDP.

When the non-construction and infrastructure elements in the programme and the closeout payments for projects that were already completed were taken into account, the level of funding available was not sufficient to meet the existing demand for infrastructure and was wholly inadequate in terms of providing for the country’s future growth needs”.

The experience of the Eighties in this country demonstrated that under investment in infrastructure delays economic recovery, limited future economic growth and left an increased legacy of poor-condition assets for future generations.

Despite this, a feature of the fiscal adjustment to date had been the favouring of ongoing day-to-day spending over capital investment, resulting in unnecessary job losses in the economy and removing any potential momentum for renewed confidence and activity domestically.

Article courtesy of The Evening Echo.