Fergal O’Brien: National Training Fund should be spent to help businesses amid economic uncertainty
"A proportion of the funds from the NTF should be used to provide a support scheme for companies."
The international economy is in a place of significant challenge. High rates of inflation, rising interest rates and volatile energy markets have all driven deep downward revisions for international growth rates in 2022.
Ireland’s strong economic momentum, exemplified by rising employment and tax revenues, which had defied the backdrop for much of 2022, will be challenged over the winter.
As a small open economy, we are acutely exposed to the prospect of a global economic slowdown and recessions in some of our major trading partners.
The global economy is experiencing a period of reset to normalised monetary policy and higher energy costs. The key question facing businesses planning for the year ahead is no longer whether that reset will be challenging, but rather how long those challenges will last.
The outlook for Irish business is marked by growing concern at rapid shifts in our competitive position and rising labour market policy costs being imposed by government. This underlines the importance of controlling what we can here at home.
With this in mind, it is simply extraordinary that government is currently sitting on a surplus in the National Training Fund (NTF) of almost €1bn unspent employer contributions which could be used to support long-term investments needed to grow our capacity and resilience in skills.
A sustainable pipeline of talented people and skills has become a key pillar of Ireland’s international competitiveness offering. Continued investment in upskilling and reskilling must be leveraged to safeguard Ireland’s talent pipeline as a strategic national asset, critical for Ireland’s continued economic and social progress.
Recognising the importance of a best-in-class talent pool for business, all employers currently pay into the NTF, a fund that is tasked with supporting upskilling and reskilling programmes across further and higher education for those in employment, or searching for employment, including apprenticeships and industry-led Skillnet Ireland programmes.
Frankly, it is unimaginable that government could allow the NTF surplus to further accumulate and go unspent.
In the past, limits on expenditure imposed by the fiscal rules have been blamed for the accumulation of surpluses in the NTF. This, however, is not the case. The accumulation of surpluses is solely driven by questions of expenditure prioritisation in government.
Skills challenges are occurring as Irish businesses are facing a myriad of emerging costs. The combination of pensions auto-enrolment, the living wage, statutory sick pay, and other leave proposals already announced will add 9% to average labour costs in Ireland over the coming decade.
For many companies in domestic facing sectors, low margin exporters and the SME community the cost of implementing these measures will be higher.
Whilst many of the additions to the so-called Social Wage have merit on their own terms, if phased correctly, they represent a major change in the Irish labour market model and come amidst existing significant cost pressures facing Irish companies, such as energy, other commodities, and transport costs.
This should take the form of both a break from NTF payments, 1% of payroll, for the period of where viability is challenge and a further rebate of up to 2% of payroll, equivalent in training, upskilling or productivity vouchers, funded from the NTF surplus.
At a time of such economic uncertainty, such initiatives would afford organisations greater flexibility and agility in meeting their training needs.
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