Mixed reaction from business community

THE supplementary budget was “savage and a missed opportunity” which will do nothing to stimulate enterprise or help keep people in jobs, the Irish Small & Medium Enterprises Association (ISME) charged yesterday.

However, the Irish Business and Employers Confederation’s (IBEC) director general Turlough O’Sullivan was more muted and said while everyone felt pain, the budget was a critically important step towards restoring our financial stability and international reputation.

The Government, in a paper entitled Macroeconomic and Fiscal Framework 2009-2013 accompanying the budget, conceded the budget will have a negative impact on economic growth: “It is estimated that the level of economic activity will be reduced by about 1 percentage point on foot of the supplementary budget.”

ISME chairman JJ Killian said Finance Minister Brian Lenihan ‘bottled it’ and utterly failed to address current expenditure, in particular the public sector pay. “This represents a significant lost opportunity. With tax revenues now at 2002 levels, there was scope to once and for all address the cost of the public sector and in particular the pay element. The minister took the ‘easy and wrong’ option by once again delaying decisions on this huge element of current expenditure,” he said.

Mr Killian said that while tax increases were inevitable, the actual level of increases is worrying, raising concerns about the impact this will have on labour costs and consumer demand.

“The announcement of a doubling of the income levy, together with the significant hike in the health levy and the increase in the PRSI ceiling, will influence the cost of labour and could potentially lead to more redundancies. The minister should realise that you cannot tax your way out of a recession, only trade your way out of it.”

IBEC’s Turlough O’Sullivan said:0 “Business considers that this budget is a credible response to the current difficulties in the public finances”.

He said it sends a clear signal the Irish government will be taking effective remedial action over the next five years. “IBEC would have preferred a greater emphasis on cutting current expenditure immediately rather than on increasing taxation,” he said.

Mr O’Sullivan said that on balance, IBEC supports the establishment of a national asset management agency and believes this measure will further stabilise the banking sector and will help re-establish lending to businesses and households. It is critical that this is done in such a way that taxpayers’ interests are protected, he said.

“It is regrettable that the supports for enterprise are so modest that they will do little to stabilise employment. This is a matter which must be urgently addressed,” he added. Bank of Ireland welcomed the initiatives on the extension of the Government guarantee of banks liabilities and the setting up of a National Asset Management Agency, to be run by the NTMA, to take bad debts off banks.

Chambers Ireland said it hopes the measures announced in the supplementary budget signal a move towards the restoration of confidence that the stabilisation of the national finances are integral to delivering.

Director of policy Seán Murphy said: “The very significant tax increases coupled with the Government’s commitment to cost reduction and containment demonstrate that all stakeholders are making a contribution. We hope that this will start the process of restoring confidence.”