Business Irish

Friday 28 October 2016

Push spend on infrastructure up €12.5bn, Ibec tells Noonan

Published 27/07/2015 | 02:30

Finance Minister Michael Noonan
Finance Minister Michael Noonan

An extra €12.5bn needs to be spent on public investment above and beyond current Government plans between now and 2020, business body Ibec has warned.

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In its pre-budget submission, the lobby group said an extra €2.5bn spend is required each year until the end of the decade to meet infrastructure demands, divided between public and private funding.

Ibec is urging the Government to use any political capital it has in Europe to persuade the European Commission to allow further exemption for Ireland from strict EU budgetary spending rules for all innovation and capital investment.

"Ireland cannot return to the reckless day-to-day spending patterns of the past, but equally the business community urges Government to challenge the EU constraints which are restricting much needed and sensible productive investment," the body's submission said.

Ibec is proposing that the private sector will be able to stump up some of the cash, but said the Exchequer must provide around €1bn next year on top of the budget package currently planned.

Ibec warned that in the 1990s, a lack of investment in infrastructure left a rapidly expanding economy with severe bottlenecks in some areas. This was overcome in the middle of the last decade, prior to the crash, through rapid and expensive infrastructure growth, the report notes. But since the recession, infrastructure spending has fallen significantly to the point where Ibec estimates that by next year, between 90pc and 95pc of capital spending will be on maintenance.

"Capital expenditure is essential for enhancing the productive capacity of the economy and thus generating economic growth," the submission states.

"Capital expenditure fell significantly during the crisis and this needs to be reversed in the 2016 budget to avoid the country's infrastructural deficit growing. Given demographic trends, there is even more pressure on Government to address this issue before economic growth is constrained."

Some 26 recommendations are made in the submission, ranging from tax reform to improving housing and childcare, entrepreneurship and R&D and ensuring Ireland remains an attractive place in which to do business.

Key recommendations include reducing the marginal tax rate by 1pc next year and committing to below 50pc by 2017, increasing the entry point to the marginal rate of income tax by €1,500 and removing the USC surcharge for the self-employed over the medium term.

In numbers

€2.5bn - The amount of extra cash needed a year for infrastructure, says Ibec

90% - Proportion of infrastructure budget used for maintenance

1% - Reduction in marginal rate of income tax Ibec wants

Irish Independent

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