IBEC HAS changed its views on austerity to join the growing chorus of organisations urging Finance Minister Michael Noonan to scrap plans for further tax hikes in October's Budget.
IBEC's arguments are supported by trade unions and left-leaning think tanks such as the Nevin Institute but opposed by organisations such as the troika, the Central Bank and the Fiscal Advisory Council, which have all urged the Government to stick to existing spending plans. IBEC said in a report published today that austerity had been necessary in the past but is now hampering growth.
"For the first time in recent years, Ireland has choices on how to proceed along its budget consolidation path," it said. "We believe the Government needs to balance the need for further adjustment with the imperative of economic growth."
IBEC made the call as it cut growth forecasts for this year and next year following the latest figures, which show that the economy entered recession last summer and continued to shrink in the first quarter.
"The Irish economy clearly experienced a difficult start to this year," IBEC said. "Nevertheless, we believe that the fundamentals point to stronger economic recovery but that achieving it requires improved business and consumer confidence."
IBEC added that trading conditions have improved in the second quarter and into July and the first-quarter figures "were something of an aberration". IBEC wants Mr Noonan to reduce the fiscal adjustment from the €3.1bn agreed with the troika to €2.6bn. It believes this could be achieved by a €2bn cut in expenditure and a €600m tax carryover from last year's budget, which raised €300m more than expected.
The employer's group also urged the Government to retain supports for the hospitality sector, such as the 9pc VAT rate and the halving of the lower rate of employer PRSI for low- wage workers.
GRANT INCENTIVE SCHEME
It urged Mr Noonan not to increase labour costs by introducing statutory sick pay proposals or forcing health insurance companies to meet the real cost of having private beds in public hospitals.
The Government's research and development tax credit scheme should be improved by making claims easier and by allowing a greater use of outsourcing and contract specialist staff, the lobby group claims.