IBEC’s pre-budget submission is a tour de force. In the name of ending austerity it calls for . . . more austerity; namely, reducing public expenditure in real terms. This is done to pay for tax cuts that will primarily benefit higher income groups. And in calling for real cuts in investment it then proposes to use fiscally inefficient public-private-partnerships which will drive up the cost of investment in order to create new channels of profits. And in all this it manages to avoid the elephant in the room – the long-term chronic under-investment of Irish business in the economy.
Irish business has gotten all the breaks. Historically, it has been the beneficiary of ultra-low corporate tax rates and social insurance while paying below-average employee compensation (compared to most other EU-15 countries). And, yet, it is a chronic under-investor. The following data is taken from the EU Ameco database.
In 2012, Irish corporate investment is at the bottom of the table. Even when adjusted for multi-national accounting practices (which is what the Irish Fiscal Advisory Council’s hybrid-GDP effectively does), we come in marginally ahead of battered Greece. Our corporate sector invests 38 percent less than the EU-28 average – or nearly €6 billion less. It invests less than half the level that pertains in other small open economics (SOE) – or nearly €9 billion less. This is pretty bleak.