Mr. Fergal O'Brien:

I thank the Chair and members of the committee for the invitation to join them to discuss business priorities for budget 2023. I am joined by Ibec's economist, Ms Ahern-Flynn.

When we look at the backdrop to the budget, it is very clear that budget 2023 takes place at a turning point in the global economy. Changes in the global environment, including commodity, energy and financial markets, are reshaping the economy from the one we have recognised over the past decade. The era of record low interest rates, low inflation, and spare capacity that we have lived through since the global financial crisis is being overturned. For Ireland, as a small open economy, shifts in the flow of capital through the global economy can have a very outsized impact on our growth model. Our members are already experiencing these changes through tighter capital markets and very rapidly rising costs.

The outlook for Irish business is marked by growing concern at the rapid shifts in our competitive position. This now underlines the importance of controlling what we can here at home in the process of budget 2023 and fiscal policy beyond it. In the short term, the focus of the business community will be on dealing with the impact of a sudden escalation in costs, ongoing trade and supply chain disruption, and the major changes we are now seeing in our business model.

Energy is very clearly the biggest challenge now facing our society and economy. We are already in a significant energy affordability crisis and there is growing concern regarding security of supply issues. For many of our member companies across the business community, energy costs next year will be four to five times higher than they have been in recent years. Despite this, Irish business is very much committed to playing a proactive role in facing up to the multitude of challenges, including those relating to climate, and commitments that will arise in the coming decade.

Budget 2023 must provide a robust response to the immediate inflationary difficulties, while also meeting the long-term challenges we face as a society and an economy. It is crucial that the undoubted pressures of the here and now do not lead to us abandoning our focus on crucial long-term investments, which ultimately will raise living standards and improve the quality of life for everyone in the country.

While the Government is aiming for a modest surplus in 2023 there remains a danger of overcorrecting given volatile economic dynamics. The path of energy prices and security, the pace of global monetary tightening and the momentum in the broader global economy are all extremely volatile at present. If the economic environment continues to deteriorate over the winter, a more significantly expansionary fiscal policy may be needed to protect households and businesses. We believe that budget 2023 will have to remain flexible in its outlook and the Government will have to be responsive to these trends, regardless of the stance set out on budget day.

In light of high inflation and rising uncertainty, particularly the uncertainty around energy costs, we need to remain agile in terms of our economic stance, especially in relation to fiscal policy. To deal with the rapid escalation in energy costs for businesses, we are calling for a significant and immediate package of emergency energy supports to be made available under the new EU state id framework that has been agreed. These supports to help offset spiralling business energy costs are urgently needed and should be implemented as soon as practicable. In terms of labour costs, Government policy in the labour market is loading significant cost pressures onto businesses, particularly SMEs. While IBEC acknowledges the merit of many of these policies individually, the lack of co-ordination in their roll-out means that businesses will face rapid and considerable increases in their labour costs over the coming years. The Government must do much more to control and offset the policy-related labour costs which are impacting businesses. The most exposed businesses will need concrete support through this period of transition. This should take the shape of a time-limited labour market transition rebate, funded from the National Training Fund, NTF. That fund is rapidly approaching a €1 billion surplus and within three years it looks like it will have a €2 billion surplus. From a business and employer perspective, we really need to see those resources put to work in our economy to address issues around training, upskilling and productivity measures through a voucher-type model.

Regarding the low-carbon transition, IBEC supports the Government's commitment to a continued increase in the level of carbon tax. However, this must also be balanced by offsetting incentives for energy efficiency, the adoption of low-carbon technologies and alternative energy sources. This includes significant resourcing of Sustainable Energy Authority of Ireland, SEAI, grant schemes, considering further super-deductions for energy efficient investments, greening our VAT rules and support schemes for micro and mini generation.

Irish companies of all sizes have the potential to compete in an economy driven by mobile skills and intangible assets but for this to happen, we are calling for crucial investments in education, skills, childcare, research and innovation and the digital economy, of over €400 million in 2023. Finally, Ireland must continue to invest in the competitiveness and productivity of the sectors still feeling the impacts of Covid-19, particularly our experience economy across hospitality and related sectors. We want to see much more ambitious investment in our town centres and in skills and through the maximum and appropriate use of the €1 billion Brexit adjustment reserve, BAR, fund to support investment, upskilling and competitiveness in the worst affected sectors.