Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I ask everyone to turn off their phones and devices or put them in silent mode. Before we begin, I wish to explain some limitations of parliamentary privilege and the practice of the House as regards references witnesses may make to other persons in their evidence. Witnesses are protected by absolute privilege in respect of the presentation they make to the committee. This means that they have absolute defence against any defamatory action for anything they say at the meeting. However, witnesses are expected not to abuse this privilege and it is my duty as Chair to ensure that the privilege is not abused. Therefore, if their statements are potentially defamatory in relation to identifiable persons or entities, they will be directed to discontinue their remarks and it is imperative that they comply with any such action.

I remind members of the constitutional requirements that in order to participate in a public meeting, members must be physically present within the confines of the Leinster House complex. Members of the committee attending remotely must do so from within the precincts of Leinster House. This is due to the constitutional requirements that, in order to participate in a public meeting, members must be physically present within the confines of the place where Parliament has chosen to sit. In this regard I would ask any members participating via Teams that, prior to making their contributions to the meeting, they confirm that they are on the grounds of the Leinster House campus.

Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any persons or entity by name or in such way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore if their statements are potentially defamatory in relation to identifiable persons or entities, I will direct them to discontinue your remarks. It is imperative that they comply with any such direction.

This afternoon's engagement is part of our post-budget 2026 scrutiny and engagements. I welcome Mr. Gerard Brady, head of national policy and chief economist from the Irish Business and Employers Confederation, IBEC, and I now invite him to make his opening statement.

Mr. Gerard Brady:

I thank the Chair for the invitation to IBEC to appear before the committee this afternoon and to the members of the committee for their time. IBEC welcomed the budget on 7 October for delivering a focus on driving innovation, protecting and creating jobs and increasing investment in critical infrastructure. The measures demonstrate sensible ambition. There are a number of measures in particular which will support business activity around the country, including the commitment to invest an additional €2 billion in capital spending on infrastructure; the expansion of the research and development tax credit to 35%, up from 30%; the reduction on VAT on new-build apartments and hospitality to 9%, and a commitment of a 17% increase, or €70 million, in innovation capital funding.

On a headline basis, the fiscal health of the country is strong with a €5.1 billion surplus in 2026 and debt-to-national income falling below 60%. The Future Ireland Fund and the Infrastructure, Climate and Nature Fund will grow to €24 billion by the end of 2026, on top of existing Government cash balances, which are nearly €33 billion. A total spending package of €8.1 billion was split between a €6 billion increase in current spending and a €2 billion increase in capital spending, in line with the new national development plan. While it is not explicitly stated in the budget documentation, our preliminary analysis of the expenditure ceilings in the budget documentation suggests that around 60% of the package on the current spending side is made up of either spending to meet existing levels of service in terms of prices, pay or population growth. Ireland has unique demographic and population needs. It is our view that a comprehensive baseline of the projected spending to meet these needs for existing levels of service should be included in detail, alongside the budgetary document and play a central role in the discussion and understanding of budgetary policy.

On the tax side, the headline package is €1.3 billion in net terms, but there is a lot beneath this. This contains €433 million of tax-increasing measures and €1.7 billion of tax cuts. However, from the perspective of the broader economy, €820 million of those cuts are not new money, rather they are technical rollovers of existing tax cuts and existing schemes, some of which have been in place for multiple years but had sunset clauses running out in 2026. In addition to this, an item which should be explicitly recognised is the failure to index the personal tax system will bring in revenues from fiscal drag of €1.2 billion next year. This means that the tax package in net terms is contractionary, that is, it takes in more than it gives out, taking in €400 million. On top of this are pre-announced additional contributions and tax decisions, including changes in PRSI and pension auto-enrolment, which will raise in the region of €1.4 billion in 2026. This is before the inclusion of pillar 2 corporate tax revenues from an increase in the rate of corporate tax to 15% for large multinational enterprises, MNEs, which will increase corporate tax by €3 billion in 2026. It an unfortunate quirk of our system that measures that are pre-announced, such as PRSI, do not count in the budget documents as tax raising and are not recognised as such, even though they have the same fiscal and economic impact as those measures announced on budget day itself.

The tax base continues to be significantly concentrated. Corporate tax, which was 16% of total tax a decade ago, is set to rise to almost a third of all tax next year. We will collect 87 cent in corporate tax next year for every euro we collect in income tax in USC. In a normal country, that would be about 25 cent. One of the big fiscal changes in budget 2026 is the inclusion for the first time of estimates of the OECD pillar 2 corporate tax increases into the base of our tax forecasts. This is projected to raise around €3 billion in 2026. We believe this number may well be exceeded, that the €3 billion may be higher. At the same time, there are substantial renegotiation of elements of that 15% new corporate tax rate currently under way at the OECD, which could mean some risks to our tax profile in future years. Ireland will collect €12,000 next year in corporate tax for every worker in the economy, nearly €5,000 per worker more than what might be expected in other small open economies if we did not have that windfall, and we must continue to be vigilant on this front.

One area which we believe could be a missed opportunity in budget 2025 is the lack of specific funding for in-work skills supports. In particular, there was no provision for increased funding for the Skillnet business networks, which are a critical network of companies working together to build training offerings that are responsive in real time to business needs on the ground. This is a matched-funding model, so it is public funding matched by private funding, with a strong track record, which is already significantly oversubscribed. In effect, the lack of matched funding from public sources will mean that millions of euro of private funding which has already been committed from the private sector will now be left on the table. With inflation over recent years and rising administrative burdens, the number of funded places which can be provided for is falling. Some of these networks will run out of funding to match private training funds looking to be deployed by next summer. At a time when the pace of technological change, including but not limited to the growth of artificial intelligence and digitisation, means that ongoing training and retraining is going to be needed, the lack of funding for such in-work training models which are successfully delivering on the ground, so much so that they are being copied by other EU member states, is a missed opportunity. I thank the Chair and the members of the committee.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Thank you. Other members are joining us online. In a meeting in Limerick with IBEC and stakeholders, the hope was expressed that the budget would actually do something to counteract the increasing costs facing businesses in Ireland, such as electricity and water costs and PRSI contributions, and make businesses that are exporting out of this country viable here. Many of them see that their sister companies in other countries are more viable and can produce goods in a more economically efficient way. Is this something that could potentially stop companies coming to Ireland to open businesses in the future?

Mr. Gerard Brady:

Yes, it is a very big challenge for our members. Probably one of the top challenges we find for members is that the cost base in Ireland is so high. There are probably two major elements to it that we draw attention to regularly and that we hear from members. The first is labour costs, which are the biggest part of any business's wage bill. Of course you have to pay workers and skilled workers well. However, there are lots of regulated labour costs that have been introduced over recent years without a lot of co-ordination from the Government that have bitten hard. These include statutory sick pay, auto-enrolment coming in next year and PRSI increases, which have all added to labour costs.

The challenge, from a business point of view, is not that those measures individually might not make sense but that all of them are coming in a short space of time. It puts a lot of pressures on businesses.

In our pre-budget submissions and in other submissions, we looked for measures on PRSI to help to offset those costs. We recognise and welcome that supports have put in place for some sectors, particularly the hospitality sector, in this budget. In future budgets - the Minister mentioned that this was the first of a number of budgets - we hope to see more to support other sectors that are impacted by these costs, including the much broader community of SMEs, the retail sector and low-margin manufacturers. Our view is that giving a PRSI rebate to very badly impacted companies is the way to make that difference.

The other area that we hear a lot of, particularly from companies that are energy intensive, is the cost of electricity. Ireland has one of the highest costs of energy in general, but substantially electricity, in the European Union. The European Union, within a global context, is uncompetitive compared to pretty much any other bloc. Therefore, we are one of the least competitive countries within the least competitive bloc of countries. Electricity costs are becoming a big challenge for those who are trying to bring investment in energy-intensive and labour-intensive sectors into this country. The big thing that is in the control of the Government - there are lots of other things to do with the relative isolation of the country, our rural nature etc. that bring up energy costs in Ireland - is the fixed costs that make us have higher energy costs than other countries. They make up a really substantial proportion - up to 40% - of the bills in many high-energy sectors. For a lot of our companies, costs on the wholesale side have doubled and then there are still increases on the regulated costs as well. In future budgets, the Government should step in to take on some of those fixed costs to make sure that energy prices, and particularly electricity prices, remain competitive for companies.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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The Government had it within the scope of the budget. Mr. Brady mentioned training and the skill networks training in his opening statement. Part of the contributions made by everyone who is working is retained for skills training, but it is held within a budgetary side that they cannot use for that. They are taking it at source from everyone who works, but they cannot put it back in to where we need to get the skill networks going. There is a need for a change of policy or regulation to allow that money to go back in for training and for the skill network we need. This would benefit companies such as those we are talking about.

Mr. Gerard Brady:

A levy of 1% of payroll is paid by every company in the country into the National Training Fund. That fund has a surplus even after the changes in budget 2025 that unlocked €1.5 billion which is still waiting to be unlocked. We are now post budget 2026, but we are getting to that point where it will be unlocked. Most of that money did not go to in-work training. It was very welcome but it did not go to training for people who are already in employment.

The Skillnet business networks are really important for three reasons. The first reason is that they are industry led, so they are close to new technology and new needs as we emerge into an era of really big change on the ground in businesses, in digitalisation and in AI. As the companies are ahead of where policy can ever be expected to be, these industry-led networks are really important. The second reason is that this is match funding. When we say there is no public funding going into them, we must bear in mind not only that businesses are paying 1% of payroll into a fund and that money is not being released back, but also that businesses are saying they will put in more money to match whatever public funding is there. That money is being left on the table because public funding has not come to meet it. That is a big gap. The third reason these networks are so important is that they try to bring businesses together to share practice. A lot of our members and a lot of businesses across the country give time to developing and designing the kinds of schemes that come out of the networks. They are really relevant to the emerging needs of businesses at a time where technology is moving very fast. I could not overstate to the committee how quickly the business world is changing because of AI and digitalisation. We have to get out ahead of it. There is no point saying we will see where it goes, and we will try to catch up in five years because it is moving so fast. We have to get out ahead of it. It not only a benefit for businesses. Workers will need to have access to that lifelong learning, to training and retraining and to very relevant training to be able to retrain. In our view, the funding for those Skillnet business networks is critical. We saw nothing in the budget. Of course, costs for running those networks are going up all the time.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Although many people who are in second level education then go to third level education, I know from talking to a lot of businesses recently in different areas that many people come out of second level education and go straight into employment. There is an opportunity that they could get the skill networks through the individual companies. As Mr. Brady says, if the National Training Fund was used to subsidise or to help to match training funding, people could go into that layer of skill training. As I said, education is not for everyone. There are skilled labourers within every organisation who could be embraced and helped to enhance their skills. People who cannot afford to go to third level education, due to the way the economy is going at the moment, are looking for different pathways to get to the same point in their career, perhaps by going from second level into the workplace and then getting their training etc. within the workplace. Many companies that have people in a certain layer within their workplace who could go up to the next level for their skills cannot get anyone to come in and replace those people at their current skill level. We could create a kind of a ladder system for people who come in from second level education if the proper investment and structure were put in place.

Mr. Gerard Brady:

It is a virtuous cycle in many ways. We are probably mid-ranked in Europe for lifelong learning. I refer to the idea that when you come out of school or college and go into the workplace, you do not stop learning. In Ireland, 15% of workers are engaging in lifelong learning in any given year or at any given time. In Nordic countries, it is upwards of 30%. People are continually going back to retrain, to look for new skills or even to update the skills they have, which obviously change quickly over the years. Even if you were trained in something five years ago, the pace of change means that things have moved on now.

We have seen really good investments in the budget in innovation. There has been investment in third level education. The gap, as we see it, is in lifelong learning where we have been traditionally poor in making sure that businesses identify needs. The key thing about the Skillnet business networks is that the businesses themselves identify the needs, build the networks and give the time. We have 11 networks within IBEC that we run out of the many dozens across the country. Within those networks, senior and experienced business people who know the space give time to design the programmes so they are really relevant for the workers who are getting trained through them. From an Exchequer perspective, the matched element of that means that businesses are paying in through the National Training Fund so the money coming from the State side is actually paid for by businesses in the first place. Businesses are matching that funding again on the other side. They are saying that they will put in more money alongside it to train them. That is usually 50%, or thereabouts, of the funding. The other 50% comes from the National Training Fund, which was paid for broadly by business. There is a dichotomy here because businesses on both ends are putting the funding in, but they are not seeing the funding come back out. Something in the system is broken if it does not support this sector at a time where the needs are obvious to everyone in the business community.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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At present, we have a shortage of skilled workers and we have ongoing training programmes. We have a massive problem with inflation in this country. I asked the previous Minister for education to put an apprenticeship model in place for those who leave second level education early. This would involve those in fifth year and sixth year getting a placement that would equate to one year under the apprenticeship model.

From an inflationary point of view, it would mean they would have some funding coming in because they would be on a placement and they would have a training fund. In addition, it would keep them in school in fifth and sixth year, which would give them a backup, and from the training perspective, they would have one year of an apprenticeship done when they got to leaving certificate age. This might guide them into different areas where they might want to go after the two years. Would IBEC support a practice along those lines?

Mr. Gerard Brady:

Yes, it is definitely something we are happy to look at. We have colleagues on the education side. IBEC runs a number of apprenticeships in retail and financial services and we directly run some newer consortia apprenticeships. I am happy to put some of the people running those apprenticeships in touch with the Chair to see how those could be designed and to work with businesses as well.

One of the big challenges from the apprenticeship side, especially in the SME community, is getting the ability to backfill the roles when people are out of work for training for periods of time. The more we can do on that for the SME community, in particular in the backfill space, would be very worthwhile. We are happy to engage with the Chair on all those areas.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Is the delivery of infrastructure for housing around the country a big stumbling block for IBEC from the point of view of companies trying to entice people with different skills to come here and enhance their companies?

Mr. Gerard Brady:

It is the number one issue for businesses – infrastructure for housing and the broader area of the delivery of critical infrastructure. It was really helpful to see the extra €2 billion in the budget for next year. It is positive to have a national development plan that has set out the ambition in terms of spending. The major challenge is making sure we deliver real projects on the ground out of that spending.

We recognise that the Government has made progress on planning and in a number of other areas but there is a lot still to be done. Some of the big challenges, in particular around judicial reviews, is the delay in major projects caused by the imbalance between the rights of individuals to object and the broader public good. One individual might have a real and genuine reason to object in many cases but he or she is holding up a project that could negatively impact hundreds of thousands of people, yet we give them equal weight in the system without accounting for the huge difference that is there. Our view is that it is another area that needs to be looked at. I know the Government is looking at it but a change cannot come quickly enough in the implementation of the new planning Bill and the resourcing of the planning system. We have seen progress in that space with An Coimisiún Pleanála, in that the timelines have come down.

In terms of the broader challenges with infrastructural delivery, from our point of view, the capacity is there. We represent a lot of people in that space. The capacity is there to deliver these projects. We have Irish companies going abroad looking for work to deliver major infrastructure projects because the pipelines does not exist here. The more certainty we can give on the pipeline, the better, and the quicker we can get projects through planning and other stages, particularly the courts, the better.

On housing, what we saw in the budget on apartments in particular is really helpful. It will unlock and make viable some schemes. We must make sure that the Finance Bill captures all schemes that are within its the ambit, not just some schemes. There is some wording in the Finance Bill that would have to be adjusted to make that work for all schemes, in particular ones that are forward funded. We are hopeful we will see those changes in the Finance Bill. That will bring forward supply on the apartment side, which is not there right now, to be honest. Our view is that the measure, which is costed at more than €300 million in the budget, will not cost that much because no apartments are being built and no VAT will be paid on apartments that are not built in the first place. We are hopeful that the more money it costs, the more effective it will be because that means the apartments are being built, which is the ultimate aim of it.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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The Bill is currently being challenged. Serial objectors can hold up a lot of infrastructural projects. A lot of companies at the moment are building houses themselves on their own land banks to make it a more viable option for people to work in their companies. They are doing that instead of increasing the size of their business here to create job opportunities for people and to give them an edge in the market.

Mr. Gerard Brady:

We have a number of members who are in that space. In most cases, they would prefer not be. They do not want to be there but they feel they have to because housing is increasingly the biggest challenge in attracting and retaining staff.

One of the other things that we see an awful lot of, which probably goes unremarked but it is a big issue for the labour market, is that people do not move jobs as much or will not move to parts of the country because they are not sure about the rental market there. We have seen it with graduate schemes, for example, where members have multiple sites around the country. Traditionally, they asked people to go between the sites as part of the graduate programme but they cannot run it in the same way because they are not able to get rental stock. We have companies that are turning into property developers rather than being manufacturing sites or whatever else. Some have done it through joint vehicles with property developers and others are managing it themselves. In most cases, it is a distraction from the core business they wish they were doing, which is building new markets in the space that they are in. They would prefer to get back to a normal functioning market where people, in particular in the rental market, had access to housing, as that would allow them to continue to grow their business.

When we look at the spread of it, there is sometimes a view that this is very much an urban thing, but it is in pretty much every town in the country, and in rural areas as well. We see members who want to expand and grow their headcount but the required stock in the rental market is not available for them to do that. It is a big impediment to continued growth for a lot of businesses.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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The apartment model is probably more pertinent to urban areas. Apartments are usually built for single people or couples and we need housing stock rather than apartments to entice people with families to come to this country. I welcome the change in the planning legislation to open up that cycle.

I wish to focus on the delivery of infrastructure. I could refer to different projects but one example is the children's hospital, which has gone over budget by nearly €1 billion and has not been delivered. A private hospital can be built in 16 months in Limerick with the doors open and people in it but Government projects are taking twice as long and cost twice as much. Could members of IBEC or others procure and deliver the infrastructure themselves at a lower cost than the Government can do it?

Mr. Gerard Brady:

There is definitely a lot of expertise out there. Sometimes, because we have long timelines on some public projects, we view it as a failure of Ireland to deliver the projects, but private projects are very good at delivering them. We are very good at delivering some public projects, most particularly roads, on time and on budget. There are two issues in that regard. One is the underpinning infrastructure – water and wastewater are the biggest barrier to building private houses in particular - as well as zoned and serviced land. The people and resources are there to build houses if the land is there and it is zoned and serviced. It is a big part of our membership ask in terms of funding infrastructure to fund and service land.

The second part was whether private companies could deliver public infrastructure. I am sure they could help. The new accelerating infrastructure task force has a lot of private sector expertise on it. We are hopeful that, when it reports, it will be taken seriously by the Government and that whatever it recommends in terms of speeding up implementation and improving delivery will be acted upon quickly.

We have had a number of reports in recent years that just became reports and nothing else. That report will be very important to make sure we accelerate it. IBEC members are very happy to work with both the committee, the Government and the broader public sector on suggestions. We have a paper, which we can share, through the Chair, with the committee, on how those things can be sped up. Our members are very happy to engage on the private delivery side. We are delivering very complex public projects on time and on budget in other countries all the time so there is definitely something that can be done in that regard. It is not beyond the wits of the Irish industry to be able to do better, if we can sort out some of those planning and infrastructure issues.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I had meetings with Uisce Éireann in the past two weeks. If you look at the tasks it has in hand around the country, it is looking at 20-year plans to try to bring the existing infrastructure up to code and is doing it on the basis of the highest demand upon it. By the time it comes back out into the other areas, it could be up to 20 years for a project. The organisation has come up with one system whereby it can have a modular wastewater system on site, which is to be welcomed. It can be put on the sites of existing waste facilities. However, the biggest problem is that, if it goes outside the parameters of the waste site itself, it will then need to meet prerequisites whereby it could take two or three years to get a small parcel of land by the time it goes through all the EPA guidelines and everything else. If it is able to fit it onto existing sites, it can bring a system on site. This will allow the system on-site to be serviced and upgraded because Uisce Éireann will be able to regulate what is coming through it, which is welcome. However, if Uisce Éireann has to enter into something like a public-private partnership or something where delivery could be done by businesses and then be taken over afterwards, with the necessary allowances for doing that infrastructure being made, then that process is something it has to do at present, especially on projects that it believes could be five or ten years out. We will lose our international edge if we cannot invite international business into this country. We have to make sure they can see the viable option here and the viability of people coming here.

We currently have many of our own committee online because of the Finance Bill. I can see some of our Deputies on the screen waiting their turn for the Finance Bill that is being discussed at present. We are going to finish up our meeting here. I thank everyone for coming to the meeting today and for their expertise. I look forward to getting the witnesses in again shortly for further questioning on how we can assist them going forward.