IBEC Submission on Jobs Initiative. Submission to Government

Transcription

1 IBEC Submission on Jobs Initiative Submission to Government April 2011

2 Table of contents 1. Summary of recommendations Active labour market policies Delivering a successful internship programme Addressing skills shortages Regulated wages Incentivising work Sectoral initiatives to support employment Loan guarantee scheme Investment and public private partnerships (PPPs)... 12

3 1. Summary of recommendations IBEC supports Government s intention to develop a series of initiatives targeted at job creation and preservation. The previous Government s policies were predominantly focused on the crises in the public finances and in the banking sector and failed to adequately address the growing unemployment crisis. Ultimately it is business which provides the new job opportunities which the country now so desperately needs, but Government can help by ensuring the optimum conditions are in place for enterprise to prosper and by addressing specific blockages and obstacles to job creation in the economy. Businesses and households desperately need a confidence boost at present and a series of policy initiatives aimed at tackling the unemployment crisis presents the ideal opportunity to achieve this. The Department of Social Protection should publish a detailed implementation plan, with timelines and costings, for the complete integration of State employment counselling, placement and welfare payment services. A dedicated national Graduate Internship Programme should be launched. A separate Skills Development and Work Placement programme should be put in place. Under both programmes, employers should be able to select participants, the type of training and method of delivery from the initial stage. An evolving portfolio of training/education schemes from which the company would select the most appropriate programme(s) and delivery mechanisms should also be available. The Graduate Internship and Skills/Work Placement programmes should be run by a small unit within the Department of Enterprise, Jobs and Innovation or Department of Education and Skills, with their own websites (carrying details of placements) and branding. This unit should put in place an appropriate promotional plan for employers and potential participants. Training and education initiatives should be subject to increased data collection, policy evaluation and the monitoring of participant outcomes in terms of their progression, further education, training or employment. Evaluation of more recent interventions such as the Labour Market Activation Fund and the Springboard initiative should be expedited in order to measure outcomes and inform further development of the programmes. The Higher Education Authority First Destination Report should be published on a more timely basis and provide greater detail on the type of employment to which graduates are gaining access. The third level sector should be encouraged to develop courses which build on and convert existing skills, particularly in engineering disciplines. The ERO system should be entirely abolished. Existing legislation, including national minimum wage and working time, is sufficient to ensure employee protection. The REA system should be fundamentally reformed. Reduce the long-term replacement rate by amending existing social welfare packages for the long-term unemployed, particularly in relation to supplementary benefits. Reform the FIS in order to aid the transition from welfare to work. The Employer Job (PRSI) Incentive Scheme should be marketed more extensively. 1

4 Reduce the employers PRSI charge on share benefits from 10.75% to 4% to match the employee contribution. Introduce a range of sectoral initiatives to support employment in areas such tourism; food processing; high-tech sectors spending on R&D; home improvements; and clinical trials. Government should immediately prepare work on designing and implementing a loan guarantee scheme for SMEs. The aim of the scheme should be to extend credit to firms that could not otherwise receive financing (additionality), both to help company survival in the short term and finance export reorientation. Government should investigate potential European sources of joint funding, including the European Investment Fund. The scheme should provide equal focus on both firm survival and firm expansion and support should not be conditional on employment creation. Public capital investment should not be reduced further. Government should form a new long-term capital expenditure plan that clearly outlines specific projects, their method of delivery, funding and timetable for delivery. All infrastructure investment above a certain threshold should be tested for procurement as a PPP. Government could achieve better bang for its buck by part-funding with the private sector a larger number of investment projects, rather than being the sole funder for a more limited portfolio. Funding of measures In drafting these proposals, IBEC has been very conscious of the need not to make recommendations with significant resource implications. The vast majority of initiatives recommended here are therefore revenue neutral, but of course some also have resource implications. We estimate that about 100 mn would be needed to resource the total package of measures. This funding will have to be found from existing agency and department allocations, through further efficiency gains. It is essential that neither the measures proposed here or other initiatives brought forward by Government are funded through taxation increases. This would be entirely counter-productive to efforts to support job creation. IBEC will therefore strongly oppose any package which would be financed through taxation increases of any nature. 2

5 2. Active labour market policies Background and context The degree to which direct Government intervention can create employment in the economy is limited. Labour market recovery is more likely to follow a restoration of competitiveness in areas such as wage costs and energy, and an improved business environment. Crucially, however, Government policy has a major impact on the conditions which are conducive to firms rehiring and on the quality of education and skills of those seeking employment. Government must also ensure that there is a strong incentive to work and that the optimum approach is taken to assist and up-skill those who are looking for work. Therefore the main objective of active labour market policies should be to maintain unemployed people s attachment to the labour market with a view to minimise structural long-term unemployment. Job search supports are provided by FÁS Employment Service and the Local Employment Service. Policy responsibility for FÁS functions in relation to employment and community employment services were transferred to the Department of Social Protection with effect from 1 January Potential for reform Ireland entered the crisis with weak activation measures. The public employment service was also highly fragmented. Since the start of the crisis, there has been a large number of responses by state s labour market authorities (e.g. short-term training initiatives and work placement schemes) but they have been uneven and without clear vision. While the National Employment Action Plan (NEAP) continues to feature in the rhetoric of government policy, job counselling and public employment services are extremely uneven on the ground. The re-configuration of Government departments has the potential to develop a more comprehensive and effective activation strategy that will strengthen the links between getting benefits, searching for a job and participating in employment and training programmes. IBEC has repeatedly made the case for the complete integration of welfare payment and employment services into one-stop shops. Employment service officers should be responsible for taking claim details, monthly signing-on, initial sanction decisions, as well job-search monitoring, employment counselling and job-brokering. This model seems to be generally accepted within the system, but its implementation appears to be proceeding at an unacceptably slow pace. Various reasons for this have been suggested most notably, incompatible IT systems, IR issues and lack of resources. This is no longer acceptable. As Grubb 1 has pointed out: an increase in expenditure on the PES, devoted to activation measures, may pay for itself several times over through reduced benefit expenditures and several times again through increased tax and social insurance contribution receipts. Recommendation The Department of Social Protection should publish a detailed implementation plan, with timelines and costings, for the complete integration of State employment counselling, placement and welfare payment services. 1 Grubb, D., (2010) Perspectives from the Review Activation Policies in Ireland. Prepared for the Labour Market Roundtable meeting 3

6 3. Delivering a successful internship programme Background and context The Government has promised several new measures to strengthen the framework of labour market activation supports for the unemployed. These include: A Skills Development and Internship Programme with provision for up to 5,000 places a call for Expressions of Interest was launched in February 2011 in order to assess the likely interest from employers in the programme. An expansion of the number of placements available on the Work Placement Programme from the current 2,000 to 7,500 in 2011; and A new Community Work Placement Scheme, which will provide up to 5,000 additional places in the community and voluntary sector. Potential for reform The success of work placement programmes depends critically on the disposition of employers and potential participants, and their willingness to engage. Therefore both groups need to be involved centrally in their design. IBEC has been running a pilot graduate internship programme since early While it is relatively small-scale to date, almost 400 companies have registered and over 700 placements have been advertised the project has highlighted a number of issues that need to be addressed if the Government wants to introduce the type of scaled-up national graduate internship programme that IBEC would strongly support: The branding and positioning of work placement/internship schemes are critical to their success. Most employers (and higher skilled participants) will be reluctant to engage with what they perceive to be social employment initiatives. The schemes need to be positioned and branded as Smart Economy work experience (for new entrants) or reskilling initiatives. There needs to be greater flexibility around payment. For example, many new graduates who live at home are entitled to no, or very low, social welfare payments and companies are prevented from providing any top-up to help defray the costs associated with attending such programmes. The legal status of internships needs to be clarified so that there is no ambiguity about the rights and responsibilities of graduates and sponsoring companies. The proposed Skills Development and Internship Programme seeks to address the issue of payment and legal status. However IBEC has serious concerns about its branding/positioning and the likelihood of it attracting significant numbers of either participants or employers. A dedicated national Graduate Internship Programme should be launched. A separate Skills Development and Work Placement programme should be put in place. All internships should be a minimum of six months. Under both programmes, employers should be able to select participants, the type of training and method of delivery from the initial stage. An evolving portfolio of training/education schemes from which the company would select the most appropriate programme(s) and delivery mechanisms should also be available. The Graduate Internship and Skills/Work Placement programmes should be run by a small unit within the Department of Enterprise, Jobs and Innovation or Department of Education and Skills, with their own websites (carrying details of placements) and branding. This unit should put in place an appropriate promotional plan for employers and potential participants. 4

7 4. Addressing skills shortages Background and context In 2011 there are approximately 276,000 training and further education places available for the unemployed to access. These include 90,000 training places to be provided by FÁS, 8,000 places delivered by Skillnets and 10,500 places delivered under the Labour Market Activation Fund. The remaining 168,000 will be provided by the Further Education sector and will be primarily delivered through the Vocational Education Committees. An estimated 162,000 learners have higher education places. In the higher education sector, a new competitive 20 mn multi-annual higher education labour market fund (Springboard) to enable unemployed people to access NFQ Levels 6 to 9 programmes has also been launched. Potential for reform Despite exceptionally tight fiscal constraints, it is obvious from the above figures that the State continues to invest significant sums in training and education. Indeed, at one level, the stimulus given by recession to the demand for, and supply of, further and higher education could be considered a silver lining in the gloomy employment outlook. However the recession also imposes a responsibility on the State to attend more closely to evidence of what education and training delivers best and for whom, and to secure improved outcomes in terms of relevance to employment from restricted levels of spending. Recent analysis undertaken by Forfas 2 reaffirms earlier ESRI research which indicates that the most effective training programmes for the unemployed are those that are close to the labour market and in which employers are involved. The Forfas report suggests that the relevance and content to emerging skills needs and the workplace of some programmes with large numbers of participants could be significantly improved. It is also noteworthy that while the number of newly advertised vacancies is significantly lower than at the peak in 2007, vacancies continue to arise 3. For many companies, vacancies in specialised niche areas (e.g. software engineers/developers, production/process engineers, quality control/validation specialists, senior technologies) continue to be difficult to fill. Language skills are also a prerequisite for many of the newly advertised vacancies, particularly in customer care. Training and education initiatives should be subject to increased data collection, policy evaluation and the monitoring of participant outcomes in terms of their progression, further education, training or employment. Evaluation of more recent interventions should as the Labour Market Activation Fund and the Springboard initiative should be expedited in order to measure outcomes and inform further development of the programmes. The Higher Education Authority First Destination Report should be published on a more timely basis and provide greater detail on the type of employment to which graduates are gaining access. The third level sector should be encouraged to develop courses which build on and convert existing skills, particularly in engineering disciplines. Training programmes of varying lengths will be required and each programme should be evaluated on individual basis. Some programmes may be shorter, others may need to be considerably longer. Where possible, training material should be developed with together with employers. 2 Forfas Review of Labour Market Programmes, March Vacany Overview 2010, Expert Group on Future skills Needs, February

8 5. Regulated wages Background and context The system of regulated wages, including those governed by Employment Regulation Orders (EROs) and Registered Employment Agreements (REAs), is outdated. Newer legislation, including the national minimum wage and working time rules, now ensure employee protection, making the arcane joint labour committee (JLC) structure redundant. The compliance costs of the system are substantial. EROs alone impose a cost of 100 mn per year on 25,000 businesses, while REAs also pose significant costs. The JLC structure imposes wage rigidity on sector of economy where (surviving) businesses have seen turnover in many cases by 25%. The JLC-determined pay rates have no regard for wages in other jurisdictions, including Northern Ireland, placing businesses located in the Republic at considerable disadvantage. The previous Government decided to reduce the minimum wage from 8.65 per hour to 7.65, leading to a 12% saving on labour costs. The new Government has stated its intention to reverse this cut. IBEC believes this would be misguided and hinder job retention and creation. The proposal to compensate for the increase by halving the rate of employer s PRSI on income up to the minimum wage would compensate only for a third of the labour cost increase and would cost the Exchequer approximately 400 mn per year. Potential for reform IBEC put forward a submission to the ERO and REA review, detailing the detrimental impact the systems have on job retention and creation. We believe that the ERO system should be completely abolished. The REA system, if comprehensively modernised, could play a constructive role in Irish industrial relations. Some EROs, where both parties are in agreement, could also be converted to REAs. Required reforms include: derogations for employers in financial difficulties; more flexibility on pay; simplification of compliance requirements; and opening the agreements to groups of workers other than trade unions. Halving employer s PRSI on income up to the minimum wage would only compensate for a third of the labour cost increase. This would also create a steep step in employer s PRSI payable: the rate would be 4.25% on pay at 8.65 per hour, but already at 9.13 per hour the higher rate of 10.75% would kick in. A wage increase of 5.5% would result in a labour cost increase of 12%. Reversing the cut in the minimum wage would add to the labour cost and act as a disincentive for employment creation, particularly in SMEs and job-intensive sectors. The ERO system should be entirely abolished. Existing legislation, including national minimum wage and working time, is sufficient to ensure employee protection. The REA system should be fundamentally reformed. 6

9 6. Incentivising work Background and context The tax and welfare systems designed by Government have a significant influence on the labour market and an economy s overall efficiency and competitiveness. High taxes on work are counterproductive to efforts to address the unemployment crisis and damage Ireland s attractiveness as an investment location. Ireland has now become a comparatively high tax economy for those earning above average wages and businesses are therefore finding it more difficult to attract mobile specialist skills. The interaction between the tax and welfare systems has a major impact on the incentive to work. As a result of recent wage and tax developments, the incentive to work has been greatly reduced and this is a major stumbling block to successfully getting people back to work. Budget 2011 and other recent Budgets significantly increased income taxes. Budget 2011 also resulted in an increase in labour costs for employers through changes to the taxation regime for employee financial involvement and the introduction of employers PRSI on pension contributions. As a result of the changes, many multinational employers, in particular, have reported an increase in labour costs of about 4%. This has come at a time when most employers are maintaining pay freezes in their Irish operations in order to regain competitiveness. The Budget-related labour cost increases have therefore undone much of the hard gained competitiveness improvements of recent years. The additional cost of the 10.75% employers PRSI on all employee financial involvement schemes has greatly increased the cost of such internationally used incentive schemes in Ireland. IBEC members continually report that they are having difficulty filling employment vacancies due to applicants stating that their welfare benefits are worth more than the salaries on offer. Our analysis shows that for an individual with a dependent partner and two children there is no financial incentive to work for a gross salary of less than about 35,000. Without a strong incentive to work, it will almost impossible to tackle the current jobs crisis. Potential for reform Taxes on work should not be increased any further for those on above average incomes. The tax burden for this category of workers is already too high by international standards and employers are struggling to attract and retain mobile skills. The impact of the employers PRSI charge on share benefits should be ameliorated through a partial reversal. Urgent reform is needed in the social welfare system for those of working age. Ireland is most out of line with competitor countries in relation to the very high longterm replacement rate in the social welfare system. This has been identified by OECD, IMF and others and needs reform. In particular, issues around supplementary welfare benefits and rent relief should be addressed. Options should also be examined in relation to a radical reform of the Family Income Supplement (FIS), which has failed to support the transition from welfare to work. Reduce the long-term replacement rate by amending existing social welfare packages for the long-term unemployed, particularly in relation to supplementary benefits. Reform the FIS in order to aid the transition from welfare to work. The Employer Job (PRSI) Incentive Scheme should be marketed more extensively. Reduce the employers PRSI charge on share benefits from 10.75% to 4% to match the employee contribution. 7

10 7. Sectoral initiatives to support employment R&D supports The R&D tax credit scheme has proved highly effective in increasing firm-level R&D investment in Ireland. However, the scheme has three major shortcomings: Flexibility in relation to use of credit: the operations of many multinational companies in Ireland have been unable to get the full value of the scheme due to the fact that the credit was generally accounted for below the line at a group level. It therefore did not help reduce the cost base of the Irish operation or the cost of doing R&D in Ireland. Increase the outsourcing cap: the scheme currently limits the outsourcing of R&D from businesses to research institutes to just 5%. This greatly limits the degree to which enterprise can collaborate with universities on R&D activity and is inconsistent with other Government policy aimed at fostering linkages between the two sectors. Flexibility in base year: the credit is provided on incremental R&D spend over that recorded in the designated base year of For a number of companies which had exceptionally high R&D investment in 2003, the scheme therefore provides no incentive for R&D activity. : Government should introduce the necessary legislative change which will allow multinationals the flexibility to treat the credit as either an above the line or below the line item, via an offset against employer s PRSI, as committed to in the Programme for Government. This would have no additional cost for the Exchequer and would deliver significant economic and employment benefits. Government should increase the outsourcing cap to 25%. Government should allow companies the flexibility to choose their base period from a number of years (for instance 2003 to 2005) or use their average annual R&D spend over the 2003 to 2005 period. The cost to the Exchequer would be minimal. National energy retrofit programme and the Home Energy Saving Scheme The construction sector has sustained severe falls both in terms of activity and employment. Housing repair, maintenance and improvement (RMI), the most labourintensive and least capital-intensive type of construction activity, now accounts for about half of all housing-related activity. The Home Energy Saving Scheme, managed by Sustainable Energy Authority of Ireland (SEAI), has played a big part in sustaining RMI activity and employment. Beyond this, the SEAI plans to put further emphasis on energy efficiency, with a national energy retrofit programme as the first step. The benefits of retro-fitting public buildings and housing are multiple: increased energy efficiency, lower CO 2 emissions, lower fossil fuel imports and long-term cost savings. To these can be added an immediate contribution to job creation due to the labourintensive nature of this work. An additional benefit is that a very significant proportion of the materials used in such a programme are produced in Ireland. Government should expand the Home Energy Saving Scheme and further explore the option of allowing householders to pay their share of the costs with pay as you save schemes with their energy providers. 8

11 Government should push ahead with the national energy retro-fit programme to create jobs, deliver long-term cost savings to the Exchequer, and help Ireland meet its greenhouse gas emission obligations. Promoting serial entrepreneurship Entrepreneurship in Ireland is notable for its high attrition rates among young companies. In order to create a culture conducive to entrepreneurs, particularly serial entrepreneurs, a change of mindset is required. Entrepreneurs should not be stigmatised by past failures and the business environment should encourage them to try again. They possess talent that requires nurturing. It should be recycled into new start-ups. This was recognised by the Innovation Taskforce, which called for modernisation of Ireland s bankruptcy legislation in line with what has taken place in other countries. Ireland s bankruptcy laws are punitive and discourage entrepreneurship. They are out of kilter with most developed economies and our European neighbours. A balance is needed between encouraging entrepreneurship and discouraging the phoenix syndrome whereby a new company is formed from the ashes and unsatisfied debts of the old. Recommendation: The current 12-year bankruptcy period is too long and the proposed period of 6 years in Civil Law (Miscellaneous Provisions) Bill 2010 [lapsed at second stage] should be reduced further where the circumstances warrant. Clinical trials Ireland s clinical trials infrastructure is fragmented and does not offer predictability or transparency in terms of ethics and competent authority approval, cost. Timelines, and access to patients, which are all key for large scale trials. Though the current draft legislation has a number of positives, it does not address the need for a central point of contact for the development and execution of clinical trials in Ireland. : A single central point of contact for clinical trials should be established, acting as a coordinating body for companies located here and international companies that might consider Ireland as a location for clinical research. This central point of contact should have a database of clinicians and a registry of patients, to create visibility about research capabilities and patient availability. Live cattle exports Live cattle exports from Ireland have increased steadily over recent years and now number about 300,000 p.a. These exports obviously generate export revenue for the economy, but many of the cattle exported are at an early stage of development (and are finished for veal production elsewhere in Europe) and are very often sold at relatively low prices. Live exports represent a substantial lost opportunity for both the agriculture and the food processing sectors. The beef processing industry estimates that about 1,000 additional jobs could be created in that sector alone if these animals were processed in Ireland rather than exported. There would be further additional jobs created in farming and in related upstream and downstream activities. Recommendation Government should roll out an integrated research, promotional, marketing and advice programme to encourage changed on-farm production processes in relation to veal farming. 9

12 Public procurement Financial standing, particularly in relation to the provision of administrative records has been a traditional barrier to entry by Irish firms to public sector contracts. Public contracts have been difficult for SMEs to win because the tendering processes tended to favour larger companies that had more resources. Innovative start-up companies can be frozen out from public contracts due to not having an extensive track record or not being able to provide several years of audited accounts. Evidence of financial standing relies on historic data, which does not take into account a firm s actual capacity to deliver the contract in question. For example, turnover levels can fluctuate according to market conditions and not be the fault of the company. There is scope within the EU procurement directives for contracting authorities to be more flexible and inclusive towards SMEs, particularly in looking for alternative evidence as to financial standing and capacity of companies. While Circular 10/10 facilitating SME participation in public procurement recognised the problems and advised the use of alternative evidence (permissible under the EU directives), it fell short of providing a full list of information that would be acceptable by public sector officials. Government needs to provide official guidance on the alternative evidence of financial/economic standing that can be provided by companies in bidding for public sector contracts. It should also be noted that economic and financial standing criteria form only one part of the challenges facing SMEs in winning public sector contracts. The circular attempts to address other issues facing SMEs, including: greater transparency regarding opportunities; pre-tender engagement with the market; guidance on insurance/indemnity levels; sub-dividing contracts into lots; debriefing unsuccessful candidates; and encouraging partnering/consortia. It is crucial that the recommendations within the circular are put into practice by public purchasers across the public sector. To date, there is little evidence of this having taken place. Government needs to provide official guidance on the alternative evidence of financial/economic standing that can be provided by companies in bidding for public sector contracts; Government should conduct an immediate review to see if provisions within Circular 10/10 have been put into practice by public purchasers across the public sector. Tourism Ireland s hospitality and tourism sector has suffered greatly in recent years from the global recession and fall-off in global tourism numbers. The global economy is now recovering, however, and improved opportunities are available for the sector. A significant development over the past three years or so has been the reduction in prices for hotels and other aspects of the tourism offering. In both housing and hotel stock there is now overcapacity but some of this could be better utilised to help attract visitors to Ireland at a range of pricing points in the tourism sector. Government should support a more extensive marketing and promotional campaign, involving innovative offers targeted at specific market segments, in order to drive home the message that the Irish tourism product now offers exceptional product value NAMA should examine the possibility for some of the existing vacant housing stock to be used as budget holiday accommodation. 10

13 8. Loan guarantee scheme Background and context Access to credit has emerged as a major issue for the business sector, both in terms of working capital and investment finance. Many businesses report loan enquiries being turned down even before a formal application; these episodes do not get captured in official credit access statistics. Many SMEs, previously solely concentrated on the domestic market, are now looking at accessing export markets in an effort to grow and internationalise the business. Research from the OECD has, however, shown that shortage of working capital to finance exports is the biggest barrier to SME internationalisation. Potential for reform Various types of credit guarantee schemes have been in existence for many years and are designed to diminish the risks and costs associated with lending to an SME. Schemes exist in countries such as the US, UK, Canada, the Netherlands and Sweden, where the aim is to extend financing to SMEs that otherwise would not have been available. At times, the schemes have been used to stabilise credit conditions for SMEs; this was the case of the Korean credit guarantee scheme, which kept on expanding its credit portfolio in the aftermath of the Asian financial crisis. A well designed scheme can be highly effective. A review of Chile s FOGAPE scheme found both financial and economic additionality; both the volume of credit and turnover in firms participating in the scheme increased. A longitudinal analysis of Canada s small business financing programme found that participants had higher sales, employment and investment growth than other comparable firms. Various models for loan guarantee schemes exist. While a large proportion have some government involvement (this can take form of risk sharing between private financial institutions and the state), the private sector is typically in charge of management of the scheme and credit risk assessment. Various funding models also exist and the European Investment Fund participates in some European loan guarantee schemes. Government should immediately prepare work on designing and implementing a loan guarantee scheme for SMEs. The aim of the scheme should be to extend credit to firms that could not otherwise receive financing (additionality), both to help company survival in the short term and finance export reorientation. Government should investigate potential European sources of joint funding, including the European Investment Fund. The scheme should provide equal focus on both firm survival and firm expansion and support should not be conditional on employment creation. 11

14 9. Investment and public private partnerships (PPPs) Background and context The funding environment for infrastructure investment in Ireland has changed completely during the economic crisis. The previous Government s four-year plan for the public finances envisages a near 60% reduction in Exchequer capital expenditure by 2014 from its peak in The Exchequer budget of 3.5 bn by 2014 will be just 1.9% of GDP and represents a major scaling back of the State s capital investment plans. Despite the economic crisis, the demand for infrastructure remains high and the existing gaps are such that the pace of economic recovery will be greatly restricted if investment is not maintained. The experience of the 1980s demonstrates that a decade of underinvestment in infrastructure limits the economy s growth potential. It also shows that significant, and ultimately very costly, long-term socio-economic problems result from a lack of adequate infrastructure provision. This is most evident in the areas of social housing, health and education but long-term competitiveness losses also arise from underinvestment in transport, environment and energy infrastructure. Potential for reform As a consequence of Ireland s fiscal crisis, the economy can no longer look to the Exchequer as the main source of funding for much needed infrastructure. In order for the private sector to fully develop these investment opportunities, Government and the public administration system must embrace the concept of non-exchequer funding mechanisms. To date, commitment to funding models such as PPPs has been uneven and greater buy-in is needed from all stakeholders in order to substantially increase the level of private sector funding in infrastructure provision. In a time of scarce resources, use of PPPs can be a useful way of spreading public funding over a greater number of projects. The PPP market in Ireland remains challenging due to Ireland s credit downgrading, but investment opportunities will still exist over the coming years for the right type of projects. Public capital investment should not be reduced further. Government should form a new long-term capital expenditure plan that clearly outlines specific projects, their method of delivery, funding and timetable for delivery. All infrastructure investment above a certain threshold should be tested for procurement as a PPP. Government could achieve better bang for its buck by part-funding with the private sector a larger number of investment projects, rather than being the sole funder for a more limited portfolio. 12