Statement | Budget will harm small businesses in Wicklow

Stephen Donnelly TD, the Independent TD for Wicklow and East Carlow, has today slammed the Government for introducing a budget that will have “a corrosive effect on small businesses throughout Wicklow”.

“A range of measures in this budget will threaten small businesses and jobs in Wicklow,” Stephen Donnelly said.

“The Government is passing a massive bill from the State to employers. Employers face a hike in their pension contributions and a massive increase in their contribution to redundancy payments.

“Some small businesses may be faced with the decision to put people out of work before Christmas, because the cost of redundancy is going to increase by 75% in the new year.

“The Government has not been able to differentiate between large multinationals, which can afford redundancy payments, and small, local businesses which simply cannot afford to do so. The Government says this is a pro-jobs budget, but the reality is that it will achieve precisely the opposite.

“The increase in VAT will also hit businesses in Wicklow hard. Small businesses will close down as a result.

“Earlier this year, the Government introduced a Jobs Initiative, and argued that by reducing VAT jobs would be created – this has been of benefit to Wicklow businesses in the tourism sector. But the figures the Government produced for the Jobs Initiative suggest that increasing the VAT rate could put tens of thousands out of work. This will cost hundreds of millions of euro in social welfare and will result in a lack of returns to the Exchequer.

“The level of analysis the Government produced on the issue of VAT was ridiculous.  It is counting on having €670 million in additional revenue, but this assumes there will be no drop in consumption. There could easily be a drop to the tune of more than €150 million.

“The VAT yield has collapsed by 31% since 2007, and this year’s VAT take is already €460 million behind target. Consumer confidence is reeling, leading to reduced growth estimates for next year. Five companies a day went out of business in 2011. So a further reduction in consumer confidence caused by the VAT hike will push more businesses, especially small businesses and retailers, over the edge.

“These measures are all based on economic theory that is being misapplied. It is as if the Government went down to the local bookshop and bought ‘An Introduction to Economics’, read the first chapter, and then lost the book. The theory the Government has stated it is using is that when trying to create jobs, you don’t tax labour, and instead you tax consumption.

“This is true in a normal economy, in normal times, but in this economy and at this time it is not. In an economic crisis, you have to look at the possibility of introducing targeted, time-bound taxes on high earners. These could raise hundreds of millions of euro, allowing the Government to provide greater, vital support for small businesses.”