Resilience-focused Budget will enable economy to absorb inflation volatility & technological disruption – Ibec
- Uncertain inflationary environment could see inflation rate of 4% or higher
- Ibec’s Pre-Budget submission highlights economic resilience required in the areas of energy and technological disruption
Ibec, the group representing Irish business, has today launched its Pre-Budget submission- Building a Resilient Economy - noting that despite our strong fiscal position, the Government’s focus for Budget 2027 should look to inject resilience through specific measures aimed at enabling our economy to navigate global shocks. These include the ongoing energy crisis and the significant technological change brought about by AI, which will require a deliberate transitioning of our workforce skills. Ibec believes that as part of the Government's budget package, a €2bn contingency needs to be factored in to provide a level of budgetary flexibility given the current climate.
According to Ibec’s submission, the current path of both interest rates and inflation- potentially hitting over 4% this year is likely to result in increased borrowing costs for governments and volatility in tax revenues. The submission calls for the Government to grasp the opportunity, presented by the €2 billion surplus sitting in the National Training Fund, to investment ambitiously to position Ireland as the leading country in preparing its workforce for a rapid period of technological change and opportunity.
Speaking about Ibec’s Pre-Budget submission. Chief Economist and Head of National Policy, Gerard Brady said:
"Budget 2027 can be framed in three ways, firstly, what needs to be done in the short term to support the costs associated with inflationary pressures, both for employers and employees, secondly, what needs to be done to ensure we do not adopt a passive approach to the transformative impact AI is having on our workforce and more broadly, what we are doing to ensure our long-term competitive advantage is protected.
"The fact that Ireland has faced the second energy affordability crisis in four years underlines the need to invest in our resilience along with protecting households and businesses. It underlines the imperative to transition away from fossil fuels and accelerate new energy infrastructure delivery. This can be done by reducing policy-related fixed costs on electricity bills through direct Exchequer subvention and directly scaling up enterprise decarbonisation grants and capital allowances. To secure our competitive advantage, Budget 2027 must reinvest current economic resources into long-term productivity, technological preparedness, and structural resilience. This can be done through the likes of expansion of the R&D tax credit and an investment to upgrade national resilience, cyber, and defence capabilities.
Speaking specifically on the impact of AI on the labour market Gerard Brady said:
"The labour market is undergoing a profound technological shift, experiencing 'creative destruction' in real time. While AI automates existing tasks, emerging opportunities are redirecting capital and human resources toward new markets. This latter force holds the key to long-term productivity and prosperity.. Ireland is well-resourced to make this labour market transition through employer contributions to the National Training Fund. We must now choose whether to remain passive observers of technological change or become active architects of tomorrow’s workplace. Our ability to be a net beneficiary as result of AI will come down to how we manage this skills transition. If the Government does not fully maximise the National Training Fund to support training and upskilling our workforce to meet these rapid changes and position our workforce as the most prepared for the changes coming, it must return those funds to businesses to invest in skills development directly.
Key Recommendations:
- National Training Fund (NTF) & Labour Market
- Invest the projected annual NTF surpluses (€200 million to €400 million from 2026 to 2030) into strategic, non-inflationary skills and training for workplace upskilling and AI integration.
- Establish a strict maximum target for the NTF cumulative surplus under a "use it or lose it" rule. Reaching this cap should trigger an automatic, temporary suspension of the training levy, returning funds to employers. The existing unused fund is €2 billion.
- Allocate €125 million from the NTF surplus to rapidly expand Skillnet Business Networks, Springboard+, Microcredentials, and "Skills to Advance."
- Innovation, Digitalisation, & Productivity
- Introduce a €130 million expansion of the R&D tax credit for related-party R&D.
- Allocate €190 million to AI and digital preparedness for business, including a new €10,000 AI training grant for SMEs/Mid-Caps.
- Invest €410 million to upgrade national resilience, cyber, and defence capabilities.
- Taxation and business costs
- Double index income tax bands and credits to offset inflation, including a €3,000 increase in the top tax entry point for Budget 2027, to make up for a failure to index bands in 2026.
- Unlock Domestic Capital: Introduce a tax-exempt Savings and Investment Account to encourage domestic investment.
- Ease Payroll Burdens: Postpone the planned €210 million PRSI increases in a period where employment growth is slowing in sectors impacted by rising costs.
- Energy & Decarbonisation Resilience
- Create a €2 billion energy crisis contingency reserve to fund inflation-related measures and guarantee the delivery of critical infrastructure.
- Reduce policy-related fixed costs on electricity bills through a €300 million direct Exchequer subvention.
- Increase enterprise decarbonisation grants and capital allowances by over €70 million.
Ends
