Dáil Éireann - Volume 592 - 16 November, 2004

Priority Questions. - Economic Competitiveness.

  73. Mr. Hogan asked the Minister for Enterprise, Trade and Employment the action he will take arising from the recent publication of the report from the National Competitiveness Council in relation to the cost base of doing business here; and if he will make a statement on the matter. [28624/04]

[645]   Mr. Killeen: I welcome last month’s publication of the National Competitiveness Council’s 2004 annual competitiveness and competitiveness challenge reports. The key findings of the reports are that the economic environment for 2004 has been encouraging, significant improvements have been recorded in GNP growth and employment, there has been a reduction in the unemployment rate and foreign direct investment, business confidence and industrial output have recovered strongly.

The council makes a number of recommendations, which are necessary to sustain Ireland’s competitiveness, in respect of matters such as the business and work environment, economic and technological infrastructure, education and skills, enterprise and enterprise development and innovation and creativity. The council recommends that Ireland should improve its cost base by removing barriers to competition in key parts of the economy, such as the retail, pharmaceutical, transport and energy sectors. It raises the possibility of the use of fiscal policy to promote economic stability and emphasises the need to make the social partnership process more sensitive to developments in international competitiveness.

Market forces are the best determinant of prices. A robust competition regime and an informed consumer are essential if the market is to work properly. The Government has shown its commitment in such areas. It has strengthened the powers and resources of the Competition Authority, taken determined action to introduce regulatory reform in the insurance sector and established a consumer strategy group to advise on the development of a national consumer policy. The Competition Authority is undertaking reviews of certain building, legal, medical and construction professions to address competition issues in sheltered sectors of the economy. Sustaining competitiveness, including cost competitiveness, will continue to be a high priority for the Government.

  Mr. Hogan: With respect to the Minister of State, I am afraid he has ignored a great deal of the National Competitiveness Council’s report. The chairman of the council, Mr. William Burgess, has said that the issue of costs is the major economic challenge the Government faces. Many stealth taxes have been imposed in the past two years. The managing director of Tesco Ireland recently told the Joint Committee on Enterprise and Small Business that waste disposal costs 250% more in Ireland than in the UK. The rate of VAT is 21.5% here but just 17% in the UK. VAT on diesel and other fuel products increased by 1% in the last budget. The regulator in the utilities and energy sector, Mr. Reeves, constantly increases energy prices on the spurious basis that he needs to increase prices to bring about more competition.

[646] Will the Minister of State acknowledge that the Irish economy faces a difficult challenge, in respect of its cost base, as it endeavours to cope with its competitors? What action would the Minister of State recommend the Minister for Finance to take in the budget to address that challenge? Is he studying the Single Market of the European Union to increase competition in various sheltered sectors of the Irish economy and to ensure that customers can benefit from the presence of European companies?

  Mr. Killeen: The Deputy referred to the role of the regulator, which was debated at some length during Taoiseach’s Question Time. It is clear that the Government is examining that matter. Considerable progress could be made in this area if the examination is successful. The Deputy is aware of the work of the anti-inflation group, which has been meeting for a long time and has enjoyed considerable success in getting its proposals dealt with.

Most of the Government’s progress in respect of cost competitiveness has been made in the insurance market. Many people strongly believed the initiatives taken in that regard could not and would not work, but it has been proven that it is possible to deal successfully with the difficulties in this area. The Government, which is aware of the competitiveness challenges that arise from the report, is continuing to address the recommendations in that regard.

  Mr. Hogan: The Minister of State is correct to state that the insurance market has stabilised. He is aware that the Tánaiste received all-party support in the Oireachtas when she brought legislation to it to facilitate that change. The Personal Injuries Assessment Board has not yet properly come into focus because it is being challenged in the courts. A case was taken on the first day of the new law term to prevent it from doing the work it has been charged with doing. I am sure all Deputies are keen to ensure that the body will be up and running as soon as possible, so that it will have a chance of having a major impact on the cost of processing claims. Does the Minister of State agree that genuine competition will not be seen in the insurance sector and small businesses which are being quoted huge premia will not be assisted if the Single Market of the European Union is not completed to enable small business to shop around the EU for more competitive quotes? I ask this question in light of the fact that just six general insurance companies are prepared to give quotes to small businesses in Ireland.

  Mr. Killeen: An examination of the insurance area illustrates well the challenges we face in this regard. The Deputy is right to suggest that competition affects prices and value in this sector more than in many other sectors. He is also right [647] to point out that the Personal Injuries Assessment Board has been challenged in the courts. The court challenge highlights the difficulty of dealing with the problems in this area. The National Competitiveness Council report contained good news about costs in areas such as food and clothing and emphasised Ireland’s positive position in that regard. It addressed the areas of competition and consumer policy in considerable detail. Despite the ongoing difficulties in the insurance sector which were mentioned by Deputy Hogan, it is fair to say that considerable progress has been made. I do not doubt that similar progress will be achieved in the other areas if the report’s recommendations are adopted.