Written Answers. - Border Counties' Business Competitiveness.

Rory O'Hanlon

Question:

64 Dr. O'Hanlon asked the Minister for Finance if his attention has been drawn to the difficulties that exist in competitiveness, particularly in the Border area, as a result of the punt/sterling exchange rate and different tax rates North and South; the plans, if any, he has to address this issue; and if he will make a statement on the matter. [8601/96]

I am aware that some Irish firms are experiencing difficulties in their competitiveness as a result of movements in the exchange rate with the UK. It is, however, a matter for each individual firm in the first instance to make the arrangements required to cope with the economic environment in which it finds itself. Nevertheless, the Government has a key role in trying to ensure that this environment is as conducive as possible to economic activity. The present environment is characterised by low inflation, moderate wage developments under the Programme for Competitiveness and Work, interest rates which are well below UK levels, sound public finances and a strong balance of payments surplus.

I would also point out to the Deputy that GNP growth is forecast at 5 per cent in 1996 following 7¼ per cent in 1995 and 7.4 per cent in 1994. Employment is projected to expand by over 30,000 this year following an increase of 45,000 in 1995. Thus, the environment the Government has created is demonstrably one conducive to output and employment growth.

Central to the policy framework which has achieved this success is the Government's commitment to price stability — which is facilitated by exchange rate stability. I would also point out to the Deputy that the fall in the value of sterling should be providing benefits to many businesses, in terms of lower input costs.

The process of enchancing Irish competitiveness is ongoing and one on which the Government has always been working. In the budget this year I reduced both the lower and standard rate of employers' PRSI. Following the reduction in the standard rate of corporation tax in the 1995 budget, I introduced a reduced rate of 30 per cent for the first £50,000 of income otherwise liable to the standard rate. I would also like to point out that industry in this country benefits from a corporation tax rate of 10 per cent which compares very favourably to the equivalent rate of 33 per cent in the UK.