Dáil Éireann Debate, Wednesday - 18 February 2009
147 Deputy Bernard J. Durkan asked the Minister for Finance the way it is intended to improve the competitiveness of the economy by way of imposition of the so-called public sector pensions levy; and if he will make a statement on the matter. [6570/09]
View answer149 Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he has quantified the extent to which recent budgetary cutbacks are expected to improve the competitiveness of the economy; and if he will make a statement on the matter. [6578/09]
View answerI propose to take Questions Nos. 147 and 149 together.
The economy's competitive position has deteriorated in recent times. This deterioration has been driven by a combination of factors including a strong euro, wage increases in excess of productivity and a relatively high inflation rate.
As the Deputy is aware, national competitiveness is a shared responsibility of all in society. Regaining our competitive position — which as a small open economy is critical to our economic success — will require each of us to play our part and work towards this end.
For its part, the Government has put in place a budgetary strategy to restore stability to the public finances. This strategy involves a number of measures including reducing and prioritising current expenditure and in this regard, the introduction of a public sector pension levy is a central element. While it is difficult to quantify the precise effects of such measures on national competitiveness, I am confident that Government action to stabilise the public finances will have a positive impact in terms of restoring wider confidence in the Irish economy, thus boosting our attractiveness as a location for inward investment. In addition, to the extent that the public sector pension levy will serve to promote wage adjustment in the private sector via a demonstration effect, there will be a knock-on effect for competitiveness.
I would also point out that by undertaking the necessary adjustments now, the Government will avoid having to take more injurious action in the future. In this way, Government action is supporting the long-term competitiveness of the economy.
More generally, the Government has, and will continue, to support competitiveness. To this end, the Government is committed to maintaining a pro-enterprise environment, and has implemented policies aimed at improving competition in product markets and flexibility in the labour market. For example, in Budget 2009, I re-affirmed the Government's commitment to the 12½ per cent rate of Corporation Tax. The subsequent Finance Act contained a number of very significant changes to the R&D tax credit scheme aimed at encouraging further R&D activity here. In addition, the Government is continuing to prioritise productivity enhancing investment under the National Development Plan.
