I propose to take Questions Nos. 31, 121 and 122 together.
Under the 2012 Action Plan for Jobs, I requested Forfás to undertake research into a number of factors impacting on Ireland’s international competitiveness, to benchmark these factors and to develop proposals to systematically reduce excessive key business costs or delays.
Forfás’s research indicates that in the period between January 2000 and April 2008, Ireland suffered a 22.5% loss in competitiveness. However, in the period from April 2008 to July 2012, Irish cost competitiveness improved by 19% as measured by the Harmonised Index of Consumer Prices. Prices have now fallen back to levels last seen in 2002. Over half of this improvement is attributable to favourable exchange rate movements.
The Forfás research benchmarks Ireland’s performance against a number of our key trading partners, as well as the OECD and Euro area averages. Some of the key messages emerging from the benchmarking exercise are that:
- Labour costs in Ireland have fallen marginally since 2008. While wage growth has started to resume of late, it is at a lower rate than elsewhere in the Euro area, meaning that our labour cost competitiveness continues to improve.
- Construction and rental costs have fallen significantly since the collapse of the property bubble. Rental costs for office space declined by 45% in the period 2007-2011. Other property costs such as stamp duty and local authority rates have also been reduced in recent years.
- In 2011, the cost of most business services in Ireland had fallen to, or below, 2006 levels, with the exception of the Legal, Accounting, PR and Business Management categories where prices remain marginally above 2006 levels.
Areas where Ireland is less competitive internationally include transport, electricity costs, water costs for industrial users, waste disposal costs and broadband.
The Forfás report concludes that while Ireland has regained some cost competitiveness, further progress is required if Ireland is to return to strong economic and employment growth. I propose to bring Forfás’s research paper to the Cabinet Committee on Economic Recovery and Jobs shortly for further consideration.
The Action Plan for Jobs includes a series of measures for delivery across Government to reduce business costs and improve competitiveness. The vast majority of the actions for delivery in 2012 were implemented and we will continue to build on this progress in the 2013 Action Plan which will be launched in the coming days.
