Thursday, 3 October 2019

Questions (130)

Michael McGrath


130. Deputy Michael McGrath asked the Minister for Business, Enterprise and Innovation the specific actions taken to tackle the cost of living and the cost of doing business as identified by the National Competitiveness Council; the rank of Ireland in the EU in terms of the EUROSTAT price level index based on current data; the number of percentage points higher than the EU average in terms of prices; and if she will make a statement on the matter. [40463/19]

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Written answers (Question to Business)

The National Competitiveness Council’s ‘Cost of Doing Business in Ireland 2019’ report found that while Ireland is a high cost economy, the cost base for enterprise is internationally competitive across a range of metrics (e.g. the cost of starting a business, communications costs, and average income taxes). However, the Council noted that cost pressures are evident in some areas including the labour market, credit, business services and residential property.

Examining our price level index, an indicator of aggregate prices relative to the EU average that is deflated by GDP, Ireland had the 5th highest prices in the European Union, behind Denmark, Finland, Luxemburg and Sweden. In 2018, Ireland’s purchasing power parities price level index was 13.3 percent higher than the EU average. Nevertheless, prices in Ireland increased by 0.7% in 2018, which was markedly lower than the European Union inflation average of 1.9%.

The National Competitiveness Council (NCC) plays an important institutional role ensuring that the Government has an independent voice raising important competitiveness and productivity issues. Under the Council’s Terms of Reference, it is required to prepare two annual reports:

- An annual report benchmarking the competitiveness of Ireland’s business sector against international peer countries; and,

- An annual report outlining the main competitiveness challenges facing the business sector in Ireland over the medium term, and the policy responses required to meet them.

Alongside these reports, they also produce a Cost of Doing Business report, a Productivity Statement, and a series of shorter competitiveness bulletins. As the Minister for Business, Enterprise and Innovation, I am responsible for presenting the findings of the NCC’s competitiveness documents to the Taoiseach and the Government.

Addressing Ireland’s competitiveness remains a key priority for the Government. We continue to monitor Ireland's cost base and to analyse the factors that are crucial to improving our competitiveness. A range of initiatives are in process across Departments to: enhance our cost competitiveness and productivity; improve the ease of doing business; reduce the administrative burden businesses face; and, drive greater efficiencies across the enterprise base.

Significantly, in March 2019, Future Jobs Ireland was launched, a cross-government framework designed to improve our economy’s resilience in the face of emerging and future challenges. It sets out 26 ‘ambitions’ to 2025 across five pillars in the areas of innovation; productivity; skills and talent; participation; and transitioning to a low carbon economy. This initiative has proposed concrete and ambitious actions to enhance our productivity and competitiveness in order to ensure that we are well positioned to adapt to transformational changes the economy will face in the years ahead.

A range of specific deliverables in Future Jobs Ireland 2019 aim to enhance the business environment and improve competitiveness, as well as other factors, that contribute to specific sectoral cost challenges. For example:

- On credit and financial costs, the Future Growth Loan Scheme will provide long term debt financing for strategic investments at competitive rates in a post-Brexit environment;

- On legal services, new business models for legal services will be introduced, including new legal partnerships and limited liability partnerships;

- On construction, an implementation plan for actions to stimulate construction sector productivity will be delivered, including greater deployment of Building Information Modelling.

Increasing productivity is the only long-term sustainable way of increasing the standard of living for our people, and there are a range of further initiatives underway across Government to enhance productivity, including:

- The review of SME policy designed to assess the SME business ecosystem and the range of supports offered to SMEs undertaken by my Department in conjunction with the OECD; and

- The development of an Industry 4.0 strategy to respond to the challenges and opportunities arising from the impact of digital technologies.

As a small open economy, we must never underestimate the importance of maintaining competitiveness, and ensuring that the cost of doing business does not impede this. In this regard, the actions outlined form an integral component of the Government’s over-arching plan for the future of the Irish economy.