Dáil Éireann díospóireacht -
Thursday, 25 Jul 1996

Vol. 468 No. 4

Written Answers. - Monetary Strength.

Mary O'Rourke

Ceist:

123 Mrs. O'Rourke asked the Minister for Finance his views on the current strength of the Irish pound against sterling; if he has estimated the impact of this on Irish companies; the measures, if any, he proposes to introduce to alleviate the situation; and the way in which he intends to assist Irish companies to offset the difficulties. [15999/96]

Minister for Finance (Mr. Quinn)

I am conscious of the concerns of certain sectors of Irish industry about the impact of the recent movements of sterling against the Irish pound, which are due to the weakness of sterling. These exchange rate movements have taken place despite the different evolution of interest rates here compared with the UK over the past two years or so, such that Irish interbank rates are now about half a per cent below corresponding UK rates.

In practice, however, the impact of such movements of the Irish pound against sterling is complex and not all one-sided. While companies exporting to the United Kingdom can face a more difficult trading situation when sterling weakens against the Irish pound, companies also pay less for any inputs imported from the United Kingdom.

It is difficult to assess accurately the impact of particular currency movements on Irish companies because, inter alia, of the different currencies in which companies make and receive payments for their mix of inputs and outputs. My Department does of course monitor economic trends, including currency movements and trade trends, on an ongoing basis.

I have no plans to introduce measures to aid exporters to the United Kingdom. The responsibility for protecting companies against currency fluctuations lies primarily with the companies themselves. In addition, any such measures would involve a significant commitment of funds when the Government has set itself a tight ceiling for expenditure.

The Government does, however, have a key role in trying to ensure that the economic environment is as conducive as possible to economic activity. The present environment is characterised by low inflation, moderate wage developments under theProgramme for Competitiveness and Work, interest rates close to historically low levels, sound public finances, a balance of payments surplus and high levels of investment, notable under the Community Support Framework: all of these factors are beneficial for economic activity, including exporting.

In addition, in each of the last three budgets, considerable Exchequer resources were allocated to employers through reductions in their PRSI contributions. The ongoing cost of these reductions is some £124 million annually. The 1996 changes in employer PRSI reduced the costs of employment of virtually all employers. There have also, of course been substantial tax reliefs, mainly targeted at the low-paid, and changes in the corporation tax regime designed to assist businesses not benefiting from the 10 per cent corporation tax scheme. The tax and PRSI changes of recent years have to some extent been designed to assist the competitiveness of Irish companies exporting to the United Kingdom.