Vol. 570 No. 2
70 Mr. Hogan asked the Tánaiste and Minister for Enterprise, Trade and Employment the new initiatives she is considering to help businesses to improve competitiveness, particularly in view of the fact that Forfás identified higher Government charges contributing over 50% to the inflation rate and increasing loss of employment in small businesses; and if she will make a statement on the matter. [18800/03]
181 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment if her Department has identified the areas of industry which have experienced the greatest increase in costs in the past two years; if she has taken steps to address the issues; and if she will make a statement on the matter. [18842/03]
186 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment the areas of the economy which are currently least competitive; the steps she proposes to address the issue; and if she will make a statement on the matter. [18847/03]
187 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment the measures she has taken to improve the competitiveness of the economy; and if she will make a statement on the matter. [18848/03]
I propose to take Questions Nos. 70, 181, 186 and 187 together.
Higher Government charges did not account for over 50% of inflation in the past year. As the Forfás report clearly states the Government-influenced category includes excisable products where price increases have occurred without any increase in excise duties. Furthermore, a significant proportion of the contribution was due to increased tobacco duties, which were more than justified. I deplore the cynical use of this analysis by vested interests to deflect attention from the need to ensure greater competition across the economy.
I fully accept that inflation is a problem and that all businesses are affected by inflationary pressures. Furthermore, the disequilibrium between our inflation level and such levels elsewhere in Europe has the potential to undermine our internationally traded sectors, in particular, and to put at risk employment and growth. I therefore welcome the sharp decrease in annual inflation to 3.7% in May.
The key to bringing inflation down is to improve competitiveness. The Government is already taking measures to improve our competitiveness in key areas. These include: strengthening competition across the economy and implementing specific measures to tackle cost pressures in key areas, such as insurance; increasing investment in research, technology and innovation, which will provide the basis for future growth in productivity; and continuing to invest in key infrastructure, such as broadband telecommunication.
On the specific issue of enterprise competitiveness, Enterprise Ireland has recently introduced a special competitiveness fund which is designed to help firms improve productivity and strengthen their overall competitiveness.
All economic stakeholders have their responsibilities in tackling inflationary pressures. The Government for its part will meet its responsibilities and its actions will be informed by advice from, for example, the National Competitiveness Council, as manifested in its recent statement on inflation, and by the anti-inflation initiative provided for under the national agreement, Sustaining Progress.
Forfás indicated in the report it published a number of weeks ago that Government-imposed charges contributed to the high rate of inflation. It is not surprising that Forfás referred to them because since the votes were counted at the last general election, €35 has been imposed on every household in additional charges such as VAT, energy, diesel and motor taxes and health and waste fees. This figure does not include insurance charges, for which the Government does not have direct responsibility but on which it has been slow to act.
The Minister of State should acknowledge the major contribution these high costs are making to job losses on a daily basis. Yesterday was "Black Monday" and over the past week more than 800 jobs have been lost in Donegal, Navan, Macroom and Westmeath. No new proposals were produced by the Minister or the Department following the much-heralded Cabinet meeting in May to suggest there is an understanding of the difficulties faced by small businesses and other companies that export or how major infrastructure and broadband technology developments can be fast-tracked to make the economy competitive and reduce costs.
What new initiatives will be undertaken by Government to address the increasing lack of competitiveness following the Cabinet meeting that was expected to address these issues and produce proposals in early May?
I refer to the findings of the Forfás report regarding inflation. The report comprised two main elements – a comparative analysis of consumer prices in Ireland and the other 15 EU member states and an analysis of the major product service drivers of consumer price inflation in Ireland in recent years. Chapter 3 set out an analysis of the national drivers of inflation in Ireland and the finding, which received much publicity and was highlighted by the media, was that more than 50% of national inflation was accounted for by Government influenced customer product services.
The report, however, went on to warn that this figure needed to be treated with caution.
That is because of the damage to the health of business and employment.
The report spelt out that the contribution of such goods and services to national inflation in recent years had been largely driven by goods that are subject to excise duty and that, while the Government has the potential to influence their price, a closer examination of developments in excise duty over the period under review suggested that the Government played a relatively minor role in driving inflation in this category over the past three years. For example, important items in the expenditure category such as beer and wine were not subject to excise duty increases. There were small increases in the excise duty on spirits but their prices increased significantly.
A review of month-on-month inflation demonstrates that price hikes in the immediate aftermath of a change in excise duty are often higher than those intended by the change and regularly monthly changes in prices may not be attributable to tax changes. The Forfás report shows clearly that Government driven changes did not cause increases in inflation.
The Government accepted the findings.
Deputy Hogan cited the report.
The Minister of State admitted the report's findings were right.
I cited the report, which stated Government charges accounted for 50% of our inflation rate in the past month.
That is a fact.
I identified a number of the charges the Minister of State and the Government have imposed on employment since the general election. Will he acknowledge that our inflation rate is still twice the European average, that no new ideas have emerged from Government regarding how the economy can be competitive and there is no urgency to tackle insurance costs, which are crippling many small businesses?
The report stated the charges were Government related not Government influenced and that is slightly different.
Is the Minister of State related to the Government?
The Minister of State is almost as good as Deputy Woods and that is saying something.
The Deputy did not listen to my reply.
