Dáil Éireann díospóireacht -
Tuesday, 9 Dec 2003

Vol. 576 No. 5

Written Answers. - Economic Competitiveness.

Bernard J. Durkan

Ceist:

106 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment the steps she has taken or proposes to take to combat the price rises which are seriously undermining the competitiveness of the economy; the areas most seriously affected by price rises in excess of the rate of inflation; her proposals to deal with same; and if she will make a statement on the matter. [29858/03]

Tánaiste and Minister for Enterprise, Trade and Employment (Ms Harney):

The Government is committed to improving Ireland's competitiveness and ensuring that Ireland is well placed to take advantage of any potential upturn in the world economy. The Annual Competitiveness Report 2003 and the Competitiveness Challenge 2003, produced by the National Competitiveness Council, state that Ireland's immediate priority must be to slow the increase in prices and costs. During October 2003, Ireland's inflation rate fell to 2.3%. However, despite this encouraging trend, we must not become complacent as many of our EU partners and other competitors currently have lower levels of inflation. The Government is committed to further reducing Ireland's rate of inflation as low inflation will stabilise firms' costs and provide them with a solid competitive business environment from which they can successfully compete on both domestic and international markets.

The budget for 2004, as announced last week by the Minister of Finance, had at its core the need to preserve Ireland's competitiveness. The Government recognised that keeping inflation low was a key priority when formulating this budget. Keeping inflation under control was important for essentially two reasons. First, a low inflation rate improves the performance of the economy and enhances the competitiveness of Irish industry and, second, a low inflation rate is central to the partnership programme, Sustaining Progress. The goal of Sustaining Progress is to create a virtuous circle of low inflation, moderate wage growth and higher productivity, thereby providing a firm competitive business environment for Irish industry. In light of the fact that a new wage agreement will be discussed with the social partners next year, it was of vital importance to continue to control inflation in order to create the virtuous circle highlighted in Sustaining Progress.

The Government continues to take steps to strengthen competitiveness across the economy and to implement specific measures to tackle cost pressures in key areas for Irish industry. As we are all aware, one of the areas most severely affected by price rises in excess of the rate of inflation is insurance. Almost every business in Ireland has been adversely affected by increasing premiums and, as a result, this has fuelled Ireland's inflation rate. I am implementing a programme to fundamentally reform the insurance market to tackle the issue of high premiums. This proposal is already having an impact with insurers announcing premium reductions. It is particularly satisfactory the CSF cited insurance as a significant factor in the recent sharp reduction in the consumer price index. I am committed to continuing with the reform programme and bringing about improvements in the functioning of the insurance market.

I firmly believe that the most important and sustainable method for reducing costs and ensuring they are maintained at an acceptable level is to facilitate increased competition in all sectors of the economy. We cannot afford to have sheltered sectors of the Irish economy immune from price competition. Competition in all sectors must be encouraged to ensure goods and services are provided at an efficient and affordable price. The powers and resources of the Competition Authority have been increased substantially to enable them to effectively tackle cartels and abuses of dominant position and to recommend regulatory reforms to improve competition in key markets.

The Government is aware that the largest component of Irish Inflation can be attributed to the services sector. It is therefore of great importance that we open the sheltered enclaves of service provision to full vigorous competition. We fully support the European Commission in its endeavours to fully complete the internal market for services so that services may experience the same level of success and competition associated with the European internal market for goods.