Competitiveness and Consumer Protection Policy: Statements (Resumed).

Ms Terry

I welcome the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Michael Ahern, to the House. This debate is important in terms of our economy and people's confidence in it. Nobody can deny that the economy has done well and we are all proud of how well the country has done over the past number of years. However, we want to ensure the economy continues to grow and that growth is sustained through good infrastructure. We must put systems in place through legislation on the built environment that will make the economy work well for the business person, employers and consumers.

I wish to mention a number of areas where our competitiveness is not as it should be or where there is room for improvement. We need much work on our infrastructure. I live in a part of Fingal which has seen tremendous growth over the past number of years, due in no small part to Dublin Airport, of which we are proud. It has brought inward investment to the Fingal area, the eastern region and Ireland generally. It is important we make the necessary changes and improvements to Dublin Airport to ensure its competitiveness is maintained. Monopolies do not help competitiveness. When we talk about redevelopments or improvements at Dublin Airport and the provision of a second terminal, we must ensure that through our decisions we provide a competitive environment and do not maintain the current monopoly.

We should also look at our public private partnership arrangements which deliver major infrastructure to the country. We need to ensure that they work properly and that structures are put in place to ensure they will deliver the best infrastructure possible. Improvements can be made in this area.

We must also examine our communications system. It is not delivering a competitive environment. Take, for example, the position of broadband. In November 2004 broadband was in only 6% of our homes. This falls way behind the European average. We should be near the top of the league in this respect and should ensure we are to the fore with our communications. We are falling behind. There are many companies that would be more competitive and better equipped if they had broadband. Many people who work from home, whether for pleasure or business, should be connected to broadband. The sooner we tackle that problem and provide broadband nationwide, the better it will be for us all in ensuring we can be a competitive nation.

The phrase "rip-off Ireland" has been well used and is well deserved. Ireland has reached a stage where it is very expensive to do even the simplest things. To move about and to purchase even the basic necessities costs more than elsewhere in Europe. Between 2001 and 2002, Ireland overtook the United Kingdom and Sweden to become the third most expensive country in the European Union for consumer goods and services. By 2003, Ireland was almost on a par with Finland as the most expensive country within the eurozone. Both countries were significantly more expensive than the next group of eurozone countries.

Dublin is now the 21st most expensive city in the world, a placing that does not give us any reason to be proud. The capital city is more expensive than Los Angeles, Miami, Singapore, Honolulu, Vienna, Helsinki and Abu Dhabi. Dublin is the fourth most expensive capital in the European Union, behind only London, Paris and Copenhagen. This situation does not provide for competitiveness. We are falling behind. We need to tackle the impediments to our competitiveness and provide rights to our consumers so that they have confidence in the economy.

The National Competitiveness Council said Irish prices rose 22% more than those in other EU countries in the years 1999 to 2003. Mr. Jim Power, the chief economist with Friends First, has stated: "Irish competitiveness has been seriously eroded by a sharp increase in the overall cost base, which will not be reversible." That does not inspire confidence in the consumer and the Government's response has not been adequate.

Budget 2005 was the latest opportunity the Government had to tackle increased prices and taxes and competitiveness. Since the last election, the Government has hit the taxpayer 34 times with new and increased taxes and charges. For example, in 2002 VAT increased by 8%; the drug refund scheme threshold increased by 31%; bank card charges increased by 108%; ESB bills soared by 13%; bus fares increased by 9%; VHI charges increased by 8.5%; and many other charges were increased, including those for accident and emergency department visits and waste disposal. Many stealth taxes are being imposed on the consumer and his or her final tax bill does not reflect the total tax he or she has paid when stealth taxes are taken into account. The increases in such taxes in recent years is worrying. They sneak up on people. Many people do not even realise the amount of additional tax they pay. This leads to high inflation. Is it sustainable? How far can the Government go?

Ireland has fallen in the World Economic Forum's global competitiveness report from fourth in 2002 to 32nd, due mainly to the Government's failure to control prices. A great deal needs to be done to tackle increasing costs. If the Government fails to do so, many businesses will close and jobs will be lost. Traffic congestion in Dublin and other cities is costing employers heavily as employees experience delays getting to and from work. Many people who live outside Dublin but work in the city centre spend two hours commuting in each direction daily. What a waste of money. Dublin Chamber of Commerce regularly comments on how much traffic congestion costs the economy. If the Government took decisions on infrastructure quickly, the competitiveness issue would be tackled. We need a Government that will take such decisions to put the infrastructure in place and, for example, reopen the rail line between Navan and Dublin all the way to Navan and not only to Dunboyne, provide more buses and expand the Luas. Other countries less well off than Ireland have such infrastructure in place. These decisions need to be taken quickly or the economy will suffer and jobs will be lost. American companies, in particular, cannot understand why decisions are not being taken to tackle the congestion on our roads. I ask the Minister of State to address that as soon as possible.

Ms Cox

I welcome the Minister of State to the House and am pleased to contribute to the debate. I will address consumer protection later, as I would like to focus on the competitiveness issue, which is creating insecurity about the future of the economy on a daily basis. According to media reports of the recent IMI conference and various other conferences over the past number of months, the greatest issue affecting businesses is competitiveness. We are facing a grim future. Ireland used to compete on the basis of lower wage costs but our wage bill is more expensive than the US. Irish companies are losing the fight on production cost per module to companies based abroad. They are also losing the battle in terms of overhead costs, including rent, insurance and training and development. They are creating the most incredible headaches for organisations who set up in Ireland because we have educated, flexible and hard working employees. While they are still willing to work hard, companies cannot compete on cost, particularly wages.

Businesses in Ireland must comply with 161 Acts, 65 of which have been enacted in the past 14 years. How are companies supposed to manage? Under the working time directive, it is the responsibility of the employer to ensure an employee does not work more than 65 hours on average every week. In addition, if an employee, unknowingly, exceeds this number of hours, the employer will be fined or face a prison sentence. It is ridiculous. The onus is on the employer and, while workers' right must be protected, their freedom must be ensured. We must not create a State where as soon as one turns a page, one must wonder if he or she is doing it right or wrong.

A raft of equality legislation has been introduced, which is important and necessary to protect people. However, is the implementation of the legislation reviewed or analysed? If people make job applications and they are turned down because they are not suitable, they bring case after case to the Equality Tribunal claiming discrimination, thereby, wasting the time of the tribunal and the companies against which they bring cases. However, no one is preventing them from bringing false claims or penalising them for doing so.

I refer to company law. I spent two and a half hours earlier this month in the presence of an auditor at a cost of €300 an hour. I was asked to outline whether the company I run in Galway had anything to fear under the Companies (Auditing and Accounting) Act 2004 and to sign a statement, as a company director, that I had done nothing wrong under this legislation. This is regulation gone mad. Mr. Ken Lay of Enron, who started it all in the United States, must be blamed for a great deal. If I had him here right now, I know what I would do; it would not be introducing more legislation. It is absolutely insane.

We spoke of competitiveness, and we must get that back on track in this country. We are a tiny nation in the global economy, and we will only stay successful, benefit and have money to spend on social welfare, education, disability and health if we have the kind of economy that generates wealth and allows us to pay tax at 20% or 40% for the top rate. That is possible because we have enough people paying tax. That our tax base is so large allows us to justify corporation tax of12.5%. We can bring in a low-tax regime because we have so many people paying tax.

I challenge those members of the Opposition who say there have been stealth taxes over the past few months and that we are paying more and more. Let us look at that in a different way. We are paying tax on services provided, but we all have more money in our pockets because we are paying less income and corporation tax. Let us focus on creating a tax regime that charges those at the lower end of the scale less in income tax and then pay tax as we spend. There may be a need to re-examine some of those charges to ensure they are not having an undue impact on the less well-off.

However, if I earn €100,000 a year, I may contribute a great deal more in tax than someone on €20,000 because I am paying a greater percentage. Ultimately it does not matter what percentage of one's income one pays in tax if one pays more tax than the other person because one is earning more. It is a simple philosophy that is neither right nor left wing but common sense. Percentages do not matter if one is paying the right amount in tax.

I will return to the issue of the minimum wage, with which I have a difficulty. We can cite statistics which suggest that only a certain percentage of people in the country are on the minimum wage, but there are relativities. Anyone in a low-skilled job at the lower end of the pay scale in a manufacturing or service industry who was on €8 an hour before the increase in the minimum wage will now seek an immediate increase in his or her pay equal to the minimum wage increase. There is a knock-on effect. We spent many years dealing with the issues of relativity in all sectors — public service, tradesmen and trade unions. We moved away from that issue and yet we are returning to it. If the minimum wage goes up to €7.65, someone who was on €8 three months before will say that he or she should now get €8.65 — or a little more if one applies a percentage increase — since the person who was on €7 is now on €7.65. What is that doing to our competitiveness?

Senator Terry was right when she spoke about infrastructure. I will not blame the Government, but if one flies into Shannon Airport, one does not know when one lands if one will reach Galway in 45 minutes, 55 minutes or two hours and 55 minutes, since the roads let one down time and time again. One gets into the car, and for the first few miles one thinks that one is in heaven, since there is a beautiful motorway as far as Dromoland Castle, and then all of a sudden it disappears from the face of the earth. Imagine Americans and Europeans arriving in our country and seeing that. They come off the motorway and get into a three or four-mile tailback into Clarecastle and remain bumper to bumper until they reach the outskirts of Ennis. What are we to do? They come to Dublin Airport and get a taxi that takes them all the way around the city before it brings them into the city centre. Buses from the airport, which I get quite regularly, are excellent. It takes them 35 minutes on a good day, to an hour and 15 minutes on a bad day in the bus lane.

We are severely hampered by our infrastructure. We need a defined, ring-fenced Government investment programme to deal with those issues, and not merely in Galway. We must redress inequalities. Development must be balanced between east and west. We must see it in the north west and all down the west coast. This is the single biggest challenge to the future of Ireland — for my children and grandchildren. We are sitting on our laurels and not dealing with it properly. I feel sorry for the Minister, given the challenges that exist. However, if we can keep that in mind, it might help frame the debate.

Mr. Hanafin

Competitiveness is vital to our economy. We are a successful and very open island economy. We have also been very successful at redistributing that wealth. To ensure we continue to grow at the level of recent years means there is a need for competition which will assist us with innovation and value for money. Our inflation rate is currently at the average for the EU and the eurozone. Our unemployment rate, at 4.3%, is half the EU average. Long-term unemployment is 1.5%, an historically low level. Since 1997, real gross national product growth has averaged 5.7% per annum, and this year and next it is estimated that it will grow by at least 5%.

It appears that many aspects of the economy need to be addressed. I suggest that the Government is taking on board whatever is necessary and listening to what the Competition Authority is saying to us. The Government is already taking several steps to address prices and costs in Ireland. It avoided inflation-fuelling increases in indirect taxation for the second year running in the 2005 budget, thus minimising its contribution to the problem. The most recent consumer price index figures from the Central Statistics Office show that inflation fell to 2.3% in January, compared with 2.6% in December.

Last year, the Government established the consumer strategy group to advise and make recommendations for the development of a national consumer policy. In the performance of that role, the group has carried out a range of activities, including studies that investigate issues of special concern. Price trends in other parts of Europe have been examined, and some prices have been the subject of additional investigation, including those of fruit and vegetables, alcoholic beverages and pharmaceuticals.

High insurance premiums have adversely affected all businesses operating in Ireland for the past few years. However, the National Competitiveness Council acknowledged that the cost of insurance for many businesses and consumers has come down over the past year as a result of determined Government action, including the establishment of the Motor Insurance Advisory Board and the Personal Injuries Assessment Board.

Furthermore, the Government is committed to increasing competition in all areas of the economy. It recognises that the key to reducing prices and maintaining them at optimum levels in the long term is to ensure vibrant competition in all sectors of the economy. That is why we have strengthened the powers and resources of the Competition Authority, which is charged with combatting anti-competitive practices in the economy.

I will refer to one or two reports that the Competition Authority has issued. One concerned the legal profession. Over 40 proposals to remove or amend unjustified anti-competitive restrictions in the legal profession were made. Among the most significant were the abolition of the monopoly enjoyed by King's Inns and the Law Society regarding professional legal education and the removal or amendment of the rule requiring barristers to be sole traders. When those were introduced, they were badly needed, but times have changed and the Competition Authority has recognised that fact.

The Competition Authority suggested that those changes should take place for the benefit of the consumer. The changes included the following: the broadening of the Bar Council's direct professional access scheme, which abolishes the prohibition on direct access by the public to barrister services; amendment of the restrictions on the provision of conveyancing services; removal of the restriction on partnerships between barristers and solicitors; removal of the restriction on lawyers holding the title of barrister and solicitor simultaneously; new criteria to allow the entry of lawyers who qualified outside the EU; and the provision by barristers of fee information to clients in advance. All those seem very practical and necessary today. The Competition Authority is taking them on board, and I am certain the Government will follow.

Similarly in the banking sector, the authority found that customers were locked in and it was difficult for them to change banks. This was particularly the case for small businesses. It was difficult for banks to offer new or innovative services. Small businesses were not getting the benefit of lower interest rates. The source of such problems was the structural arrangements within the banking sector. The behaviour of the banks was affecting the small business community and costing up to €85 million per year. One of the recommendations made was that a customer switching code be put in place to allow customers to move from one bank to another quite easily. The Government will examine the recommendation that the Department of Finance should revise the stamp duty levy so that it does not penalise those who switch accounts. The Department of Finance should propose legislation to eliminate IFSRA's price controls on charges and fees to ensure consumers benefit.

Senators have spoken exclusively about price during this debate, but I would like to talk about innovation, which is an essential part of competitiveness. A distinguished American economist, Dr. Paul Krugman, once described price competitiveness as a dangerous obsession. He was right, to a large extent. In the medium term, countries compete with each other on the basis of innovation, rather than price. While it is important that we do not allow our wages or prices to differ greatly from those of our competitors, we should not lose sight of the fact that our prosperity will ultimately be determined by the quality of our capital endowment and the skills of our people. Far-sighted economic policy should reflect that reality.

The Government is placing an emphasis on the skills of our people and the development of our capacity for research and development. While technological innovation is vital, we should bear in mind that we are challenged each day with being innovative in all sectors of the economy. The Government has demonstrated its commitment to innovation by pursuing a programme of public service modernisation and regulatory reform. The level of competitiveness within our economy can be measured by the quality of our public administration, the flexibility of our regulatory system's responsiveness and the openness of our policy process to the changing international context. The Government has done more than any other Government to ensure our economy remains broadly competitive, which can be measured by our economic growth, our price competitiveness and our level of innovation. I commend the Minister of State on his work in this area.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. M. Ahern)

I thank Senators Terry, Cox and Hanafin for their contributions this evening. I also thank the other Senators who spoke earlier in this debate. I am glad the Seanad has given time to and focused attention on important subjects like competitiveness and consumer protection. We need to increase our understanding of the various factors which contribute to competitiveness, which is a broad subject. This discussion has helped to improve our comprehension of this complex topic.

I would like to begin by citing some macro-statistics, which tell their own story. Ireland returned to strong economic growth last year, when GNP increased by 5.5%, total employment increased by an average of 3% and domestic demand increased by a substantial 4.4%. There has been a significant decrease in consumer price inflation over the past 12 months. Ireland's rate of inflation is close to the euro zone average and it looks likely that the economy will continue its robust performance. Rates of growth of between 5% and 6% have been forecast for 2005 and 2006. Labour market conditions are expected to remain buoyant during the rest of this year and in 2006. It is likely that the positive environment for investment and employment will keep unemployment hovering around the historically low rates of approximately 4% in 2005 and 2006. Such statistics are hallmarks of a successful economy.

Despite the positive outlook I have outlined, we cannot afford to be complacent. Competitiveness is the lifeblood of a modern open economy. Given that foreign direct investment is increasingly mobile and depends on changing global economic circumstances, Ireland's future prosperity will be determined by its competitiveness. Ireland's competitive success continues to be built on key competitive strengths such as its taxation regime, which is one of the lowest in Europe, its well-educated and skilled workforce and its history of pursuing policies which are pro-business and proactively support enterprise. Globalisation means it is easier for our competitors to copy the competitive strengths which led to our remarkable economic success over the past decade. If we are to retain our competitive edge, we need to protect our strengths and develop new bases for competitive advantage, at national level and in every company.

The Government recognised, when it established the enterprise strategy group, that Ireland faces the direct and demanding challenge of moving from an economy driven by investment to one driven by innovation and knowledge. The recommendations contained in the group's report, Ahead of the Curve, will be pivotal in mapping the direction of Ireland's enterprise policy, ensuring its long-term competitiveness and increasing its corporate profitability. The recommendations aim to give the economy the capacity to move quickly to counteract emerging threats to business and to exploit the opportunities being presented by technological developments and the internationalisation of business. The Government is committed to the implementation of the recommendations. If we are to remain competitive, we must address our increasing cost base. That will continue to be a high priority for the Government, which has enacted several provisions to tackle increasing costs in a wide variety of sectors of the economy.

The Government has vigorously pursued a policy of introducing regulatory reform in the insurance sector. The establishment of the Motor Insurance Advisory Board and the Personal Injuries Assessment Board has led to a significant reduction in the cost of motor insurance. Statistics issued by the Central Statistics Office indicate that the average cost of motor insurance has decreased by 15% over the past 12 months.

Any discussion on competitiveness must be concerned with the level of competition in the marketplace and the protection afforded to consumers operating there. A marketplace is said to be effective if traders can compete robustly to sell their goods and services and consumers can readily avail of the choices offered by such competition. Markets which restrict competition or choice are ultimately self-defeating. For that reason, the policy of successive Governments has been to promote competition and consumer choice. Some of the measures which have been taken in support of that policy include a wide range of laws aimed at bolstering competition and providing certain protections to consumers when buying goods and services. Dedicated bodies, such as the Competition Authority and the Office of the Director of Consumer Affairs, have been established to enforce such laws.

One of the Government's primary responsibilities is to ensure that its policies and statutes remain effective and robust. Competition policy has been reviewed and developed in recent years for that reason. Senators will be aware of recent changes to strengthen competition law. Significant additional resources have been allocated to the Competition Authority to assist it in enforcing the law and carrying out its wider remit. The Government's initiatives in this area demonstrate its determination to ensure that those operating in the marketplace can do so on a level playing field and that traders who seek to abuse the marketplace are brought to book.

Competition and consumer protection are closely entwined and interdependent. Consumers can exercise choice only if the market offers a choice. Having strengthened competition policy to enable traders to compete and offer choice, it is incumbent on the Government to examine its policies which protect consumers when they are purchasing goods and services in the market. Some people claim that price control should be the cornerstone of consumer protection policy, but I do not accept that price control has a part to play in a modern economy. It is a failed policy of the past that should remain in the past.

The Government's view is that the interests of consumers are best served if they use the power of their pockets. I do not claim that standards should not be in place to protect consumers from unscrupulous traders who use unfair practices or false statements to mislead consumers into making ill informed choices. As I have said, a large body of consumer protection legislation has grown up in this area over time. Unfortunately, the evolution of consumer protection law has meant that the current legal framework is somewhat fragmented and dated in some instances.

The Department of Enterprise, Trade and Employment is undertaking a critical review of existing consumer protection statutes to ensure that consumer protection laws are attuned to modern markets and consumers. The review is intended to create a more comprehensive, effective and modern framework of consumer law. While work on the review is ongoing, the Department is anxious to update consumer law wherever possible, particularly to deter rogue traders who seek to mislead or abuse consumers. I am pleased to include specific provisions in the Investment Funds, Companies and Miscellaneous Provisions Bill, which was discussed earlier this afternoon in the House, increasing the fines for breaches of a range of consumer protection legislation to more realistic levels.

In addition to the aforementioned legislative initiatives, my Department also established a consumer strategy group in March 2004 to advise and make recommendations on developing national consumer policy and strategy. The group presented its final report to the Minister for Enterprise, Trade and Employment, Deputy Micheál Martin in early March 2005. The report is currently being considered by Government and I understand it may be published shortly. I am certain it will greatly assist in the development and modernisation of current consumer policy.

Competitiveness and consumer protection are key to our future growth and success. A vital element of economic growth is consumer confidence. Competitive economies, where traders actively compete for business, invariably maintain the confidence of consumers. To ensure our economy remains dynamic, innovative and competitive this Government is determined that its policies in these areas are robust and effective.

Senator Terry raised the question of infrastructure and I can confirm that the Government is committed to spending 5% of GNP on infrastructure over the next ten years. That covers roads, public transport, regional airports and all necessities for an economy that is growing at such a rate as ours is today.

I accept Senator Terry's point that Ireland's broadband service does not rank highly compared to other countries. In the recent past progress has been made. It is very important that broadband be available throughout the country. I understand it is now more widely available at a competitive price than it was six months ago. We need to have the necessary equipment and resources available to us if we are to maintain our competitiveness. The 2004 budget was deliberately non-inflationary and the inflation rate has been falling steadily since then. We are now on a par with the average in the euro zone and we will maintain our place in that league table.

Notwithstanding the recent reduction in inflation the Government appreciates that consumers are concerned about prices. The consumer strategy group met to advise and make recommendations to the Government. The report contains over 30 recommendations involving all sectors of the economy impacting on the consumer. I hope that the Government will be in a position to publish that report in the near future. A recent report on better regulation required the Government to conduct analysis of existing and future laws according to a number of criteria including whether the proposal is necessary and the effects it will have on employment. The Government fully supports that legislation should be subject to regulatory impact analysis.

As Senator Cox points out, it is important to protect workers' rights. Labour protection laws in Ireland are mirrored by laws in every developed country in the Organisation for Economic Co-operation and Development, OECD. This is the case in the United States, where there are minimum wage regulations and equality laws. The Organisation of Working Time Act 1997 was implemented in a practical, pragmatic manner. I am not aware of problems with the Act. If Senator Cox has any examples or cases where there is a problem I would be happy to investigate.

I wish to thank the Leas-Chathaoirleach for the opportunity to address the Seanad on these important issues and I look forward to discussing them with Senators in the years ahead.

An Leas-Chathaoirleach

When is it proposed to sit again?

Mr. Leyden

At 10.30 a.m. on Wednesday, 27 April 2005.

Seanad Éireann díospóireacht - Tuesday, 26 Apr 2005