Micheál Martin (Cork South Central, Fianna Fail)

I propose to take Questions Nos. 71 and 239 together.

Each year the National Competitiveness Council undertakes a comprehensive analysis of Ireland's competitiveness performance and publishes its results in its annual competitiveness report. The council benchmarks Ireland's performance relative to competitor countries, including Euro-zone countries. Based on this analysis the council also publishes its competitiveness challenge report, which offers a list of policy recommendations aimed at enhancing Ireland's competitive position. These recommendations, presented to both the Taoiseach and the Minister for Enterprise, Trade and Employment, make a significant contribution to policy development in all areas affecting competitiveness.

The most recent reports by the National Competitiveness Council were published in October 2004. Both reports found the economic environment for 2004 encouraging. The economy experienced significant improvements in the growth of GNP, employment and a reduction in the unemployment rate. According to ESRI's spring 2005 quarterly economic commentary, the economy will continue its robust performance with rates of 5.7% in real GDP and 5.0% for real GNP forecast for 2005, followed by rates of 5.5% and 5.8%, respectively, in 2006. Following an exceptional strong employment growth of 3% last year labour market conditions are expected to remain strong in both 2005 and 2006. It is forecast that the unemployment rate will stabilise to average 4.3% in both 2005 and 2006.

However, the council's analysis discovered several constraints and threats to future competitiveness. Chief among these was the increasing cost base relative to our trading partners. The 2004 competitiveness challenge report stated there is a need to make wage setting, governmental spending and taxation more responsive to changing competitiveness developments. We must address our increasing cost base to protect our competitiveness. This continues to be a high priority for the Government.

The Government has taken several steps to address the issue of prices and costs in Ireland. In budget 2005, by not increasing indirect taxes, the Government demonstrated its commitment to ensuring that the progress made on reducing consumer price inflation last year continues this year. The most recent consumer price index figures from the CSO show that inflation fell to 2.1% in March. That was the fourth consecutive month that Ireland's rate of inflation decreased.

If we wish to improve our competitiveness, Ireland cannot afford to have sheltered sectors of the economy immune from competition. The key to reducing prices and maintaining them at optimal levels in the long term is to ensure that vibrant competition is present in all sectors of the Irish economy. That is why the Government has strengthened the powers and resources of the Competition Authority, which is charged with combating anti-competitive practice in the economy.

Additional information not given on the floor of the House.

The NCC also found that there remains an inconsistency between our image as a high technology economy and our underlying knowledge base. The Government recognises that the research agenda is one of the most important elements in terms of our drive to increase both competitiveness and quality employment now and in the future. A group involving representatives from industry, venture capitalists, the universities and institutes of technology, Departments and agencies has developed Ireland's research and development action plan under the aegis of my Department. The plan was published in August 2004. It sets a target of spend on research and development of 2.5% of GNP by 2010 and makes a range of high level recommendations in pursuit of this. These recommendations are ambitious but represent the type of actions Ireland needs to take if it is to continue to be competitive in a fast changing globalised economy.

The NCC also made a number of other recommendations in the areas of entrepreneurship, enterprise development, innovation and creativity. These and other recommendations are being considered by an interdepartmental group of senior officials, which is chaired by my Department. The interdepartmental group is currently preparing a report on the NCC's recommendations, which will be submitted to Government before the summer.

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