Micheál Martin (Cork South Central, Fianna Fail)

I emphasise the important priority I attach to business costs and the broader issue of competitiveness. There has been an increase in business costs in areas where statutory and independent regulators have to respond to international price movements, for example, in energy markets. These have undoubtedly contributed to increased business costs, but these increases are also a burden on all economies. More broadly-based increases in world commodity prices have also increased raw material and component costs for business.

I wrote to the chairman of the Commission on Energy Regulation emphasising the competitiveness implications of large energy price increases at a time when international prices were falling. The CER agreed to my proposal for a forum, including the enterprise development agencies, at which the importance of competitiveness could be discussed with the CER in the context of its analysis of price changes.

According to the Department of Finance, over the long term the Government has contributed very little to inflation. On average in the ten years to 2006, it is estimated that indirect taxation added an average of approximately 0.5% a year to the CPI.

In the mix of business input costs there will always be variability in costs. Irish enterprises cannot be insulated from external-driven price pressures. What we can do, however, is maintain active oversight of the competitiveness agenda and internal pressure points. For example, in the last three budgets there was no increase in indirect taxation apart from the recent health-driven change to tobacco duty. These budgets were designed to limit inflationary tendencies by not increasing indirect taxation.

We are also making sure that the economy consistently maintains a level of relative competitiveness that encourages firms to invest, expand and create employment. While we cannot be a low cost economy like India or China, what we are doing — and doing well — is managing our competitiveness so that we sustain growth and prosperity.

I am not complacent about cost competitiveness. We must concentrate on areas that can be influenced domestically. It must be recognised that tackling the cost challenges requires a response from all sections of society and not only from Government. Consequently under Towards 2016, we are re-establishing an anti-inflation group to proactively address areas where costs pressures diverge from those of our competitors.

On the topic of business costs, I would also like to mention the National Competitiveness Council's recently published Statement on the Costs of Doing Business in Ireland. Looking at overall business costs in key sectors, the analysis points to Irish cities being on average 15% more cost competitive than the average of other high income cities. The research highlights that Irish cities, besides Dublin, show the greatest cost competitiveness compared with others that were looked at in medical technologies, engineering and food processing. These are important sectors for economic development and the report underlines the competitive position of a large part of our manufacturing sector. I am confident that our broadest competitive position will remain robust and particularly in those sectors of the economy which will drive economic growth and employment.

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