Dáil debates

Wednesday, 30 January 2008

Priority Questions

Economic Competitiveness.

2:30 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 77: To ask the Tánaiste and Minister for Finance the policy changes he plans to strengthen the resistance of the economy here to a downturn, in view of the loss of its competitive edge and the tougher global environment. [2569/08]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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Last month in my budget, I indicated that the outlook is for a moderation in the rate of economic expansion this year. At the time, my Department forecast GDP and GNP to rise by 3% and 2.8%, respectively. These forecasts reflected the transition to a more sustainable level of output in the new housing sector and a more moderate rate of growth in some of our major trading partners was assumed.

In my budget, I indicated risks to this outlook, including a less benign international economic climate. However, the general consensus is that once these adverse influences begin to fade, the pace of economic growth in Ireland will return to our potential growth rate of between 4% and 4.5% because our medium-term prospects remain favourable and the economy's underlying fundamentals are strong.

For example, we have a dynamic and well-educated labour force, we have flexible markets that allow us to respond efficiently to adverse developments, we have a pro-business, outward-looking society, our public finances are sound, as indicated by the low level of public indebtedness, our unemployment rate is among the lowest in the euro area and our tax rates on capital and labour are low. Therefore, while there are risks to the economic outlook and overall sentiment has deteriorated in recent weeks, we are meeting these challenges from a position of relative strength.

Notwithstanding this assessment, policies are in place to help to improve our competitive position and enable us to absorb the impact of any deterioration in the global environment in a more efficient manner. In this context, my recent budget provided a significant stimulus, with current spending rising by 8% while revenues are projected to rise by approximately 3.5% this year. I announced an increase of approximately 12% in capital spending, confirming again that the implementation of the national development plan would be a key priority of the Government. The consensus approach to policy formulation through social partnership will help us to address any short-term economic slowdown by ensuring that all stakeholders in our economy have a shared sense of the emerging issues.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Where is the strategy to protect Ireland from the worst threats posed by global difficulties? It is commonly accepted that, under this Government and the Tánaiste as Minister for Finance, we became too reliant on the property boom, which the Government fuelled. The rankings provided by the National Competitiveness Council show that we have slid 17 places and, in the past five years, lost export market share, which is the key to growth for a small, open economy. Does the Tánaiste agree with the council that, to restore cost competitiveness, a national programme driven by the Government with specific targets for utilities, where the Government is the key regulator, and other areas of public service pricing is necessary? Government-generated price increases have undermined our competitiveness. Does the Minister agree we need this sort of approach, which would confront matters like the excessive growth of quangos, excessive bureaucracy in many public services and better cost structures, and that we need a concerted drive to reinvent Ireland so we can be competitive in a tougher environment?

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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In general terms, as we face into more moderate growth rates in the immediate years ahead, the level of resources that will become available means that we must use the existing level of resources as efficiently as possible. The role of Government is to ensure that this happens. In respect of competitiveness, inflation and price stability, we will continue to have a budgetary stance that best guarantees that outcome.

While the international situation and sentiment have deteriorated, we are in a position of relative strength because the policies of the Government have halved our indebtedness during good times and have put in place a national development plan which seeks to deal with infrastructure bottlenecks. This would enhance our competitiveness through that kind of investment and the type of planned investment we have in science, technology and innovation. All these are real building blocks to maintain and enhance growth prospects in the years ahead.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Will the Tánaiste agree to some specific initiatives? For example, in the electricity sector, we are clearly 50% dearer than many of our competitors. It appears that we have decided to pay the chief executive much more. Will the Tánaiste demand that there be benchmarks for competitiveness in this utility set?

Will he agree to audit the number of quangos that have been established and which now run to 500, an increase of 200 under this Administration? Does he agree that we must look at these in order to squeeze better value from public money? Will he agree to take some definite time-limited initiatives to drive some of the change that he appears to accept in principle but where little is happening in practice?

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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I do not accept that little is happening in practice. An efficiency review has been put in place to see how we can look at issues there. In respect of the overall point made by Deputy Bruton, be it in respect of utility prices or electricity, and the Minister concerned with the advent of the all-island electricity market, which brings its own competitive pressures, we are moving from the old-style State monopoly of the past into a far more competitive environment. The investments envisaged and the question of moving to renewables and trying to reduce our dependence on foreign sources of energy and build up a competitive domestic energy industry are part of the policy framework to which the Minister for Communications, Energy and Natural Resources is working.