Bernard Durkan (Kildare North, Fine Gael)
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Question 9: To ask the Minister for Finance his proposals to address the downturn in the economy with particular reference to improving the cost base; if an effort has been made to identify the cause or causes which have to date contributed to a deterioration in the competitiveness of this economy; and if he will make a statement on the matter. [31535/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The deterioration in the economy's competitiveness relative to that of our main trading partners has been driven by a combination of factors. These include a strong euro, the global rise in commodity prices and wage increases in excess of productivity. The relatively high rate of inflation we have experienced over the last number of years has also played a role. At this stage, price levels here are in excess of 20% above the euro area average.

Improving our competitive position is essential to facilitate a rebalancing of the economy towards more sustainable, export-led growth and to maintain Ireland's attractiveness as a location for inward investment.

While external factors such as the price of oil and exchange rates have an impact on domestic costs, these are beyond our control. As such, we must seek to control those costs which we can influence. We must also take steps to improve productivity.

In support of these objectives, the Government is committed to maintaining an appropriately low burden of taxation on capital and labour, and has implemented a range of policies aimed at improving competition in product markets and flexibility in the labour market. Furthermore, despite the recent weakness in the public finances, this Government will continue to prioritise investment under the national development plan that enhances future productivity. These measures will equip the Irish economy with the skills, infrastructure and operating environment needed so that we can take advantage of the global pick-up when it emerges.

While my Department, along with the Tánaiste's Department and the National Competitiveness Council all take an active role in monitoring competitiveness developments on an ongoing basis, I would point out that national competitiveness is not solely a matter of Government policy. It is a shared responsibility of all the social partners — Government, employers and unions. Regaining our competitive position, which as a small open economy is critical to our economic success, will require each of us to play our part and work together to this end. This means ensuring that externally driven price increases do not become embedded in our system as that only creates a vicious cycle from which no one wins. In this respect, the willingness of the various parties to compromise and adopt a realistic approach to wage developments in the recent pay talks is welcome.

Richard Bruton (Dublin North Central, Fine Gael)
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I suppose it is the elephant in the room so far as competitiveness is concerned, but can I ask the Minister about the role of sectors that he manages or regulates? Does he accept that half of the inflation generated since 2000, excluding mortgage interest, has been generated by services directly provided or regulated by the Government? Does he intend to benchmark the competitiveness of services such as waste disposal, electricity and communications? These are all areas where Ireland has had a much more rapid increase in costs than any other country in the EU zone. Has the penny dropped with the Government that it is the Minister who manages many of these services and regulates the price increases? Does he not have a responsibility, therefore, for driving down costs in these key sectors? This was not mentioned in his reply.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Government collectively has a very important fundamental duty to maintain our cost base under control as much as possible. My Department does not control the cost of electricity in the State, which is one of the cost factors which bears on our inflation. We have established as a State an independent system of regulation to determine energy prices. That independent process is informed by objective characteristics.

Richard Bruton (Dublin North Central, Fine Gael)
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We have the highest price for electricity and the highest rate of increase. Riddle me that?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Bruton made the case that I was personally responsible for the price of electricity.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister does not have personal responsibility. The responsibility lies with the public sector, which he manages.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I wish to point out that neither I nor my Department is responsible but that the Government collectively has to take the decisions that ensure we have the lowest possible price in the Irish market. The Deputy referred to inflation in respect of public sector costs generally. I can assure him that, as Minister for Finance, I keep a very wary eye on any such increases in public expenditure. It is a fact and an international phenomenon that the costs of health care and the health system are subject to what is called "medical inflation". One suggestion made by Deputy Bruton, which was echoed by Deputy Burton, concerned value for money audits in the health service. Deputy O'Donnell also raised that question. That is an important issue which the Oireachtas should examine. I certainly would be interested in discussing that with the Opposition spokespersons.

Joan Burton (Dublin West, Labour)
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In the context of preparing for the budget, has the Minister taken the opportunity to look at comparative costs for public services in other countries? For example, one can visit a doctor in France and expect to pay €20 or €30 and proportionate amounts, perhaps, €70 or €80 to visit a consultant, whereas in Ireland the cost of a visit to a doctor, unless one has a medical card, would be at least 100% higher and in the case of a visit to a consultant probably 500% higher. The Government along with the Minister for Health and Children, Deputy Harney, has been encouraging an aggressive introduction of private for-profit medicine into the Irish health sector. We have had a private health sector for a long time but it was largely not-for-profit, religiously-based involving various denominations.

Will the Minister agree that the private for-profit health sector in Ireland is charging what the market will bear? The costs that are being charged for private health services in Ireland are almost at the top end of the range in terms of the European Union, often with dramatically less quality, as is clear from the very sad inquests we have read recently, than the comparative European standard of delivery. This is where the Minister's take on competitiveness and costs comes into play. I wish the Minister well in his job but how does he propose to get his Department to analyse and deal with this type of inflation which happens all the time in regard to costs in Ireland?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As regards the health service, primary responsibility for the formulation of proposals rests with the Minister for Health and Children. The matter is collectively considered by the Government at regular intervals. In regard to the costs of the health service, I do not accept Deputy Burton's assumption that the for-profit sector is necessarily more expensive than the public sector provision.

Joan Burton (Dublin West, Labour)
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Has the Minister used it? How many of his consultants use it?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The public sector provision also carries a considerable cost driven by normative salary rates which are well in excess of those of many of our European partners at all levels of the service.

Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister speaks continually about external factors for which he certainly cannot be held responsible. When we joined the euro we lost control of our exchange rates and interest rates but the one thing we can control is inflation. The Minister is probably aware that international indicators of competitiveness rank us as the worst of the euro countries. In light of what the National Competiveness Council recommended, that Ireland should try to get its inflation rate well below the EU average, when will the Minister have an inflation policy in place? What target inflation rates does he expect to put in place? There is a lack of leadership in this area.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The budget will provide a framework with regard to our costs and competitiveness for the future. I do not accept Deputy O'Donnell's casual reference to the fact that we lost control over our exchange rates when we joined the euro. The reality is that Ireland has been locked into some form of monetary union since the earliest part of the 19th century. For a large part of that history we have had no control over our exchange rates and we had a very limited control over these during the short period when we were in the European exchange mechanism from 1979 onwards. I do not accept this. It is an important point because we have had a very big debate on Europe——

Kieran O'Donnell (Limerick East, Fine Gael)
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We devalued.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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——and the dissemination of inaccurate information played a major part in that debate.

Kieran O'Donnell (Limerick East, Fine Gael)
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What about the inflation rate?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy must wait for the budget.