Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

To ask the Minister for Jobs, Enterprise and Innovation his assessment of the recent Forfás report The Costs of Doing Business 2012; if he has prioritised any of the issues highlighted; and if he will make a statement on the matter. [18971/13]

Richard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

A Forfás report that was published recently, Costs of Doing Business in Ireland 2012, indicates that business costs have decreased significantly in recent years, with overall prices in the economy falling back to levels last experienced in 2002. This is an important report in the context of our need to continue to build an export-led recovery. It examines the relative importance of different areas of cost for different sectors. The improvement in business cost competitiveness has been driven by dramatic reductions in property-related costs, in terms of purchase and rent levels, and falling prices across a range of professional and business services. We have also seen relative improvements in labour costs in Ireland, which fell by 0.9% per annum between 2008 and 2011. By contrast, labour costs in the euro area increased by an average of 4.6% per annum in the same period. While these improvements are welcome and indicate that we are moving in the right direction, we must continue to focus on actions to promote further cost reductions across the economy. The report advises that over half of recent cost competitiveness gains are attributable to favourable exchange rate movements. The report also indicates that upward price pressure is beginning to emerge in some areas, while rigidities persist within the economy.

The report highlights the fact that Ireland is still out of line with our key competitors on a range of business inputs. Despite the reductions achieved to date, labour costs remain relatively high and are over 6% above the euro area average. Energy costs remain a cause for concern, particularly for the SME sector, with Ireland as the fourth most expensive location in the euro area for electricity. Waste costs in Ireland are higher than those elsewhere in Europe. Despite the recession, legal service prices are 11% above 2006 levels. The report shows that Irish consumer prices are 12% above the euro area average. This is a significant indirect cost for business because it puts upward pressure on wage expectations. Another issue highlighted in the report is the impact on our competitiveness of labour taxation. The marginal rates of income tax are 52% and 55% for employees and the self-employed, respectively. This is higher than in many of our competitor countries. In addition, these rates commence at a relatively low level of income. Tax rates of over 50% on average incomes damage inward investment and entrepreneurship and can act as a disincentive to work. It was in recognition of this issue that I said the Government must continue to keep its promise by avoiding further increases in the burden of taxes on work if we are to sustain and accelerate the transition in our economy and the jobs recovery that has begun. We must begin to reduce the income tax burden as soon as possible, starting with hard-pressed families on average incomes.

Additional information not given on the floor of the House

I draw a comparison with our nearest neighbours in the UK, where one pays 20% tax up to approximately €37,000 and then a marginal rate of tax of 40% on income up to €175,000. The contrast highlights the mistake, in my opinion, of previous Administrations, under which 80% of fiscal correction was made through increases to income tax. The Forfás report makes a number of recommendations aimed at further improving our cost competitiveness position. Part of the Action Plan for Jobs has been the development of proposals each year that can improve our competitiveness. This report will be a valuable input into developing further proposals. Forfás is undertaking detailed work in areas such as licensing and regulation, ease of doing business and wider measures that would enhance competitiveness. This is intended to develop proposals that can be enacted in the years ahead. The implementation of these actions, combined with the Government's broader agenda to enhance productivity, will play a key role in improving our competitiveness and realising our ambition of making Ireland the best small country in the world in which to do business.

Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Electricity costs for SMEs in Ireland are now among the highest in the euro area and the fourth most expensive behind Cyprus, Malta and Italy. The cost of credit for new loans to Irish enterprise exceeds costs in the euro area for a range of loan types from the banks, but also from a State scheme, the microfinance scheme, which at over 8% is far higher than many euro projects. A warning contained within the report, as the Minister will have read, is that Irish consumer prices are 12% above euro area prices. What we are paying for food in particular is far in excess of the average in the euro area, which, in itself, is an indirect cost for business.

The Minister mentioned 2002. Between 2002 and 2006, in particular, the consumer price index and costs rocketed. It was very difficult to do anything after costs had gone up but the Minister now has the chance to intervene before those costs begin rising again. It will be difficult to lower the consumer price index unless we tackle the cost of our utilities - for example, our excessive water costs. In light of the Forfás report, has the Minister brought specific concerns or plans to the Government with regard to our utility costs and the cost of banking in Ireland? With regard to the agencies within his Department, has he any proposals for controlling the consumer price index, particularly the cost of food, at a time when labour costs have come down and people are being paid less while the cost of living is actually going up?

Richard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

As the Deputy knows, the Government has a series of initiatives in the area of water and waste which are designed to produce a more cost-effective and efficient delivery of water and waste to the industrial sectors. The report seeks the rapid implementation of those. In the case of electricity, while the Deputy might be better tabling a question to the Minister with responsibility for energy, I understand the ESB has been implementing a process of cost reduction. Some of the disadvantage is in the fuel mix we have. No doubt the ambition to diversify sources of fuel is an important aspect of long-term delivery of cost-effective electricity.

In the area of consumer prices, I have beefed up the Competition Authority, which will be merged with the Consumer Agency later in the year, and I have put additional staff there to look at areas in which there is potential or real abuse of competition. I am determined to see effective implementation of our competition legislation. The issue with regard to banking is one we can discuss and I acknowledge the point that has been made.

Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Forfás also points to the difficulties arising in the property sector, particularly the lack of availability of high-quality office space and the implications this has for enterprise. Is this something the IDA is dealing with or aware of? Are there specific proposals in this regard?

Richard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The IDA is very much aware of this and its chief executive, Mr. Barry O'Leary, has pointed out that there are now potential scarcities in respect of high-quality office space for new developments in Dublin. The issue is whether the margin is there for speculative building and whether it is willing to do that at this point. I know the IDA has, in certain cases, lodged and obtained planning applications in areas in which it feels the issue of property opportunities could hamper development. The IDA is very alert to this issue and will pursue it in every possible way.