Micheál Martin (Cork South Central, Fianna Fail)

I am delighted to have the opportunity to address this House as Minister for Enterprise, Trade and Employment, particularly on the vitally important areas of competitiveness and consumer policy, which fall within the remit of my Department.

Last week, the Oireachtas Joint Committee on Enterprise and Small Business heard from the chief executive of a major supermarket multiple on the reason supermarket prices are higher in this country than elsewhere. Last month, the National Competitiveness Council published its statement on prices and costs and its annual competitiveness reports outlining the cost disparity between here and other countries.

We have very compelling evidence. We also have robust analysis and no shortage of prescriptions. The National Competitiveness Council has given us a set of recommendations highlighting the areas of action on which we should focus. We also have the recommendations of the enterprise strategy group to take us forward.

The first point I would like to make clear is that tackling the issues of competitiveness and costs, both consumer costs and the costs faced by business, will be one of my major priority areas over the coming two years. I will shortly set out the actions I will be taking in my Department to address the cost and competitiveness issues but it is useful, first, to set things in context.

It is interesting to reflect and recall where Ireland has come from in terms of prosperity over the past ten years. We are now the second wealthiest country in the European Union, after Luxembourg, having been one of the poorest as recently as a decade ago. This remarkable pace of development has brought us to a situation of virtually full employment. This is perhaps the most important factor in assessing the real level of prosperity here and one of which we should feel justly proud. Furthermore, our recent prosperity means we can now afford to look to the future in terms of investment in the sources of growth for the next generation, particularly publicly-funded research and development, and provide better for the social needs of the current population.

Behind this modern legacy lies a deep and firm commitment on the part of the Government to competitiveness and growth. Ireland's competitive success has been and continues to be built on key competitive strengths such as having one of the most favourable taxation regimes in Europe, access to the European Union's Internal Market, a well-educated and skilled workforce and a history of pursuing Government policies that are pro-business, investment driven and which provide a benign business environment. Furthermore, our modern legacy is uniquely and most importantly underpinned by a shared commitment between the social partners on sustaining the progress we have made.

I would like to give the House some figures, which I believe tell their own story. In 2003, the labour market was particularly resilient, with employment growth of 1.9% creating 33,600 new jobs. This strong employment growth, while much lower than some of the rates recorded over the past decade, kept average unemployment for 2003 at a comparatively low rate of 4.6%. Despite the appreciation of the euro, the Irish economy grew last year by 2.8% in GNP terms and 3.7% in GDP terms. The performance of business, both on the part of our overseas investors and our increasingly important home-grown industry, continues to strengthen even in the face of the recent adverse global trading conditions. The performance of Irish industry has also been robust. Last year, Enterprise Ireland reported €1 billion in new export sales and 60 new high export growth companies established.

These positive trends are continuing this year. Significant improvements have been recorded in the growth of GNP, employment and a reduction in the unemployment rate during 2004. Foreign direct investment, business confidence and industrial output have also all recovered strongly in 2004. According to the National Competitiveness Council the essence of national competitiveness is how we capture economic benefits available from industries ensuring that they locate and develop within our jurisdiction. By any standards we continue to perform well in terms of our attractiveness to industry and providing employment to our citizens.

Ireland's commitment to competitiveness and growth is a mirror reflection of the basic objectives of the European Union's Lisbon goal to make the European Union the most competitive, knowledge-based society. Ireland is playing a strong part in this process which I will briefly illustrate.

Ireland is set to maintain its public finances so that it continues to meet the terms of the EU Stability and Growth Pact. Sound public finances provide the basis for GDP growth averaging approximately 5% per annum over the coming period. That is well above the European 15 average.

Inflation levels here have also fallen significantly in recent years. Measured on a harmonised basis, the differential between Irish inflation and the euro area average has narrowed significantly since the start of 2003.

In line with the objectives of the Lisbon Agenda, tax policy in recent years has been geared to promoting a job-friendly environment in order to facilitate robust employment growth. Over the period since 2000, the Government has successfully continued its policy of alleviating the tax pressure on labour, particularly on the low paid.

Concerning the composition of public expenditure, Ireland's level of public investment, at 5% of GNP, is among the highest in the European Union and is twice the EU average. Public investment under the national development plan is targeted at addressing the infrastructure deficit, investment in research and development, education, employment supports and training. These are investments in our future prosperity and competitiveness. Significantly, they are also bringing us closer in our transition to the Lisbon goals.

Notwithstanding these facts, we cannot stand still and we should not be complacent. There are challenges and the Government is committed to taking action to address both the shorter and longer-term competitiveness issues that have arisen. The National Competitiveness Council and the enterprise strategy group have given us a set of prescriptions in the following key areas. These are enterprise development and entrepreneurship, innovation, science and research and development and the business and work environment, including regulatory reform, consumer and competition policy.

These are among the key foundations of our competitiveness in terms of how we influence the competitiveness and cost environment both now and into the future.

An enterprise strategy group was set up in 2003 to prepare an enterprise strategy for growth and employment in Ireland up to the year 2015. The group's report, published in July 2004, identifies the areas that need to be addressed to ensure success in the new knowledge economy. The report indicates the five key areas in which Ireland can establish sustainable competitive advantage which are as follows: developing an expertise in international markets so that business can be more responsive to the needs of customers; building a world-class research and innovation capability to support the development of high-quality, high value products and services; renewing Ireland's historic commitment to education and training to provide the skills base industry will need; maintaining a competitive tax environment to drive economic growth; and providing capable and flexible Government that can quickly identify policies for facilitating change and implement those policies in a cohesive manner.

That last point is important because many people who have located here have pointed to the responsiveness of Government to business and enterprise coming into the country and the capacity of Government to respond quickly to any obstacles or issues that arise and facilitate not just the location but the start-up and development of industry here. They would compare us very favourably with any other government in Europe. Sometimes the political system does not give itself enough credit in terms of the job creation agenda and the role it plays in facilitating both the attraction and expansion of industry in Ireland.

The outcome of the report of the enterprise strategy group will be significant in terms of setting competitive industrial policy for the Irish economy. The report identifies the need for firms here to complement their existing production and operational strengths with new capabilities. Irish enterprise will need to focus on developing expertise in international markets to promote sales growth. It will also need to focus on building technological and applied research and development capability to support the development of high-value products and services. That in turn will involve working with Enterprise Ireland in terms of restructuring and reorganising the skills sets so that Enterprise Ireland is in a position to assist Irish companies in their internationalisation process. The second major leg of that is to develop the research and development capability of indigenous enterprise, which is a significant challenge going forward.

I will shortly be bringing an action plan to Government on the implementation of the recommendations of the enterprise strategy group. This will focus on what is being done to give real effect to those recommendations. Enterprise in Ireland has supplied the oxygen for prosperity, provided the basis for unprecedented employment growth and the resources for social progress and investment. I want to ensure that enterprise and enterprise issues are embedded at the heart of Government policy and will be recommending new structures to see that this is achieved.

Today, Ireland is widely recognised for its high level of performance in an investment driven context. We secure a disproportionate share of foreign direct investment relative to our size and have become the location of choice for manufacturing and international services in areas such as electronics, pharmaceuticals and financial services. We are an exceptionally open economy, critically dependent on trade. As a result of our willingness to embrace openness we have benefited hugely from the creation of the Single Market within the European Union and from the wider trend towards global trade liberalisation but the process that has yielded those benefits also brings challenges. Put simply, the industrial structure which was appropriate to our development in the late 20th century will not serve us in the new millennium. Many developing countries are now competing to be the location of choice for routine manufacturing operations and lower value added industries, and rightly so. It is a step on the same staircase to prosperity that we took. As our competitors ascend the staircase, we must also keep moving upwards.

Our challenge is the direct and demanding one of moving from being an investment-driven economy to an innovation and knowledge driven economy. A central part of that is to dramatically improve our performance as a world-class research centre.

I view the research agenda as one of the most important parts of my wide-ranging departmental brief.

Our national research and development action plan has set an overall objective, namely, that Ireland, by 2010, will be internationally renowned for the excellence of its research and be at the forefront in generating and using new knowledge for economic and social progress within an innovation-driven culture. The action plan sets targets by which the objective can be realised. The most important of these are as follows: gross expenditure on research and development should increase from 1.4% of GNP in 2001 to 2.5% of GNP by 2010; business expenditure on research and development should increase from €917 million in 2001 to €2.5 billion by 2010; research and development investment in the higher education and Government sectors should increase from €422 million in 2001 to €1.1 billion by 2010; and the number of researchers should increase from 5.1 per 1,000 employees in 2001 to 9.3 per 1,000 employees by 2010. While these are challenging targets, they represent the kinds of metrics we need to achieve if we are to come close to the research and development performance of the economies we wish to emulate. More important, they are achievable.

If we want to be a world-class economy and generate the resources to support the level and quality of services to which we aspire, below average or average research spending is not good enough. We must aim to be one of the most research intensive countries in the developed world. In a recent speech on the challenge of research and development, I outlined steps I intend to take via the Cabinet sub-committee on research to set clear intermediate targets and put flesh on the bones of how we will achieve the Lisbon targets by 2010. We will ask the various funding groups involved in the research area to come together and chart the way forward on a step-by-step basis to enable us to benchmark and monitor progress over the next six years.

Regulatory reform, while perhaps not the most exciting subject, is one on which incremental progress can make a real difference to the red tape burden faced by business and, consequently, the costs it faces. I am pleased an initiative commenced during the Irish Presidency is bearing fruit. At the European Union Competitiveness Council later this month I hope we will be able to agree a list of priority areas of law for simplification. Following a joint initiative with my Dutch counterpart, we asked member states for a list of burdensome or complex rules amenable to simplification. This trawl around the European Union produced a list of 330 rules and regulations. The European Commission, in the context of its new rolling simplification programme, will examine each of these rules and address the problem areas. These EU rules have a bearing on the red tape burden faced by business here. This was a practical and effective initiative which will bring results.

In January this year the Government published its White Paper, Regulating Better, which sets out six core principles of better regulation and a detailed action plan. It covers actions to deal with the stock of existing legislation, including provision for sectoral regulatory reviews, an ongoing programme of statute law revision and a major review of pre-1922 legislation to streamline the Statute Book. In terms of the flow of new regulations, the Government White Paper signals the introduction of regulatory impact analysis in support of a more evidence-based approach to policy making. This will facilitate better understanding of the burdens and costs associated with proposed new significant regulations and provide for better consultation with the business sector and wider society.

With regard to sectoral regulatory reforms, progress has continued in a number of areas. There are ongoing reviews of certain building, legal, medical and construction professions by the Competition Authority which, when completed, may have regulatory implications. The Department of Justice, Equality and Law Reform has developed proposals for major reform in the liquor licensing area. Other work is ongoing towards codifying the law governing particular sectors, such as company and consumer law, conveyancing law, criminal law and social welfare law.

The consumer agenda is extremely important for a modern market economy. Knowing that we are getting a fair price and value for money for the goods and services we purchase is what matters to consumers and is critical to ensuring that our economy remains competitive. There is growing concern that consumers are paying more for many goods and services than their counterparts in other European countries. Why is this the case and what can be done about it?

The most effective way to positively impact on price levels in the interests of ordinary consumers is to facilitate effective competition. To do this we must ensure shoppers have a choice across the entire spectrum of consumer goods and services. We must guarantee that choice can be exercised in an informed manner in order that consumers can get the best value available in the goods and services they require.

Exercising choice is only part of the solution. Consumers must be protected from unscrupulous traders. A comprehensive and easily understood body of consumer protection law must be in place, consumers must know their rights and have easy access to redress when things go wrong. There must also be adequate sanctions against unscrupulous traders who break the law and take consumers for granted.

Considerable responsibility and obligations rest with business which must learn to value a satisfied customer and understand that giving value for money makes good business sense. Customers who have not obtained value for money will not return or encourage others to do so. Where choice does not exist, we must ensure a regulatory regime is in place which guarantees fair competition and allows others into the market to provide the choice customers want and deserve.

The Government is tackling the consumer agenda on all these fronts. We have legislation in place which ensures consumers are provided with clear price information prior to making a decision to purchase goods. Traders who do not display prices in the required manner are liable to prosecution. We have reviewed the level of fines for breaches of consumer legislation and I will shortly introduce legislation to update these and bring them into line with the demands of a modern economy.

My Department has worked closely with the Central Statistics Office, the Office of the Director of Consumer Affairs, the Consumers' Association of Ireland and Forfás on the issue of price transparency. This resulted in the publication last July, for the first time, of the CSO consumer average price analysis for Dublin and outside Dublin for May 2004. My Department proposes to continue to work with all interested parties to consider if there is further potential to build on this initiative so as to enhance price transparency for consumers and empower them to seek out the best value possible.

The Office of the Director of Consumer Affairs has published and highlighted the results of price surveys on products such as petrol, potatoes, over-the-counter medicines, compact discs and drink price increases coinciding with major sporting and social events. These provide valuable information for consumers wishing to make informed purchasing decisions.

I am also conscious that confident and discerning consumers play a key role in making the businesses with which they interact more competitive. If business listens to and acts upon customer comments and complaints, it leads to improved goods and services and the possible identification of innovations to win more customers.

The consumer strategy group was established last March to advise on the development of a national consumer policy strategy. The group is focusing on the key principles guiding the consumer agenda, namely, access, safeguards, advice and support, redress, consumer power and business and the consumer. In the performance of this role the group is carrying out a range of activities, including studies investigating issues of special concern. The studies are intended to identify areas where policy intervention could lead to improved consumer access, choice, and redress. I expect the group's recommendation to form the basis of national consumer policy over the coming years. I look forward to receiving its final report, which is due at the end of the year.

Commentators on consumer issues often raise the issue of price control as a possible measure to curb price inflation. Price controls do not have any part in a modern economy. Price control is a crude instrument, which has been proven to be ineffective. It does not encourage cost efficiency, positively discourages pricing based on market forces and it distorts markets by preventing justified price rises due to higher costs incurred by business. When we had stringent price control in the 1970s inflation was running at up to 25% and the maximum price set for a product was nearly always the minimum price. Consumers had little choice and considerable manpower resources were utilised in trying to police a system which had no real benefit to the economy and is now judged to have been detrimental to consumer interests.

There is a more powerful alternative to price control. Developments in sectors such as the airline industry have shown that competition is the key to bringing better value for the consumer. The Competition Authority has the resources and autonomy to investigate the reasons for price levels, which do not seem justifiable and to report publicly on its findings. I have already mentioned ongoing reviews of certain professions by the authority. The authority has the necessary powers to investigate price fixing and other anti-competitive practices. My priority is to ensure the removal of unwarranted restrictions on competition in all sectors of the economy.

The Government has tackled with determination the issue of high insurance costs. Initiatives such as the establishment of the Personal Injuries Assessment Board have helped to drive down insurance costs and business and ordinary consumers are reaping the benefits in the form of lower premiums and greater choice as a result of new entrants into the market.

The Government has taken decisive action to ensure a fair deal for the consumers of financial products. The new consumer director of IFSRA, the Irish Financial Services Regulatory Authority, has already demonstrated her determination to ensure the interests of consumers are adequately represented and protected.

These are just some of the actions being taken in the area of competition and consumer policy. For example, we continue to provide funding to the Consumers Association of Ireland and contribute to the anti-inflation group established under Sustaining Progress. A key issue identified by this group has been wage inflation.

A critical issue for the next round of social partnership talks will be the issue of wage competitiveness. The evidence we heard at the Joint Committee on Enterprise and Small Business is stark. The latest figures from EUROSTAT show that Ireland continues to be sharply out of line with other EU countries in terms of real wage increases for the period 1998 to 2003. During this period Irish wages increased by 12.1% compared with 5.5% growth in the then 15 EU member states. We cannot ignore this evidence if we are serious about sustaining our progress.

Competitiveness is not just an issue for the Government. The Government, for its part, is determined to address competitiveness and cost issues. We intend to do so in consultation with all the social partners to help create and maintain the dynamic, innovative, competitive economy which we aspire to now and for the next generation.