John Gerard Hanafin (Fianna Fail)

Competitiveness is vital to our economy. We are a successful and very open island economy. We have also been very successful at redistributing that wealth. To ensure we continue to grow at the level of recent years means there is a need for competition which will assist us with innovation and value for money. Our inflation rate is currently at the average for the EU and the eurozone. Our unemployment rate, at 4.3%, is half the EU average. Long-term unemployment is 1.5%, an historically low level. Since 1997, real gross national product growth has averaged 5.7% per annum, and this year and next it is estimated that it will grow by at least 5%.

It appears that many aspects of the economy need to be addressed. I suggest that the Government is taking on board whatever is necessary and listening to what the Competition Authority is saying to us. The Government is already taking several steps to address prices and costs in Ireland. It avoided inflation-fuelling increases in indirect taxation for the second year running in the 2005 budget, thus minimising its contribution to the problem. The most recent consumer price index figures from the Central Statistics Office show that inflation fell to 2.3% in January, compared with 2.6% in December.

Last year, the Government established the consumer strategy group to advise and make recommendations for the development of a national consumer policy. In the performance of that role, the group has carried out a range of activities, including studies that investigate issues of special concern. Price trends in other parts of Europe have been examined, and some prices have been the subject of additional investigation, including those of fruit and vegetables, alcoholic beverages and pharmaceuticals.

High insurance premiums have adversely affected all businesses operating in Ireland for the past few years. However, the National Competitiveness Council acknowledged that the cost of insurance for many businesses and consumers has come down over the past year as a result of determined Government action, including the establishment of the Motor Insurance Advisory Board and the Personal Injuries Assessment Board.

Furthermore, the Government is committed to increasing competition in all areas of the economy. It recognises that the key to reducing prices and maintaining them at optimum levels in the long term is to ensure vibrant competition in all sectors of the economy. That is why we have strengthened the powers and resources of the Competition Authority, which is charged with combatting anti-competitive practices in the economy.

I will refer to one or two reports that the Competition Authority has issued. One concerned the legal profession. Over 40 proposals to remove or amend unjustified anti-competitive restrictions in the legal profession were made. Among the most significant were the abolition of the monopoly enjoyed by King's Inns and the Law Society regarding professional legal education and the removal or amendment of the rule requiring barristers to be sole traders. When those were introduced, they were badly needed, but times have changed and the Competition Authority has recognised that fact.

The Competition Authority suggested that those changes should take place for the benefit of the consumer. The changes included the following: the broadening of the Bar Council's direct professional access scheme, which abolishes the prohibition on direct access by the public to barrister services; amendment of the restrictions on the provision of conveyancing services; removal of the restriction on partnerships between barristers and solicitors; removal of the restriction on lawyers holding the title of barrister and solicitor simultaneously; new criteria to allow the entry of lawyers who qualified outside the EU; and the provision by barristers of fee information to clients in advance. All those seem very practical and necessary today. The Competition Authority is taking them on board, and I am certain the Government will follow.

Similarly in the banking sector, the authority found that customers were locked in and it was difficult for them to change banks. This was particularly the case for small businesses. It was difficult for banks to offer new or innovative services. Small businesses were not getting the benefit of lower interest rates. The source of such problems was the structural arrangements within the banking sector. The behaviour of the banks was affecting the small business community and costing up to €85 million per year. One of the recommendations made was that a customer switching code be put in place to allow customers to move from one bank to another quite easily. The Government will examine the recommendation that the Department of Finance should revise the stamp duty levy so that it does not penalise those who switch accounts. The Department of Finance should propose legislation to eliminate IFSRA's price controls on charges and fees to ensure consumers benefit.

Senators have spoken exclusively about price during this debate, but I would like to talk about innovation, which is an essential part of competitiveness. A distinguished American economist, Dr. Paul Krugman, once described price competitiveness as a dangerous obsession. He was right, to a large extent. In the medium term, countries compete with each other on the basis of innovation, rather than price. While it is important that we do not allow our wages or prices to differ greatly from those of our competitors, we should not lose sight of the fact that our prosperity will ultimately be determined by the quality of our capital endowment and the skills of our people. Far-sighted economic policy should reflect that reality.

The Government is placing an emphasis on the skills of our people and the development of our capacity for research and development. While technological innovation is vital, we should bear in mind that we are challenged each day with being innovative in all sectors of the economy. The Government has demonstrated its commitment to innovation by pursuing a programme of public service modernisation and regulatory reform. The level of competitiveness within our economy can be measured by the quality of our public administration, the flexibility of our regulatory system's responsiveness and the openness of our policy process to the changing international context. The Government has done more than any other Government to ensure our economy remains broadly competitive, which can be measured by our economic growth, our price competitiveness and our level of innovation. I commend the Minister of State on his work in this area.