Batt O'Keeffe (Cork South Central, Fianna Fail)

It is always a pleasure to come to the Seanad. As the saying goes, I lost my feet and found my feet in this House. I welcome the opportunity to address Members on the important issues of competitiveness and tourism.

I will begin by discussing tourism with particular reference to the latest American Express holiday cost of living index. This document is essentially a table of the reported prices of 13 shopping basket items in 12 countries which might be purchased by a UK tourist in those countries. On the basis of a survey of only 12 countries, one cannot possibly say that one country is either the cheapest or the most expensive to holiday or live in, either in Europe or worldwide.

Despite its title, this table is not an index of the holiday cost of living. No information is provided on the cost of access or accommodation, for instance, and no rationale is provided for the choice of the particular 13 items in the table. The cost of sunblock figures prominently. God speed the day when the cost of sunblock becomes a major preoccupation of tourists in Ireland whether from at home or abroad. The index is compiled simply by totting up the cost of the 13 items without any weighting whatsoever. No economist or statistician would call this a scientific exercise and its conclusions should be treated accordingly.

It is important to look at the competitiveness issue from a tourism perspective. We all know Ireland is not a cheap destination, nor is it marketed as such. Nevertheless, there is no doubt the high cost of living here poses a competitiveness challenge. The report of the tourism policy review group was published in September 2003. That report set out an action plan to respond to the various challenges facing Irish tourism, and the Minister for Arts, Sport and Tourism, Deputy O'Donoghue, appointed a group to oversee its implementation.

The report identified competitiveness and value for money as key challenges facing Irish tourism. In 2002, visitor attitude surveys carried out by Fáilte Ireland showed that some 55% of overseas visitors were not satisfied with the value for money they obtained. Unfortunately, this increased to 62% in 2003. Poor customer perceptions are not helped by opportunistic price increases by certain elements of the tourism and hospitality industry during special sporting and other entertainment events that attract high visitor numbers.

Competitiveness relates not only to prices but is concerned also with value for money. People are prepared to pay high prices if they get commensurate value in terms of quality of product and service. In its first progress report, the implementation group outlined the nature of the challenge facing the industry. The group acknowledged there are many factors involved in creating the competitiveness challenge which are outside the control of the industry. However, the industry itself can do much to address that challenge.

The report of the tourism policy review group set out a range of actions in this regard. It is the view of the tourism action plan implementation group that the industry generally has genuinely sought to address many of the issues within its remit in order to improve the perception among visitors in regard to the value for money they receive in Ireland. In this context, it is worth noting that the 2004 visitor attitudes survey, in contrast with recent trends, found there was no deterioration over the previous year in the level of satisfaction among visitors about the cost of access, accommodation or tourism-specific services such as car hire.

Stopping the deterioration is one issue but it is another matter to reduce the level of dissatisfaction. The second progress report of the tourism action plan implementation group, which was published some weeks ago, highlighted a number of developments which are designed to address the ongoing competitiveness challenge. For instance, there were no increases in excise duties or VAT rates in budget 2005 and the annualised rate of inflation dropped to 2.1 % in March 2005. Some reductions have taken place in insurance premia due to more competition in the market and a new legal claims environment.

Furthermore, the industry continues to provide hundreds of special travel offers to overseas visitors on the Tourism Ireland website, www.tourismireland.com. Fáilte Ireland has launched a new website, www.ireland.ie, where special offers from the industry are packaged and offered to domestic and Northern Ireland customers. At present, more than 1,100 value breaks are listed on that website and I strongly urge Senators and the general public to examine it.

Some 500 members are actively participating in the "special offers" section of the Irish Hotels Federation website, www.irelandhotels.com. In addition, the Irish Tour Operators Association, through its winter value breaks programme, offers a "go as you please" programme featuring more than 100 hotels and four car rental companies. This programme was extended to bed and breakfast accommodation in the 2004-05 season. The packages include up to 40% reductions on normal prices.

The Restaurants Association of Ireland and the IHF with the support of Fáilte Ireland re-launched their value menu initiative in August 2004. The pricing levels for 2004 and 2005 are more flexible and include a new value menu for wines which is supported by the wine trade. Over 500,000 copies of a brochure setting out the value on offer have been printed.

Increasing productivity is one of the keys to improving competitiveness in any enterprise. Recently, Fáilte Ireland launched three new initiatives specifically designed to focus on helping enterprises address the competitiveness challenge. Performance plus is an online extranet benchmarking device for tourism enterprises to compare their performance in a range of areas to industry norms. A business solutions toolkit consists of an interactive CD-ROM guide to addressing cost management and business development issues within the tourism industry. A legal and financial advice platform provides a facility for tourism businesses to access top line advice from a range of blue chip professional companies. Fáilte Ireland has also introduced two new training initiatives for the sector on cost management, a diploma in financial management and cost control workshops. Ireland's best awards for high standards in service excellence were won by 50 businesses and Fáilte Ireland launched a programme which focuses on building business excellence and quality within tourism enterprises called the optimus programme. Finally, Fáilte Ireland has recently developed and launched a comprehensive human resource development strategy for the industry.

Last year, Ireland returned to strong economic growth with GNP increasing by 5.5%, total employment increasing by an average of 3% and domestic demand growing by a substantial 4.4%. Ireland's rate of inflation is now very close to the euro area average. It is likely that our economy will continue its robust performance with growth rates of 5% to 6% forecast for 2005 and 2006. It is also likely that unemployment will remain close to the historically low level of about 4% in both 2005 and 2006.

United Nations figures show that we attract considerably more global and EU foreign direct investment than the size of our country would naturally suggest. From just under 4% of the total in 2000, Ireland accounted for more than 8% of total inflows to the EU 15 in 2003. On a global basis, we won almost 5% of total world inflows. Hard nosed investment decisions are not made in favour of uncompetitive and lowly rated economies.

According to Forfás's recently published International Trade and Investment Report 2004, the US overtook the UK to become Ireland's largest single export market. From a position of accounting for less than one tenth of exports as recently as 1996, the US breached the 20% threshold in 2003, when exports to that country were worth almost €17 billion. This report also found that exports of services continue to gain importance. Ireland recorded growth of 11% in service exports to €3.6 billion in 2003, when $1 in every $50 spent on traded services globally accrued in Ireland. Computer services accounted for almost half of the growth in service exports in 2003 and were the largest single category of services sold abroad. Business services, which are the second largest single category of Irish exports, saw growth of almost 9% in 2003, while the spectacular increase in exports of insurance services of recent years continued apace in 2003.

Each year, the National Competitiveness Council undertakes a comprehensive analysis of Ireland's competitive performance. The NCC's competitiveness challenge 2004 states there is a need to make wage setting, government spending and taxation more responsive to changing competitive developments. Addressing these issues is and will continue to be a high priority for the Government.

The Government has already taken several steps to address the issue of prices and costs in Ireland. By not increasing indirect taxes, the Government in its 2005 budget demonstrated its commitment to ensuring that the progress on reducing consumer price inflation last year continued into this year. The most recent consumer price index figures from the CSO show that inflation stands at 2.2% in April. This rate of inflation is now very close to the European average. Government action has also reduced some insurance costs.

The key to reducing prices is to ensure that vibrant competition is a feature across all sectors of the economy. That is why the Government has strengthened the powers and resources of the Competition Authority, which is charged with combating anti-competitive practices in the economy. Today, the Minister for Enterprise Trade and Employment launched the report of the consumer strategy group, entitled Make Consumers Count. The report stresses the needs for the balance of power to be shifted towards consumers and to awaken consumers to the potential economic and social power that they can wield. In this regard, I wish to inform the House that the Government has agreed to the establishment of a new national consumer agency as recommended by the CSG. Work will commence immediately on the necessary legislative and organisational work to ensure that the national consumer agency is established as soon as possible. A board for the new agency will act in an interim capacity until such time as legislation to formally establish the agency can be enacted.

In conjunction with setting up the interim board and preparing the legislative and other work to establish the national consumer agency, consumer policy continues to develop. In addition to developments in European consumer law, it is vital that domestic legislation in this area is attuned to the needs of the modern consumer as acknowledged by the CSG in its report. In this regard, the Department of Enterprise Trade and Employment is currently engaged in a comprehensive review of all existing consumer protection legislation. The extent to which consumer interests are entwined with practically every facet of economic, political and social life can only be appreciated by reading the full report of the CSG, which covers such diverse areas and sectors as health, planning, utilities, transport, food and drink.

The Government accepts that competitiveness is a key challenge. Addressing that challenge is one of its priorities. I believe that the actions I have described represent clear evidence of the Government's success and its intent and I would welcome this House's endorsement of its approach.