Bernard Durkan (Kildare North, Fine Gael)
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Question 159: To ask the Minister for Finance the steps he will take to reduce costs in both the public and private sectors with a view to improving economic performance; the targets set; and if he will make a statement on the matter. [28440/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Since the early years of this decade Ireland has lost competitiveness. Up until last year, prices grew faster than those in the euro area, while wages grew at a rate greater than productivity would justify. These developments have left Ireland exposed in the midst of the collapse in global demand. Nonetheless, consumer prices have adjusted quickly downwards in the last six months. In addition, we are also seeing the benefits of our labour market flexibility: all available evidence points to recent downward pressure on wages economy-wide. The European Commission forecasts that Ireland's unit labour costs will fall by -4% this year, against a rise of 3% in the rest of the euro area.

In relation to public sector pay, the recently-introduced public service pension-related deduction decreases the net cost to the Exchequer of the public sector paybill. It is currently estimated that receipts from the deduction will come to just under €940 million in 2009 and over €1.1 billion in 2010. This reduction in public service net pay is likely to have a demonstration effect on private sector wages too.

On indirect costs, the Government spends over €1 billion annually on a range of professional services across all Departments. In view of the need for an equitable sharing of the burden of the adjustment to address the deterioration in the public finances, the Government is pursuing a general 8% reduction on fees to legal, medical, veterinary and other professionals engaged by the public service. This will raise €80 million in a full year. This process is being done by engaging in consultations through appropriate channels.

Regulated energy costs to private households also decreased this year, with piped gas falling by 12% from the 1st of May and electricity by 10% on the same date. Overall, my Department expects a small but significant fall in consumer prices this year which will go some way to addressing cost pressures that exist economy-wide.