Dan Neville (Limerick West, Fine Gael)
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Question 37: To ask the Tánaiste and Minister for Enterprise, Trade and Employment her plans to lower the business cost base here in view of the assertion of the Competition Authority that the problem of the Republic of Ireland's higher cost base is a much more long term threat to the competitiveness of retailers, suppliers and all businesses here; her further plans to tackle energy costs to business; and if she will make a statement on the matter. [40952/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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This Government recognises the critical importance of reducing business costs at this time, when all sources of efficiency are in focus and when jobs are at stake in all sectors of the economy. Restoring cost competitiveness is a vital part of driving export led growth.

Under the Framework for Economic Renewal we are taking a number of measures across Government to improve our competitiveness. Cost competitiveness has been a particular focus of attention and we are already seeing results. Firstly, Irish inflation reached minus 6.5% in the year to September 2009 — the sharpest fall in Ireland since the 1920s. We have also seen a decline in unit labour costs, which has a direct effect on competitiveness. We continue to exert further downward pressure on costs, including reviewing those recommendations of the Competition Authority that have most effect on competitiveness. We are working to ease costs to enterprise in administered sectors of the economy under State control such as local authority charges. We are also easing the administrative burden that regulations can create.

The Government recognises that the cost of energy in Ireland is a serious competitiveness issue facing the enterprise sector during this difficult period for the economy. The provision of secure, sustainable and competitive energy supplies is critical for the economy. Ireland's high energy costs, by comparison with much of Europe, are primarily due to significant dependence on imported fossil fuels, particularly gas, as well as a requirement for very significant investment in energy infrastructure. Recognising the concerns of business, the Government has put in place a number of measures to mitigate the cost of energy for business.

The trend of energy prices for business has been downward in recent months. Following the double-digit energy price reductions in May 2009, from this October there has been a further significant reduction in gas prices and a modest reduction in electricity prices for medium business customers. Overall, all categories of business, including SMEs, have benefited from significant energy price decreases in 2009. These reductions will result in a further easing on cost pressures for businesses.

The CER has also recently announced that the PSO levy will be zero for 2009/2010. The level of capacity payments, that compensate electricity generators for their long run costs, will also be 15% lower in 2010 compared with 2009. This represents a direct saving to all electricity consumers in 2010. Working with the CER, the Government is also investigating the scope for further permanent structural changes to our electricity markets that will benefit business. These changes include some re-balancing of network tariffs, as well as recovering carbon windfall gains from electricity generators. The CER is also about to commence work on a five-year review of network expenditure.

The Government remains firmly committed to increasing competition as the best means of exerting downward pressure on electricity prices, and also towards ensuring diversity of energy supply to reduce our exposure to high and volatile external energy prices. Significant progress has been made to date, most notably with the all-island Single Electricity Market now in place, the sale of ESB generation capacity, entry of new players and new generation capacity coming on-stream in the Irish market.