Bernard Durkan (Kildare North, Fine Gael)
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114. To ask the Minister for Jobs, Enterprise and Innovation the extent to which the cost base in the manufacturing and services sectors remains competitive; and if he will make a statement on the matter. [42248/15]

Richard Bruton (Dublin North Central, Fine Gael)
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Improving Ireland’s international competitiveness is a key economic priority for Government. Since 2012, the Government’s Action Plan for Jobs has set out a comprehensive set of measures to improve our competitiveness performance. Ireland’s improving competitiveness performance since 2011 has been central to securing the recovery in economic growth and employment. Overall, Ireland has moved from 25th to 16th on the IMD Competitiveness rankings, and we are ranked fourth in euro-area in the recent World Bank Doing Business Report. Notable areas of progress include the environment for start-ups, regulation, and access to credit.

Improved competitiveness has made Irish firms more cost competitive internationally and made Ireland a more attractive location for firms to base their operations in. The recovery in jobs to date, with 135,800 more employed than at the beginning of 2012, unemployment down from over 15% in 2012 to 8.9% in October and the record levels of indigenous exports being achieved, is in large part due to the considerable improvements in the business environment for enterprises.

We continue to focus on actions to improve Ireland's cost competitiveness and take appropriate action to address fragilities as they emerge. Budget 2016 introduced a number of measures to improve our cost competitiveness, including for example, reducing road transport costs through the introduction of a cap of €900 on the largest commercial vehicles, reducing the Universal Social Charge and consequent reductions in marginal tax rates, increasing employers PRSI ceilings and thereby reducing the costs of employment, sustaining other measures such as the reduced rate of VAT for the hospitality sector and accelerated capital allowances for investment in energy efficient equipment. The introduction of the Knowledge Development Box will also allow innovation-led enterprises to benefit from a reduced 6.25% rate of corporation tax on intellectual property-related income.

The National Competitiveness Council's 2015 Costs of Doing Business in Ireland report benchmarks key business costs across over fifty indicators and focuses on areas where Irish enterprise costs are out of line with key competitors, and on costs that are largely domestically determined. The NCC's report finds that while relative cost competitiveness is improving (i.e. although costs are increasing, they are increasing at a slower rate than in many of our competitors), this improvement is largely being driven by external factors beyond the control of domestic policymakers. In particular, a weak euro exchange rate, low ECB interest rates, and low international fuel prices have all combined to improve Irish cost competitiveness. The NCC report concludes that Ireland’s industrial cost base has improved but pressure points are emerging in labour, property and business service costs.

I am convinced that for us to achieve the ambition in the Government's recent enterprise policy statement Enterprise 2025 of achieving sustainable full employment, we must maintain an intense focus on reducing costs that are out of line with those in competitor countries. There is a role for both the public and private sectors alike to proactively manage their cost base and drive efficiency, thus creating a virtuous circle between the costs of living, wage expectations and cost competitiveness. Measures that ensure open and competitive markets and improve productivity performance are essential.

I will shortly bring the Competitiveness Council's annual Competitiveness Challenge report to Government and we will ensure the required actions to address emerging issues are addressed as part of the Action Plan for Jobs process.