The National Competitiveness Council
says in its latest report that there is not a strong appetite in Ireland to
tackle high costs in sheltered sectors. It also calls for an independent fiscal
council to be established along the lines of the UK’s Office of Budget
Responsibility.
The NCC, which reports to the Taoiseach, says it is
concerned that there is not a strong appetite in Ireland to tackle high costs in
sheltered sectors. A systematic approach to ensure that competition law applies
to all sectors of the economy is necessary.
A rigorous review of laws, rules and
customs governing locally traded sectors is required to identify barriers to
enhance competition. In addition, the State should use its purchasing power to
exert downward pressure on professional fees. The NCC also supports the CSO
proposal to introduce an administrative cost index which would enable more
accurate benchmarking of government driven costs relative to the wider economy.
Finfacts has repeated ad nauseam that the lack of Irish
interest in structural reform is striking despite an economic crash that has
brought misery to tens of thousands of people.
People appear to be much more interested in the drama of the banking, governance
and economic disasters rather than the causes and remedies required.
We now know what the payback is for a buck stops nowhere system.
Finfacts Blog, Nov 28: Ireland, reform and the IMF
The NCC also says there is a need
for better fiscal planning and control mechanisms with in-built risk assessment
and risk management capacity, once the economy gets back onto a sustainable
growth path. Both the OECD and the IMF have proposed changes to the current
budget framework. These include protecting against outcomes where revenues are
spent even when they are transitory and institutionalising commitments to
stabilise the public finances. The structures recommended already exist in
countries such as Sweden and the UK recently established an Office for Budget
Responsibility.
Essential to reposition Ireland as a competitive location
for business
"Repositioning Ireland as an internationally competitive
location for doing business is essential to support
sustainable economic growth and drive job creation" said National Competitiveness Council (NCC)
chairman Dr Don Thornhill, today on the publication of the
NCC's Annual Competitiveness Report.
The report,
Ireland's Competitiveness Challenge 2010, focuses on the
long term national competitiveness issues that need to be
prioritised to develop a more competitive operating
environment for businesses. "In times such as these it is
vital that we identify those elements of our economy over
which we have most control, and that we maximise competitive
advantage where it exists" said Dr Thornhill.
"While
the economy faces unprecedented economic challenges, Ireland
continues to show significant competitiveness strengths -
not least of which is our resilient export performance. We
need to build upon these strengths and develop a platform
for future prosperity. Having benefited from
competitiveness gains as a result of cyclical factors, we
must now ensure that action is taken to achieve more long
lasting structural competitiveness gains. Given the wide
range of challenges facing policymakers at present, we
believe that immediate and decisive action is more important
than ever. Economic recovery leading to improved living
standards requires that we excel in key areas that determine
international competitiveness"
said Dr Thornhill.
Commenting
on the publication, Martin Shanahan, chief executive of
Forfás, noted that "the recently
published National Recovery Plan begins to address the
competitiveness and enterprise issues raised by the NCC and
Forfás. In order to achieve economic growth and employment
creation, it is vital that policies designed to support
enterprise continue to be prioritised and implemented".
Given the wide
range of issues that need to be tackled to support
sustainable long term growth, the NCC has highlighted the
main recommendations that it believes need priority
attention and action.
1. We must put in place the structures,
processes and the capacity to support sustainable
competitiveness: This
means focusing on productivity enhancement, ensuring
fiscal stability, and taking a sector-specific approach
to policy development, where appropriate. Among the
specific recommendations highlighted by the NCC are:
-
Promoting and delivering economy wide
productivity growth:
Higher productivity is the glue which sustains high
living standards and competitiveness. There is no
part of Government, however, responsible for
promoting policies that drive productivity growth.
To deliver the required improvements, it is
imperative that one department has overall
responsibility for prioritising productivity related
policy actions, monitoring progress and driving
implementation. Improving productivity across all
sectors of the economy should be central to future
policy and budgetary decisions;
-
Addressing the specific needs of
sectors: In recent
years, the composition of Irish exports has changed
considerably. The NCC is concerned that our
institutional structures and mindsets towards export
opportunities are rooted in the past. We need to
ensure that our Government structures better reflect
the changes in our economy and can provide the
necessary supports to potential high growth sectors;
and
-
Promoting fiscal stability:
The NCC sats there is a need for better fiscal
planning and control mechanisms. The Council have
recommended the establishment of an independent
fiscal council. Among the principles that should
underpin the establishment of a statutory fiscal
council are independence, accountability, full
access to the information available to Government
and the capacity to stress test taxation and
spending scenarios. The proposed reforms to the
budgetary process and reference to the establishment
of a Budgetary Advisory Council in the National
Recovery Plan are key in this regard.
2. Although it may be difficult to force
our gaze away from the most immediate issues confronting
us, the report says we must plan for the future:
The NCC recommends that the following actions are
prioritised to support sustainable long term growth and
prosperity:
-
Ensure a sustainable tax system:
The NCC believes that broadening the tax base by
introducing a valuation based tax on property and
user charges for treated water and third level
education, is central to repairing the public
finances. Without measures to broaden the tax base,
taxes on income will inevitably have to rise
further, which puts competitiveness at risk. Higher
taxes on income are a disincentive to people to
remain in or return to the labour market. A
competitive tax wedge is also an important
competitive advantage in attracting and retaining
highly skilled and internationally mobile workers;
-
Promote indigenous enterprise:
Only through increasing the number of
internationally trading indigenous firms and their
export intensity (exports as a share of sales) will
Ireland be able to create broad based sustainable
growth. We must prioritise actions to enhance the
export activity of indigenous firms – these include
ensuring viable businesses have access to credit,
deepening linkages between domestic and exporting
firms and diversifying into high growth, emerging
markets; and
-
Improve competition in locally traded
sectors: The NCC
says it is concerned that there is not a strong
appetite in Ireland to tackle high costs in
sheltered sectors. A systematic approach to ensure
that competition law applies to all sectors of the
economy is necessary. A rigorous review of laws,
rules and customs governing locally traded sectors
is required to identify barriers to enhanced
competition. In this respect, the focus accorded to
competition policy in the National Recovery Plan is
significant.
3. We must continue to focus on essential
competitiveness factors such as skills and education,
infrastructure delivery and innovation:
Although Ireland has made significant progress in terms
of improving our physical, educational and research
infrastructure in recent years, further actions are
required. The priorities identified by the NCC include:
-
Engendering a culture that seeks to
be world class at everything we do:
Improving living standards requires that we excel in
key areas that impact upon international
competitiveness – policy making, education,
infrastructure provision, R&D. Managed properly,
the public sector has the capacity to be at the
forefront of the adjustment process in the economy
in moving to higher levels of productivity growth
and innovation. The report says the Croke Park
agreement provides an opportunity to reform public
services and improve productivity - -
but Finfacts says it's time to call time on the
slow-motion process of implementation;
-
Prioritising and delivering
infrastructure projects offering greatest return:
Given the need to maximise returns from more limited
resources, further work is required to prioritise
projects that promote competitiveness. It is
essential that the identification of specific
investment priorities is progressed immediately and
that the agreed budgets are spent in a timely
fashion to deliver important investments to support
economic recovery. With a curtailed public capital
programme, a more integrated approach to
infrastructure planning and delivery can promote
improved efficiency, effectiveness and
competitiveness ; and
-
Ensuring the quality of education:
It is vital that the priorities highlighted in the
NCC’s 2009 Statement on Education and Training to
further enhance the performance of Ireland’s
education and training system are progressed
immediately. In particular, the NCC reiterates the
need for adequate resourcing to enable Irish higher
education institutions to equip students with the
highest quality of education available. It is also
essential that the available resources are deployed
in a manner that provides the best value for money
and that there is a continuous process of reform at
institutional level to improve productivity.