ADDRESS BY TANAISTE MARY HARNEY TO THE ANNUAL IBEC CONFERENCE - LIVING ON THE EDGE - DUBLIN CASTLE, THURSDAY 25TH MARCH 1999
The Government has been preoccupied with European matters in recent times and I am glad to see that one of the central themes of the conference is Ireland's place in Europe and our future in Europe.
I believe that competitiveness is the key to prosperity.
I believe that our future prosperity in this country is dependent on Europe maintaining and improving its competitive position in the world and on Ireland maintaining and improving its competitive position within Europe.
The fact is that in competitive nations employment rises and unemployment falls. In uncompetitive nations the opposite happens. That is why I want Ireland to be a competitive nation.
We now have a single European market and a single European currency. But each member state is free to pursue its own economic policies within the parameters of EU membership. Measured by two of the main yardsticks of economic performance - delivery of growth and delivery of jobs - it is clear that performance varies enormously across the EU.
In terms of growth, some member states are booming while others are on the edge of recession. Even neighbouring countries have markedly different economic prospects.
I would accept that unemployment is notoriously difficult to compare across countries. For instance, some would argue that America's 4.4% rate of unemployment would be appreciably higher if they didn't have nearly two million people in prison. Still, there must be something wrong in Europe when you see unemployment rates of 10.5% in Germany, 11% in France, 12% in Italy and 18% in Spain.
A cut in interest rates is seen by many on the continent as the key that will unlock economic growth and employment growth. It would certainly help; but interest rates are already low and I am not sure that taking them down another half-a-per-cent is going to transform the economies of continental Europe. In any event, a rate cut is not going to provide the whole answer.
If the European Union is going to succeed, and if its largest member states are going to succeed, I think that they will have to make themselves more flexible, more adaptable and more liberal in their approach to economic issues.
I would like to see Europe doing three things.
For a start, I would like to see it taking on board the need for flexibility in the labour market. If we are going to bring in more legislation that affects the labour market, let's make sure that it does not deprive people of jobs down the line. I would like to see full liberalisation right across Europe in sectors such as transport, aviation, energy and telecommunications. Competitive provision of essential services can stimulate economic activity and have beneficial consequences for employment.
I would like to see an acceptance of the need for tax reform and tax reduction and I would, of course, be delighted to see Europe forgetting about any plans for tax harmonisation.
Some people in Europe have become concerned about what they call harmful competition in the taxation area. I must admit that I have some difficulty with that concept. As a liberal I believe that, in the economic sphere, healthy competition is a good thing and that it must not be construed as harmful.
If Ford see General Motors coming out with a new and attractive model they don't try to stop it: they try to emulate it. That's how a free-market economy works. Equally, I would say to people in Europe: if you see low tax rates working for Ireland then why not try them yourself ?
Europe could choose to go in the opposite direction to the one which I am suggesting. It could opt for more regulation, more restriction, more taxation. That option will certainly create jobs; but it will create them in America, in Australia and in Asia - not in Europe.
Whatever about Europe, for us in Ireland competitiveness begins at home. We will have to make our economy as competitive as possible if we are to sustain our impressive rate of economic growth continue to grow employment.
Government can make a real difference in three areas when it comes to improving the international competitiveness of the Irish economy - taxation, market liberalisation and the provision of infrastructure.
The issue of taxation is crucial. We are moving rapidly towards a standard rate of corporation tax of 12.5% for which we have secured EU agreement. It is vital that we maintain that position and that we continue to resist any attempt to force us to raise our rates.
Low tax rates stimulate economic activity. Low personal tax rates reward people for working. Low tax rates encourage people to move off welfare and into paid employment. In short, low tax rates work. In Government, I intend to deliver lower rates of personal tax over the coming Budgets.
We in Ireland have not been as enthusiastic as we should be about market liberalisation. Indeed, without EU prodding we might not have made the progress that we have.
The benefits of liberalisation are readily apparent in two key sectors - aviation and telecommunications. Unlike the 1980s, you no longer need to take out a mortgage to fly to London - you can do it now for twenty pounds.
Similarly, you no longer have to write begging letters to Government ministers if you want a telephone: now you can pop into a shop and buy yourself a mobile.
In both of these sectors liberalisation has delivered enormous benefits for consumers. State monopolies have been turned into competitive industries. Exciting new employment opportunities have been created. Consumer costs have decreased; consumer choice has increased.
A visitor from Mars might be tempted to ask: 'if liberalisation has been so successful in these areas, why have you not tried it in other sectors ?'
The answer is: we will. Monopolies, whether they be public or private, do not work. Competitive provision is good for business; it is good for consumers; it is good for the staff of the former monopolies - ask the workers in Telecom Éireann. We must aim for full competitive provision.
On the issue of infrastructure, you don't have to be a professor of civil engineering to realise that Ireland has a major infrastructural deficit. That deficit stems from many factors - lack of resources for investment, the slowness of the planning process, a failure to recognise the need for large-scale expenditure, particularly on roads.
We still don't have a proper road link between any two of our major urban centres. We have only about seventy miles of motorway in the entire state. National primary routes pass through the main streets of our cities and towns.
Clearly, there is much to be done. Delays in the planning process will be addressed. The Government is determined to streamline the planning system and ensure that, without prejudicing people's democratic right to participate in the planning process, major projects can proceed without undue delay. My colleague Mr. Noel Dempsey, the Minister for the Environment, will shortly be bringing forward legislation in this area.
We must recognise also that all the problems do not lie in the planning process. We must also speed up the whole pace of development in the provision of infrastructure and I believe that the private sector must be given a much greater role in this area than ever before.
The Government is committed to the concept of public private partnerships as a means of delivering major infrastructural projects on time and on budget.
A recent study set out how we could have a modern road network over a twenty-year period. We can't afford to wait twenty years: the bulk of the work will have to be done in ten.
Investment in rail-based public transport is also essential if we are to eliminate the bottlenecks in the major urban areas. I recognise, however, that the vast majority of public transport journeys will continue to be made by bus and I think that in the bus market liberalisation would be more beneficial to consumers than further state investment.
We in Ireland have prospered greatly over the last twenty-six years from our participation in Europe. We can prosper for another twenty-six years and more if we take determined action to build a competitive economy in this country.
Last modified: 26/09/2001