It's time to put the government's stewardship of the economy firmly on the agenda. The report of the National Competitiveness Council makes interesting reading. It's a dry and somewhat technical document and it takes a useful survey of Ireland's position in relation to the globalised economy and summarises its structural strengths and weaknesses. It notes that domestic consumption and construction investment have replaced net exports as the drivers of growth. Supported by high and fast growing private debt levels, construction now dominates employment and economic growth. International trade did not contribute to Ireland’s growth in 2005. This is just not sustainable so blame where blame is due.
OK, so we can't blame the government for everything that has gone wrong in the economy but the opposition should make certain that the governing parties cannot make economic management a reason to re-elect them. The NCC says in the long run, success in international markets is the only sustainable driver of economic growth. A number of international trends are also likely to impact on Ireland’s future growth. These include intensifying competition due to the growing economic importance of China and India, the expansion and development of the EU, and increasing concerns about energy prices, security of supply, and the environmental impact of economic development.
The report contains policy recommendations in a number of key areas such as infrastructure, energy and the education system - all areas within the competency of central government. The fact that there are such major lacunae in these areas points to the failure of the government to formulate and plan at the level of national policy. It is notable that the report states that "competition will be based not just around cost,
but also around productivity, quality, innovation and speed to market", reinforcing a general point that competitiveness has nothing to do with keeping wages low. Even Marc Coleman, in his commentary in Thursday's Irish Times, doesn't mention wages once.
On the question of taxation, the report notes a number of European developments (for example, the proposal to create a common consolidated corporate tax base and recent European Court of Justice rulings on tax) that have the potential to reduce autonomy on issues of tax policy over time and thus reduce our competitive advantage in this area. While Ireland and other EU states will continue to oppose such plans, the report recommends that, to ensure the stability of the tax regime "the Government should broaden the revenue base that finances public spending but not as a means of increasing the overall yield from taxation. This should include the measured introduction of new taxes (e.g. taxes on property stocks rather than property transactions, congestion charges and polluter pays environmental taxes) to replace tax revenues from other sources".
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