Warning for Government as costs start to increase

Minister for Jobs Richard Bruton has asked Cabinet colleagues to report on actions taken to curb costs after a report warned costs for business and consumers were creeping up in the recovering economy.

The National Competitiveness Council, which advises the Government on key economic trends, found recent price falls were at risk of being reversed as the economy returns to growth and demand increases.

While Ireland is at present drawing benefits from the weaker euro and low interest and fuel costs, the council warns such trends could reverse. Saying cost reductions are difficult to achieve when inflation is low, it warns of a “significant risk” that competitiveness gains will slide as growth strengthens.

Unnecessarily high costs “It is vital that we continue to take action to address unnecessarily high costs wherever they arise,” said Prof Peter Clinch, chairman of the council.

“There is a role for both the public and private sectors alike to manage proactively their cost base and drive efficiency, thus creating a virtuous circle between the costs of living, wage expectations, productivity and cost competitiveness.”

Mr Bruton’s spokesman said the Coalition had put new systems in place to ensure such issues were firmly addressed and he argued this was in contrast to previous governments.

The council draws particular attention to labour costs, saying future cost increases in this area must be accompanied by productivity gains. The report comes amid a formal review of the minimum wage and in advance of looming talk between the Government and public sector unions.

After Central Bank moves to prevent another house price bubble, the council also links wage claims to developments in the property market. “After significant price falls over recent years, house prices and rents are on an upward trend again with potentially significant consequences for affordability and knock on impacts on wage demands.”

The council draws its membership from the public sector, business and trade union movement. Its Cost of Doing Business in Ireland 2015 report concludes that costs in a wide swathe of business sectors are above the euro zone average.

It also finds that the cumulative impact of increases in income taxes, changes to bands, the introduction of the universal social charge and other measures undertaken since the recession have weakened competitiveness.

It argues, however, that taxes and social insurance rates for married couples with children, particularly for those on the average wage, remain competitive.