State's free economy score slips further

Increased public spending, taxes and regulation have combined to damage the Republic's standing as a free economy, according to a report published yesterday.

The Open Republic Institute's economic freedom report for 2003 showed the State's score as a free economy fell to eight out of 10 in 2002 from 8.5 the previous year. The Republic held on to its ranking as the seventh most free economy of the 123 surveyed.

The institute published the report along with 57 other organisations around the world. Individual countries' scores are measured according to 38 criteria, which assess the rule of law, property rights, freedom to trade, regulation and government.

The institute said the Republic's score fell for two years running. The reasons for its decline were: the increased public spending burden, which rose by €5.2 billion last year; increased indirect taxes, which cut the national score by 20 per cent; increased regulation of business; and a rise in the cost of imports.

The institute director, Mr Constantin Gurdgiev, warned yesterday that the State was in danger of reverting to the economically disastrous policies of the 1970s and 1980s.

"It's becoming clear that the State is increasing taxes, expanding its payroll and failing to remove regulatory barriers to enterprise," he said.

"We should be worried about this, there have been gains [in economic freedom scores\] around the world, but there is a sense that we are moving in the direction of reversing recent gains, while at the same time we are becoming less competitive," he told The Irish Times.

He added that implementing the benchmarking public service pay deal, which will cost €1.2 billion, will further erode competitiveness and damage productivity.

Mr Gurdgiev called for further deregulation and controlled government spending.

In the rest of the world, Hong Kong maintained its place at the top of the league with 8.6 out of 10.

It was followed by Singapore at 8.5, the US at 8.3, and New Zealand and the UK at 8.2.

The other countries in the top 10 were Canada, Switzerland, Australia and the Netherlands.

The first world economic freedom survey was published in 1996.

The Dublin-based institute describes itself as Ireland's only source of policy and analysis oriented towards individual freedom and open markets. Its director is economist Mr Moore McDowell.