Competitiveness has many aspects, but there are signs that this is an area requiring renewed attention from Irish policymakers. In recent years strong inward investment and jobs growth has shown that Ireland had a formula which was having some success. But there are reasons now to think that a strategic approach and a new focus on implementation are now needed to build competitiveness for the future, encompassing everything from costs to infrastructure, education and the vital role of meeting climate targets.
Ireland is now a relatively high wage economy , a status justified by productivity growth, driven in large part by the multinational sector. But rising costs after the recent inflationary surge, and reflecting Government policy in some areas, are now an increasing burden, particularly on smaller domestic companies. If this coincides with a slowdown in consumer demand, this could leave some firms in trouble.
In areas from energy costs to insurance to legal charges, costs here are relatively high. Reforms in the personal injury regime and related falls in some insurance costs – with more expected to follow – show that policy can make a difference.
Competitiveness has wider, more strategic aspects too. Many of these were presumably in the mind of Intel chief executive Pat Gelsinger when, opening the company’s latest Fab plant in Ireland last week, he pointedly said that Ireland would need to compete for future projects. Industry large and small has underlined Ireland’s infrastructure deficits as a key threat, from housing to energy to water. This is recognised in Government policy, but the problems of implementation are all too familiar. The promised new national industrial strategy for offshore wind, due early next year, is clearly needed. So is delivery on the changes to the planning system and the resourcing of this area at a much more realistic level.
There are other vital areas, too. The leaders of the eight major universities wrote to the Government last week warning that their ability to deliver high-quality education has been “stretched to the limit”. Third-level funding is an area which successive governments have fudged and avoided dealing with. Talk of cutting charges to students in the budget may go down well with voters, but if Ireland cannot deliver the highest level of third-level education the long-term costs will be enormous.
Ahead of the budget, there are worrying signs that many of the longer-term strategic issues relating to competitiveness have taken a back seat. The budget, of course, cannot give all the answers. But it is an important statement of Government policy. As well as laying out spending and tax plans for next year, it needs to give some signposts of how the Government plans to build the economy in the years ahead.