Sustaining Progress - Department of Taoiseach

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7.3 While the weakness of the Euro from its inception until recently has been the most significant external factor in driving inflation, most of our present problems are attributable to rising domestic costs and profit margins associated with a very tight labour market and strong demand. Such conditions, combined with inadequate competition and continuing restrictive practices in certain sectors, support a bidding up of the prices in areas such as property prices and rents, and provide the opportunity for exceptional increases in some profit margins especially in certain service sectors. 7.4 It is acknowledged by the Government, IBEC and ICTU, that some of these problems can only be tackled over the medium term. Nevertheless, an explicit and co-ordinated set of policies could help to slow down the present rate of domestically generated inflation. Implementation and Monitoring 7.5 The Government agrees that proposals for action will be co-ordinated by a specially convened group, which will draw up a detailed action plan and will monitor its progress. IBEC and ICTU have prepared a range of measures which they will pursue through this group. 7.6 The group will comprise representatives from the Departments of the Taoiseach, Finance and Enterprise, Trade and Employment, together with two representatives each from IBEC and ICTU. Representatives of the Competition Authority and the Office of the Director of Consumer Affairs will also be invited to participate, as appropriate. The group will present regular reports to the Taoiseach, the Tánaiste and Minister for Enterprise, Trade and Employment and the Minister for Finance and, in particular, will submit a report reviewing progress, six months after the ratification of this Agreement. Annex Anti – Inflation Initiative Proposals for Action from IBEC and ICTU IBEC and ICTU have agreed the following proposals and recommendations for an anti-inflation initiative. They complement the initiatives on social and affordable housing and the private rental sector included in Section 6 above and Chapter 2. 1. A Target Driven Approach ■ The parties are agreed that bringing inflation down as quickly as possible towards levels comparable with our trading partners’ performance and towards the Eurozone average must be a top priority if jobs are to be secured. The parties agree to demonstrate their strong commitment to achieving this target by promoting and communicating it in order to influence the behaviour of consumers, business and employees in moving towards lower inflation. ■ Public policy, both at central and local government level and the actions of employers and trade unions should be framed with this inflation target in mind and its progressive achievement over the period of this Agreement. Part 2 Pay and the Workplace 79
Part 2 Sustaining Progress 80 The Pay Agreement ■ Trade unions and employers will respect the terms of the pay agreement, having particular regard to the common objectives of improving competitiveness and living standards by bringing inflation under control. ■ Government, in implementing the public service pay agreement, should seek to minimise its effect on inflation by actively pursuing the modernisation programme as agreed to achieve better value for money in public service delivery. 2. Public Expenditure It is desirable that demand should evolve in a sustainable way consistent with the growth potential of the economy. Public spending growth has the potential to drive excess demand in the economy. The parties to this Agreement undertake to support the Government in its determination to ensure longerterm stability in the public finances by avoiding excessive increases in current spending. In particular, they agree that: ■ Where certain priority areas need additional resources (e.g. health), every effort shall be made to secure these resources through reallocation and through the elimination of programmes that are no longer effective. ■ There is a need to identify and develop delivery mechanisms for services and infrastructure on the basis of securing better value for money. In addition, the parties attach particular importance to the agreed programme of modernisation and change in the public sector and attach great significance to the process of verification of performance, which it contains. 3. Stronger Competition, Controlling Inflation and Other Control Measures Strong competition in the economy exerts downward pressure on prices, encourages responsiveness to customer demands and also promotes innovation. Competition is weakened either through inappropriate State regulation or through collusion among private companies. Greater competition in protected sectors, including the professions, can contribute to reducing inflation. The Competition Authority and the Director of Consumer Affairs should be given specific additional priorities and tasks to boost this counter-inflationary policy including: ■ More aggressive implementation of competition policy, including dealing with sheltered sectors where unnecessary barriers to entry exist. ■ Accelerating the studies of professional services, which were initiated by the Competition Authority at the request of the Government on foot of the OECD Review of Ireland’s regulatory regime. The findings of these studies should be published on a phased basis beginning in May 2003. Tackling Excessive Prices Investigations will be undertaken in sectors where price increases do not appear justified by market conditions. These surveys should, in particular, be targeted at sectors which were identified in the Forfás euro changeover report where “levels of competition for the supply of certain services in Ireland are most likely below desirable levels”.
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Sustaining Progress Social Partners
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Overview Sustaining Progress 6 Over
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Part One A Policy Framework for Sus
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Glossary Sustaining Progress 130 Gl
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Sustaining Progress - Department of Taoiseach

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