Before we proceed, I have a few housekeeping matters to go through. I will explain some limitations to parliamentary privilege and the practice of the Houses regarding references witnesses may make to other persons in their evidence. Witnesses within the parliamentary precincts are protected by absolute privilege in respect of the presentation they make to the committee. This means that they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Cathaoirleach to ensure it is not abused. Therefore, if their statements are potentially defamatory regarding an identifiable person or entity, they will be directed to discontinue their remarks. I ask that they comply with any such direction.

I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, a member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask any member participating via MS Teams to confirm, prior to making his or her contribution to the meeting, that he or she is on the grounds of the Leinster House campus.

Members and witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarding as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Regarding speaking arrangements, I suggest that we invite our witnesses to speak for approximately ten minutes and subsequently allow members to ask questions and make comments for seven minutes. There may be a second round of questioning if time permits. Members will be called as they appear on the week two speaking rota circulated before the meeting. Is that agreed? Agreed. I also propose that we publish the opening statements and submissions provided by witnesses on the committee's website. Is that agreed? Agreed.

The committee has decided that our priority policy will be competitiveness and the cost of doing business in Ireland. The committee has had several meetings with various stakeholders on this topic. I welcome our guests. In 1997, the Government established the National Competitiveness and Productivity Council as part of the Partnership 2000 agreement. Council members are appointed by the Minister for Enterprise, Tourism and Employment. The current members include representatives of the employer and trade union social partnership pillars; people with relevant expertise in productivity and competitiveness; a representative of the Department of Enterprise, Tourism and Employment; and representatives from various Government Departments who attend council meetings in an advisory capacity.

The council reports to the Taoiseach and the Government, through the Minister for Enterprise, Tourism and Employment, on key competitiveness issues facing the Irish economy and offers recommendations on policy actions required to enhance Ireland’s competitive position.

In 2018, in accordance with the European Council recommendations on the establishment of national productivity boards in euro area countries, the Government designated the National Competitiveness and Productivity Council as the body responsible for analysing developments and policies in the field of productivity and competitiveness in Ireland. The enterprise strategy, competitiveness and evaluation division of the Department of Enterprise, Tourism and Employment provides the council with research and secretariat support.

I once again welcome representatives from the National Competitiveness and Productivity Council, the NCPC, to this meeting. I welcome Dr. Frances Ruane, chair, and three NCPC members, namely, Dr. Dermot Coates, chief economist, Dr. Keith Fitzgerald, senior economist, and Mr. Jordan O'Donoghue, researcher. I invite Dr. Ruane to make her opening statement.

As chair of the council, I welcome this opportunity to present to the committee. I am aware of the work the committee has done in recent months on competitiveness issues in Ireland. It is clear that competitiveness and productivity have become more central stage. I have circulated my opening statement and I will talk to a few of its points, rather than taking members through the whole thing, which I hope is comprehensive.

We live in a very challenging time and Ireland's economy is still in a relatively strong position. We are all aware of a lot of the issues but we are in a strong position. Ireland ranked seventh most competitive country in the 2025 IMD World Competitiveness Rankings and the most competitive economy in the eurozone. The strength of our current performance, and our performance in the 30 years since the council was established, is a testament to how we have responded positively and consistently to both the opportunities and possibilities provided by membership of the Single Market. At the time the council was established, I was on Forfás and the whole issue was that the Single Market in Europe was the big driver in making it necessary for Ireland to look at competitiveness in a fundamental way.

Things are very challenging internationally because, like all other small economies, Ireland is exposed to changes in the national economic environment and the uncertainties that they create. As the committee will be very well aware, there are other issues which are more under our control. These need urgent attention. They include delays in the delivery of critical public infrastructure, high energy costs, low rates of innovation, low rates of lifelong learning and the absence of competition in important domestic markets. These are all features of competition which have a bearing on everybody who operates in the economy.

Three years ago, we introduced a new framework to look at competitiveness. This is included in our paper as a simple diagram, which I hope the committee will find useful for its purposes. The framework establishes the idea that sustainable growth and well-being are at the centre of what we are trying to achieve. That is the ultimate objective. The proximate objectives are competitiveness and productivity. We have identified six key drivers in the Irish context which really matter for those purposes. They are on the outer ring of that circle. There are then various determinants that go into that. It is an organising framework for thinking about competitiveness and productivity. Members will note, on the right-hand side of the diagram, that the key drivers of productivity are infrastructure, education and skills, and technology and innovation. A lot of their impact is through the productivity prism. Members will see that the business environment, the international environment and macro stability come very much through the competitiveness side. As they will see from the way the diagram is laid out, the two sides interconnect, so better competitiveness means better productivity and vice versa.

I will say a few things about the business environment. I know the committee spends a lot of time considering these issues. High input costs are an issue for Ireland and have been for a long time. Large firms find it easier to manage higher costs because they have the advantages of better bargaining, better scale and additional productivity. In recent years, the NCPC has focused on SMEs because if we get it right for them, it will be fine for multinationals but if it is right for multinationals, that may not deliver what SMEs requires. The council is very conscious of the regulatory environment faced by SMEs, their wish to scale up and the extent to which markets can constrain them in doing that. If we do not have a healthy ecosystem for SMEs, we will not have the entrepreneurship, innovation and investment that we want. Improving regulatory efficiency is crucial in this case. As we state in our paper, this does not require a diminution of standards but better regulation.

On macro stability, again Ireland has recovered amazingly well. Internationally, we are a well regarded case in terms of the improvements we have made since the financial crisis. The public debt has now been significantly reduced as a share of GNI*. The council is very conscious of and, in our annual document, makes reference to how we are using current expenditure to deal with issues. We note the Irish Advisory Fiscal Council, IFAC, has stated there has been a very rapid growth in some of those areas in recent times.

As regards Ireland’s public institutions, in the last week the NCPC published a new bulletin on the performance of the Irish public sector relative to other EU and advanced economies, based on the Blavatnik Index of Public Administration from Oxford University. While Ireland ranked 24th out of 120 countries overall in the index, we only ranked 14th out of 16 western European countries and we were last among a peer group of smaller, advanced economies to which the Department and the Government make reference to in general. That is an issue which I think will come on to the agenda in the next while. This is the first time we have had a major international index that deals with this issue. It is not a perfect index but it does give a signal of where we need to ensure we are dealing with it appropriately in a national context.

In terms of the international environment, there is a lot of uncertainty. We can have a limited effect on the international agenda and we can have more in the coming year because of Ireland's Presidency of the EU. The council believes we should use Ireland's Presidency to get the issues, as mentioned in the Draghi report, which are very relevant to us in terms of competitiveness onto that EU agenda. The Draghi report needs to be dealt with sooner rather than later and other countries in Europe need to be supportive of some of the proposed changes.

The fourth area that determines our productivity and competitiveness is skills. Ireland has a very skilled workforce. We have invested heavily in education in recent years, which is very positive. We must make sure that the supports for further and higher education and the promotion of lifelong learning are strongly advanced by the Government in the years ahead. They are absolutely pivotal to productivity. Obviously, in a changing environment, with digital, green and different agendas, having a very skilled workforce is essential.

Ireland has invested a lot in education. Other European countries did not do quite as much but they invested more in lifelong learning. We have come later to the game of lifelong learning, partly because our graduates and school leavers had a higher standard to start with, but given the changes that are taking place in technology and skills, we need to give more attention to lifelong learning in that regard. We do reasonably well but not as good as the leading peers in the EU, against which we should benchmark ourselves.

On infrastructure, the world and his wife, or the world and her husband, have been talking continuously about infrastructure for the last year. The NCPC started to talk about infrastructure four years ago and we are very pleased to see the extent to which the issue came on to the agenda after our first competitiveness meeting with the Cabinet 15 months ago. While it is excellent that the Government has committed to making a substantial capital investment, in reality planning and administrative bottlenecks, co-ordination issues and limited specialist capacity within the public service contribute to delaying projects and reducing the impact of the investment. It is, therefore, important to improve the State’s capability to manage and deliver in order to enhance our competitiveness. While a lot of progress has been made, the council stresses the need for continued reforms to planning systems, improved project management capacity and clear accountability structures to support timely delivery. We welcome the recent report and action plan, Accelerating Infrastructure, which has been published. The crucial thing is to see progress in relation to that.

Technology and innovation are particularly important for the SME sector. Internationally, most of the multinationals bring their technology with them. They have access to global technology hubs, which local, small companies here do not have so it is vital to them. We are very conscious of differences in the productivity levels between SME participants and others in the same sector. As technology changes, Ireland needs to be able to attract and develop skills further.

It goes without saying that the pace of technological change, including automation and artificial intelligence, means that continuing upskilling and reskilling are increasingly essential. For an economy like ours, which is concentrated on giving a good basic education and, subsequently, master's degrees and so on, continuing lifelong learning, while not a new game for us, is much more significant and will be more important in the future.

We are obviously delighted that the Government has shown a greater focus on the competitiveness agenda in recent times, and the Action Plan on Competitiveness and Productivity was published earlier this year. It was possibly to be published at the end of the year but was brought forward. It is great that the plan has a very strong cross-government structure for addressing many of the issues that exist and which are vital in a competitiveness context. It is really crucial now, once we have the plan, that it is delivered on and closely monitored. The council in the future has taken upon itself to monitor that in addition to what will be done through the normal committee structures from an external perspective.

Ireland has significant strengths and these have supported decades of economic success. We are the envy of many countries around the world. Whenever I go to international conferences, I am always being asked about how we did it, how we have recovered and how we have got it right. We are all aware of what we got wrong as well but they seem to know more about what we got right than what we got wrong. It is very important that if we are going to have improved living standards, we make the most of the competitiveness and productivity growth that we can assure. Many reports have called out where we have not performed to our best. We have done very well but we have not performed to our best and we can do better. A real strength in Ireland is that we call these things out, because you cannot deal with a problem or an issue until you call it out, but what matters now is that there is consistent implementation and evidence-based policy-making if we are to meet the challenges effectively. Vital in all of this is what is under our control. What happens internationally in terms of trade or what happens even in Europe, we can influence, but we are small takers.

This is my final meeting and my final month as chair of the council. It has been a great pleasure and a privilege to chair the council. It is particularly pleasing to see, in recent years, the increased focus on competitiveness and productivity in Government policy. I particularly want to thank the members of the council for their work in informing the analysis. It is crucial to have this mixture of people who are business people and others with the relevant expertise around the table informing the work of the council. Of course, I pay particular tribute to the secretariat, three members of which are here today, for absolutely outstanding work in delivering on what has been decided at council meetings to take the work forward. I thank them for that.

I thank Dr. Ruane. I commend her on her work and wish her well as she completes her final meeting. I have spoken about it a lot throughout the course of our deliberations here in the last number of months as we have been discussing competitiveness, but a particular topic of interest to me is around Government inertia. That is inertia between interdepartmental sanctioning that might be needed to advance critical infrastructure projects or perhaps from a local authority level through the planning processes that are involved in building critical infrastructure. For example, with transport infrastructure under the Department of Transport, you need to go through the local authority and you need sanctioning from the Department of public expenditure. Then you are curtailed to what is contained within a national development plan process, which is constantly reviewed with each election in Ireland, which I do not necessarily believe is the most conducive to success or the most healthy thing to do. If we look at the Danish model, their NDP document or their equivalent document is locked in and is not amended. They have a strategic set of priorities and to alter or change that document is a very big deal.

What I am getting at here is that it is so hard to get something done in Ireland because of the amount of red tape and regulation. Often, what sets in then is the lack of political will because there is a Minister or a Cabinet subcommittee that is left with the unenviable task of having to go between seven or eight different State agencies, Departments and local authorities to complete and get projects done. Is that a matter of concern to Dr. Ruane and her esteemed colleagues who are here with her today? Do they have any particular view on that matter around how our public service in Ireland and decision makers in senior capacities in Departments and local authorities could work better together?

I could point out so many examples. I can think of one in particular. I represent the Cork East constituency and it is one of fastest growing regions in terms of new housing construction. However, when the Department of education wants to provide a school in a community to meet demand, it will look at the census figures which count people who already live in the area. It does not look at housing data or at new housing estates that are going to be built and developed and expected population growth when it comes to forecasting and its decisions on its capital build. That is just one example of how there is this silo syndrome in the public service in Ireland where people do not necessarily consult one another.

When it comes to competitiveness, we need to build public transport infrastructure in the city of Dublin, which, as we know, is one of the most congested cities in Europe. We need to build new port infrastructure to help build up our economy's resilience in terms of the impact that Brexit has had and having better connectivity to the EU 27. When it comes to critical energy infrastructure, for example, we have two gas interconnectors connecting Ireland to the UK and, other than that, we are, effectively, awaiting the emergency development of an LNG facility. Therefore, when it comes to our competitiveness, there are so many examples that could be pointed to where there are infrastructure projects that are almost at an emergency stage but there just does not seem to be that level of urgency at a Government level when it comes to tackling those issues. Often, that is to do with the inertia as I have described. I would be very appreciative if Dr. Ruane could give me some insights from her expertise. If her colleagues want to contribute as well, it would be most welcome.

I thank the Chair. I will say a few words on that. First, managing Government is very complex and is not getting any easier over time. There is an inherent complexity, and a lot of people in the wider world possibly do not appreciate just how complex it is. The multiple layers of Government and the multiple institutions we have as a result of EU membership and as a result of our own evolution effectively mean that it is a complex system to manage. One of the things I remember looking at many years ago was that Ireland's average growth rate was in and around 3.5% over a very long period. That average is just phenomenally unusual in western Europe; it is unusual anywhere in the world. What is much more unusual is the volatility in that rate, going down to -9% - obviously the year of the financial crisis - and being up and down repeatedly. One of the reasons we have the problems we have now is the financial crash and coming out of that. We were struggling beforehand because of the pace of growth of the economy. We then went into a very deep trough. We came out of it faster than we might have expected. Let us be honest in this room, we came out of it faster because we have a strong multinational sector that was networked into parts of the global economy that was growing faster than most sectors. We were very fortunate in terms of the structure of our industry at that time.

However, we have the legacy from that and we were slow to get back into making provision for capital. The capital budget was a tiny fraction of what it is today. It was about one fifth of what it would be today, in proportionate terms. We are not only getting back into that. We started on the council in about 2018 when I joined. The economy was recovering. Therefore, we requested and looked for 4% every year to be spent on capital. Now, I think 5% is the number. We looked for that and we eventually got there but it did take some years to get there.

What was somewhat of a concern for us is that, even when the Government made the provision, there were still the losses. The financial crisis was huge, and in 20 years' time people will be still talking about the effects of it on where the world economy is. The impact of it was enormous. Regarding Ireland, it was not just that we did not have the revenues to spend but also that we lost a lot of expertise, a lot of capacity to build infrastructure and a lot of the significant capacity that had been built up, for example, in housing. People had left Ireland and gone elsewhere to work because there was no work here. We have come out of a very deep trough. That is why we were where we were.

Getting out of that and speeding that up is absolutely essential. What we realised on the council a few years ago was that the Government was making the money available but the money was not being spent to the extent it was being made available. Why? Because the system did not seem to have the capacity to spend in a joined-up way. We had, for example, in 2018, our first national planning framework. That was an enormous step for us because we had not had one of those before in anything like that way. A lot of the issues listed by the Chair in his question are really connected to the physical planning of this country. There are lots of other areas in which we do much better but the physical planning side has been historically one of our weaknesses going back a very long time.

Trying to get that right is where we are at the moment.

The Chair raised the question of whether it is inertia. I think we have not built the connects to get to the strength that we need to have to deliver at the kind of speed that is required now. We have not had some of the structures. The new accelerating infrastructure committee will be crucial but we have got to see that it works, and that will only work successfully if it is joined up across the Departments, the agencies and down into local government. We have underinvested historically in local government, so as we beef up what is happening in, for example, the Cathaoirleach's part of Cork or any part of the country, capacity also depends on what is there locally. Having the right set of skilled capacities in Government to deliver the kind of scale of project we are talking about here is essential, and this is something we have mentioned in many reports. It is right that it looks as if things are moving very slowly. One's expectation is that they are going to move much faster. Perhaps Dr. Coates, Dr. Fitzgerald or Mr. O'Donoghue might like to add something.

I would entirely endorse what Dr. Ruane has referenced in terms of this being almost an aftershock from the significant reductions in public capital expenditure after 2008 and lasting until 2014 or 2015 because it is taking capacity out of the system. More importantly, when we begin to ramp up expenditure again, to some extent we are playing catch-up. We are remediating a lot of the deficits that set in over that period, but more to the point I would just mention three specific issues.

When the State makes additional funds available, as it has post 2015, we have really seen a difficulty in terms of the absorptive capacity, I might call it, of the economy to actually translate that into projects active on the ground. This has come up again and again. It is worth bearing in mind that the impact after the global financial crisis was not just in terms of expenditure but also in terms of the availability of labour. We all know there was a very significant exodus from these shores after 2008, particularly of young men working in the construction sector. Many of those people have not come back, but there is also the impact it has on the throughput of new graduates going into construction or engineering courses because it plants the seed that this is an unsafe career choice. We are working through this. I have just mentioned the fact that the labour supply is a binding constraint, and when we look at the growth and the number of people working in different sectors, the construction sector has been much slower to grow at the same time as the overall economy has been growing. In part, we address this through the use of employment permits, and while employment permits bring in additional people who are building houses, we still have to house those people in the interim.

In addition to that private sector constraint, I would mention as well the capacity of the State to manage and deliver those projects. For example, with the primary route improvement programme in the nineties, which was the technical term for building all of those motorways, to the last stage of that, we were really good at doing that. They came in on time and on budget. Think of the last round of the M50 upgrade. However, the reality was, in the early nineties, when we were starting to do that, we were not very good. We had to learn how to do that, and the same applies when it comes to building port tunnels, the Luas, electrification of railways, etc. As a small economy, these are things that we do not do very often so there is a learning that has to be caught up there.

My final point is that we now find ourselves not just trying to build all the housing that allows us to deal with an expanding population and the catch-up from the housing that was not built for a very long period of time but we now also have to do the energy, the water and the green transition. We are trying to do everything in this telescoped window of time and it is clear that this has really stressed the system.

I want to make one comment and I will come back in the second round because I am fascinated by this. I could be here all day talking about it because I am that interested in it. Something I hear very often from private sector companies, even from companies involved in road construction, is that a lot of them want to see multi-annual budgets in order to give them certainty where they are involved in major capital builds. They only get a seven- or eight-month window in the year when they know they can tender for funds. They would rather have a three- or four-year window because a lot of them actually decide to not even bother. They are looking further afield. They are going to the UK or France and other locations for work because these are big companies. I think that is worthy of reference but I will tease that one out further later on. I appreciate the information.

I apologise for my delay. I met some of the kids from Mayo as part of the Little Blue Heroes Foundation who were here with members of An Garda. I acknowledge the great work that they do. I thank the witnesses for their work and I wish Dr. Ruane well in the future. I know she is coming to the end of her time as chair.

There is nothing I disagree with in the opening statement, which clearly outlined the issues that need to be addressed. Dr. Ruane correctly pointed out that when there was a review of the national development plan in 2021, the commitment at that time was to have 5% of GNI*, which never materialised in any of the years going through. We are now in the situation where we really have to ramp that up in a way that does not impact on inflation. Dr. Ruane rightly pointed out the importance of prioritising the infrastructure.

Dr. Ruane rightly referred to the Draghi report but I have some concerns about how we do that in terms of ending up with light regulation. How do we separate the bureaucratic nightmare that it is for many businesses in terms of reporting to several different bodies and duplication and all, and getting away from it being administratively complex and a lot of that nonsense? However, I also firmly believe that we should not row back on regulation, workers' rights or environmental rights in terms of trying to address climate change. I have concerns about how we get the balance right in these areas. I would like Dr. Ruane's advice on how we might do this. That is my first question.

I thank the Deputy for her kind remark. I appreciate it. In relation to the Draghi report and to some extent the Letta report which preceded it, I think we are all talking about the right kind of regulation. We know that the kind of regulation we have had has not necessarily been the best and we have not necessarily done it in the best possible way. For example, something that has now come up for consideration, and I am delighted to see it, is a technique developed some 20 years ago called regulatory impact assessment. When a regulation is being introduced, it involves looking at how it will affect everyone involved. If this is not done, we could have very good-minded civil and public servants making decisions of interpreting something coming out of Brussels, and if they decide on their view and maybe a little bit of consultation but without the formal structure of review, we end up getting regulations that are actually not in the interest of anybody, the State and the population in particular. The reintroduction of the regulatory impact assessment is really important. We have a huge amount of analysis of the tax and the welfare system, what it does and how it will affect people. The regulatory system for businesses and for individual workers is equally important and we need to give that attention. That is the part of the Draghi report that I think is very important.

The other side of it then is to say that a very large multinational with 5,000 employees and a massive turnover is in a very different situation to an SME with ten. The question is how we ensure that we have it correctly done. In the case of some of the European rules on planning and the environment, we have actually gone for a one-fits-all policy when in fact the society and the country require something quite different. The council in no way is in support of anything of reducing the quality of regulation. The council wants to see appropriate regulation at every stage.

Yes. That is excellent, because we never want to end up in a situation again like we have with the defective concrete blocks where now it is costing us maybe up to €5 billion that could be spent on other things, so we are trying to rectify where we had light regulation.

The other question I want to ask is about security and cybersecurity, which have not been mentioned. Businesses, whether multinationals or smaller indigenous ones, could be wiped out overnight if we do not have the proper investment and the proper join-up between business and Government in addressing, in particular, cybersecurity. Obviously, we also have the challenges with the subsea cables and the data and all of that. Will Dr. Ruane speak to that?

The reality is the cybersecurity issue has done nothing but grow and grow. The issue of the subsea cables is another addition to make that even more difficult. Many years ago we were very pleased about the extent of the ocean owned by Ireland. When you have to monitor that ocean, it is another thing. The solution to these things has to be found in a European context. I do not think Ireland can do very much on its own. I often think if we did not have Europe we would have to create it now to deal with some of the issues that face us. There is work being done and awareness of cybersecurity but we have not had that consciousness, to an extent, and are now playing catch-up. The way to do that is by drawing on the expertise within the country in different areas. There is also fantastic expertise in Northern Ireland, the UK and the EU. We need to look not at ourselves alone doing this but at following a path that will work effectively to deliver what Ireland needs.

We talk often about the need to promote digitalisation of SMEs. We know there is a digitalisation gap between small firms and larger firms. If we are looking for SMEs to digitalise, cybersecurity will be a big part of that. We can expect it to be a bigger part of the cost base for SMEs over time as well. It will be a much more significant issue in the years ahead.

That is why I would like to see funding targeted at helping smaller businesses. They need to bring in expertise, and that is another cost. They may be inclined to deal with that at another time, until it is too late. Uneven productivity was referred to in the opening statement. All that area needs to be looked at in terms of access to funds and finance for smaller businesses to bridge the gap between our indigenous businesses and foreign direct investment. We have talked for years about the need for better connectivity between foreign direct investment and indigenous businesses.

We were quite late movers, in some regards, in the innovation ecosystem and the ecosystem around transformation and change, which is now front of stage for everybody. We are definitely having to play catch-up on that. The Deputy is right that SMEs face the biggest challenge. We need to strengthen our supports and institutions so they can access this at a reasonable cost and are not at the other end of just a market solution, which might be a big cost drag for them.

We tend to focus on the MNC sector and the big global brands, but the SME sector provides the vast bulk of employment across the country and is rooted in every town and village. Most of us got our first job working in a local SME, whether a retailer, coffee shop or whatever the case is.

Look at the support the State generally provides for digitalisation, etc. I am thinking of the research and development tax credit. It is targeted at the big global firms I referred to. It is for that reason the Action Plan on Competitiveness and Productivity, which the Department published and the NCPC had a key role in informing, pointed to the need for a suite of fiscal supports, primarily on the tax side, where it can be much more effective, to help firms adopt innovative new technologies. These are not technologies that are new to the world, but they might be new to the firm and enable the firm to bridge some of that productivity gap. The State has a role to play there and that is recognised now. There is a recommendation. We will see it implemented in the coming two to three years. That is the plan. As the Chair mentioned, we are very good at delivering plans and strategies; it is the implementation we have to follow through on. That is where this committee has a role to play.

Yes, indeed. Thank you.

I thank Dr. Ruane and her team for coming in. Competitiveness is something we have to keep an eye on and look at. The infrastructure report that came out last week will, it is hoped, speed up infrastructure development across the country. We need that in order to have a strong economy and remain competitive.

We have had different groups here over the lifetime of the committee. We have had IBEC, the Small Firms Association, RGDATA, the Restaurants Association of Ireland and the Irish Hotels Federation. They talk to us about the red tape and bottlenecks that hold up business. I would like to hear the witnesses' view on the minimum wage, considering we have the second highest minimum wage in Europe and are a high-cost economy.

I want to talk about digitalisation and stand-alone 5G. While the United States has 20% coverage and China has 90%, we have very little coverage in Europe and literally no coverage in Ireland. This will leave us behind with AI, remote medical surgeries, smart factories and everything that comes along with that. How do we bridge that gap?

How did we go from second to seventh in the competitiveness table in a relatively short space of time?

I will take the last question first. I used to have a great slide but I put it somewhere in my machine and have not been able to find it. It was a circular chain with a lot of links. I had a paper clip as one link. Competitiveness is about identifying the paper clips that are the weak links. If you strengthen some areas and ignore others, you can make the chain weaker because there is a greater weight going on the other links. One of the things about competitiveness is realising we have to deal with many issues at the same time. While our reports are now very streamlined and we make a limited number of recommendations each year, the Government comes back and says how it will deal with those recommendations and we think that approach is really important.

How did we go from second to seventh? We can carry on doing what we are doing, but if others are catching up on us, they move past us. It is about a relative pace in the race. You might be running at your usual pace but other countries have trained harder and are moving faster. A lot of the source of the loss of competitiveness comes down to infrastructure. Infrastructure has been the weakest area for over a decade - probably 15 years at this stage. Not only that, it is the basic infrastructure, which is the material and contribution the State makes, that has been the weakest of all. Other countries have been moving. We have been moving but have lost some relative position in relation to that.

It is useful to have these indicators but it is like taking your temperature. If your temperature is a bit high, you can look at what you need to attend to. It may be nothing. It may be something small. Indicators are literally what they say. They are indicators of your position relative to other countries. It is important when we slip to work out what we need to do. There is quite a lot being proposed in the accelerating infrastructure report and the Action Plan on Competitiveness and Productivity for dealing with areas where we know we have slipped. It is like taking the temperature and asking where we need to pay attention, particularly now. Going back to what the Chair said, if we do not have the skilled labour we require, we can put in all the capital we want, but without the skilled labour or relevant senior people to run the project, it will not happen.

Is Dr. Ruane saying infrastructure is the main reason we have dropped from second to seventh?

Infrastructure is a key reason we have dropped down-----

Are there any other links we are lacking in?

What was the other one we dropped on slightly? Infrastructure was the main reason. If it were not for infrastructure, we would be right up at the top. It is extraordinary how it is.

Some of these metrics are more relevant to some countries than others, so something can have a disproportionate effect in Ireland compared with other countries because of where it is. For example, the current international trade situation, given that we are one of the most open economies in the world, has a disproportionate effect on us compared with other countries. Infrastructure is one of the key reasons we are where we are. It feeds into the lack of housing and the cost of things. High wages were mentioned earlier. We have to pay people reasonable wages to enable them to afford accommodation, so it is a kind of a circle, and that in turn goes back to infrastructure and housing. If we look around the world, it is very clear that we are not the only country that has a housing problem. I just wonder what we were all doing. The distraction at the time of the financial crisis meant we were all watching different things, and suddenly we had this issue. The different structure in society basically means we need a different composition of housing from what we had in the past. To respond to the question, infrastructure is a major contributing factor to where we are in terms of the lower competitiveness.

Dr. Ruane referred to the minimum wage and high wages, etc. We really need to keep an eye on that. To my mind, although I may be wrong, we need to keep an eye on that because it is one of the major factors. When companies are looking to locate here, they are looking at the bottom line in a lot of cases. While they are looking at the education, we have a very mobile workforce here. A lot of our workers are coming in from Europe and other parts of the world, so we have to be very careful that these companies do not shift off to somewhere else where the bottom line is a lot better for them. We have to be really conscious of where that wage is to be able to be competitive in the European market and the world market.

The crucial thing for that wage is productivity, because we can sustain high wages if we have high productivity. For example, we need to make sure that we are using modern methods of construction. I am watching an old house down the road from me being renovated and extended. There are all sorts of changes every day because they are using modern methods of construction. Just watching the scale and speed at which this project is progressing is certainly an eye opener to me. I have seen nothing like it in my lifetime. Those are the kinds of things that make very significant differences. Digitalisation helps people with productivity of the workforce to make it easy for them to export or engage in whatever business expansion is suitable to them. Productivity is absolutely crucial to sustain high incomes and those high incomes are necessary, as the Deputy says, to attract people to come to Ireland for certain key roles.

I just want to jump in on a couple of those points. As Dr. Ruane has pointed out, infrastructure has weighed and continues to weigh on our performance in those international rankings. We have seen disimprovements under some of those themes, like basic infrastructure, where I think we dropped seven places, which is dragging down the overall rating. The index we typically use is made up of many different sub-indicators, and in some we have improved our position while in others we have disimproved. There are some technical issues with the way the data is put together. The data on international investment flows showed for a particular period a very significant drop in our ranking, which would have pulled down the overall ranking. However, if we look at the CSO data that followed, it showed that this reversed out. This would lead us to think that this particular indicator may well improve, but there is quite a bit of volatility. Looking year on year does not necessarily suggest a particular issue but, again, as Dr. Ruane has mentioned, if basic infrastructure and infrastructure overall are low and disimproving, that is really where the fundamental issue is.

On the minimum wage, yes, we do have the second highest national minimum wage but looking back even over the last ten to 15 years, Ireland has typically ranked in the top three in the European Union in terms of median wage levels. We have also ranked in the top three in terms of price levels. It tends to be the same three or four countries that always top those league tables because typically it is the reality that countries with higher wages tend to have higher prices and vice versa. We think about the objective of competitiveness and productivity as being sustainable growth and well-being. There is a well-being issue in ensuring that the minimum wage actually allows people to have a decent standard of living in a high-price economy. We should not assume that in the absence of an increase in the minimum wage, employers would not have to increase that wage. Given that the labour market is so tight, if they were not willing to do so, they would run the very real risk of workers leaving. I think the increase last year was about 4%, but that is in line with overall wage levels. The key is that the Government agreed on foot of recent work that the council had done to push out the timeframe for the transition to the living wage proposal.

We could go on for hours. I have to say that, like Deputy O'Connor, I am fascinated by the whole competitiveness issue and I could sit here and talk about it for hours but unfortunately I have to leave. I thank the witnesses.

Go raibh maith agaibh go léir. I will try to frame this question by question and we will see how much time we have or whether we have to come back again. It was mentioned that the references in the Draghi report have a resonance for Ireland and, obviously, in terms of innovation and addressing structural weaknesses, that makes sense. However, so far, the progress on the Draghi report has been described as limited and uneven. The only area that has had success has been the pharmaceutical sector through the EU pharma reform agreement. My question on this is specific. How will any EU pharma reform benefit Ireland if we are largely dependent on companies coming in that already have their intellectual property? Is there much homegrown innovation in the pharma sector or is that an area that we could develop and get some EU funding for as part of the Draghi reforms?

I thank the Deputy for the question. I am not an expert on the pharma sector but we have done some work that is relevant to that and there is a lot of work going on elsewhere that is relevant to it. Going back to the Deputy's original point, in relation to the Draghi report, there has been the distraction of dealing with Ukraine and a lot of the other issues within Europe. It has not necessarily got the amount of traction it needs to move forward quickly. We in Ireland know better than anybody else that a good report can sit for a long time on a shelf. It is really important that we do get that traction. By putting European competitiveness in comparison with China and the USA, the Draghi report was basically giving a call-out to where we needed to be in order to survive in the longer term. The pharma industry has gone through a massive restructuring over a period of time with the creation of the single market. Reforms in relation to that are always going to impact indirectly on us. We do have quite a lot of generic pharma companies now in Ireland producing drugs, which are a very important part of the cycle of drugs. However, I cannot answer very specifically, and I will check with my colleagues about this, but innovation in pharma is absolutely crucial and the way in which innovation is expected to take place now with AI is going to get more complex. We need to be in a good position to be able both to manage the companies that we have here and also to help the domestic companies that we have in that sector. We can look for more information on that to send to the committee.

I am also not an expert on the pharma sector but my understanding is that there are a lot of indigenous firms, particularly Enterprise Ireland-client firms, in areas like pharma, medical devices and ancillary sectors and there is scope to continue to grow these. When we think about future ways of change, we often tend to focus on AI, robotics and virtual reality. However, the medical devices sector and the pharma sector are likely to see huge change over the coming decades, particularly with advances in areas like gene and cell therapies. It is incumbent on us, given that we have such a big footprint for the pharma sector and life sciences more generally, and that we work as an export hub, that we maintain our place there and that we are not complacent in terms of what we do today.

The Deputy referred to intellectual property. To be honest, I cannot say how many of those multinational companies have located the intellectual property in Ireland for those projects, although I suspect it would be very limited. One of the things called out in the action plan on competitiveness and productivity was the particularly low level of patents being registered by firms in Ireland, whether they are multinationals or SMEs. We need to focus on this.

Typically, you would expect a small, advanced economy focused on information technology, etc., and spending money on that to have a concomitantly high level of patent registrations but that is not the case. Government has identified that as an area where we need to make progress.

A driver referred to in the diagram is macroeconomic sustainability, which includes environmental angles. Do the witnesses have a view on workforce sustainability? At the moment, 30% of workers employed through FDI have come from the EU and elsewhere to fill those posts. We are getting the revenues but the downside is not being measured in economic terms. It is harder to measure how to build more houses, for example. I have mentioned in this committee that many software companies want to come to Dublin and will do everything they can not to use broadband or remote working or to go down the country because the technical hub is in Dublin. Some 85% or 90% of the people purchasing houses in the new estates in my constituency have come from the EU and outside the EU, which pushes up house prices in the area, makes them less affordable and pushes the threshold up for affordable housing.

I commend Dr. Ruane on her tenure and offer her my best wishes on moving on.

If we are talking about bringing in construction workers to build houses for construction workers, as we had at the end of the Celtic tiger, we are costing our economy by bringing in more workers rather than training and upskilling people for a sustainable economy. Is overheating caused by too much dependence on foreign direct investment? We are producing more and, by economic output, we are one of the richest countries in the EU. We are a net contributor but when we take away the foreign direct investment and income that is not long term or dependable, we are not doing so well. Maybe we need to focus more on what is indigenous and homegrown for people already living and working in Ireland.

I have been around the block for a long time and my first job was in the IDA in 1971. One of the big issues even then was small indigenous industry. We did not call it "indigenous industry" then but we were trying to get small and medium-sized Irish companies to grow. That has been a work in progress for a long time. Sometimes when I read the media, it seems people think we have only just started to think about SMEs but they have been there a long time. We have been exceptionally successful at attracting multinationals. That has built up a huge presence and a scale of the economy that I would not have dreamed of in those days. Total employment in the economy was under 1 million; we are talking now of total employment of 2.8 million or whatever the latest number is. It is a very different scale and it has allowed us to grow and modernise our economy in a phenomenal way. One of the issues is to make sure SMEs can thrive in that environment. Crucial to that is that, as we talk about in our general discussion, the ecosystem works for them and they can get access to finance, workers and the specialist information they need. I do not think we have too much FDI per se. We have to strengthen the domestic sector and we are making some progress but I would like to see more. There is a major role for the universities and other specialist institutes working in areas relevant to industrialisation and modernisation if they have that level of support. There is a need to keep that in mind. Does Dr. Coates want to say a few words on housing and circularity?

The Deputy raises an interesting point. When we talk about sustainability, we could translate that as trying to strike the right balance. It is important to bear in mind that many multinational corporate groups cycle through projects, whether in IT, life sciences or biopharma. They bring people within the corporate group to Ireland to work on such projects and then move those people onto a different project. Typically, they bring in world-class talent in microprocessor technology or whatever. I do not think the Irish education system will ever produce sufficient world-class experts in every area. It is a function of the modern global economy that international talent is mobile and moves between countries.

EU workers coming here is a slightly separate issue in that those people have an entire right to move between EU countries and take up work and residence. There is a level of upfront cost in the sense that we are struggling to build housing and do not have enough labour supply or skilled craftspeople in a given area. If we are bringing people in on work permits from Latin America or elsewhere - engineers, carpenters or electricians - upfront that person needs somewhere to live but within a short time the housing stock they contribute to becomes greater than the initial additional consumption. The key is we have a deficit from not building enough housing - or not building really any housing - over a long period and we need to get those numbers up. Modern methods of construction and so on can do a lot in that space. The amount of money being put into apprenticeships by the Department of further and higher education will go a long way. In the immediate future, we need to get labour onto projects. That means bringing in people where we do not have the skills.

I thank the witnesses for coming in and wish the best of luck to Dr. Ruane. She has been there a good while if she is talking about being there since 1971 but she certainly does not look it.

She mentioned we are seventh in the rankings, which is fantastic. That is from a European point of view, I assume.

I am always concerned by viability, competitiveness and the cost of doing business in the domestic market. As Deputy McCormack mentioned, we have had many groups in: Retail Excellence, RGDATA, the Irish Hotels Federation, the fitness federation. The word "SME" has been floated around quite lot; I think it should be "MSME" because we forget about the micro. I am glad Dr. Coates mentioned that. I went through this part of the action plan on competitiveness. In theme 3, "Creating and Scaling More SMEs", we read that "SMEs accounted for 68% of all employment and 41% of gross value added across the economy" and that "Small and Medium sized (SME) businesses are vital to Ireland’s success and are central to our ability to build a broad-based and successful economy and wider society." Many in small businesses, including myself, do not export or manufacture and we get forgotten about. The challenges outlined in the witnesses' diagram are business environment, macroeconomic sustainability, international environment, technology and innovation, education and skills, and infrastructure. Are they applying these also to micro and small enterprises? When they came in, they were very much about energy costs and building costs. We had Maxi Zoo in here, who have 26 stores across the country and now cannot get investment. They will not build any more stores because it is two and a half times more expensive to build them here than in the UK or other places.

Spain was mentioned.

Yes. Is that applying here?

Another thing I wanted to bring up about competition in the domestic economy is this. I have been doing a little research and have only scratched the surface. I will probably open a can of worms on our tendering process. Smaller firms are having great difficulty in accessing even Government projects, compared with bigger companies. I looked at a recent example where somebody was trying to go for a €60,000 project. The first criterion was to confirm the applicant was tax compliant. Obviously, it is very important to be tax compliant.

The second one is to confirm that there is a turnover of over €200,000 for the last three years. They probably would not be applying to go for the tender if they were doing that anyway. For insurance, they have to make sure they have employer's liability of €13 million and public liability of €6.5 million. I just had a look at some of the comments from small businesses and they say they have just given up on the tendering process. They could be more competitive in this market if that was even easier. With all the reports that we read here, are we putting enough into the action plan for competitiveness and productivity for the microenterprises, by which I mean the ones that are turning over less than €2 million or have fewer than ten employees? Since the committees started in June, it is has been all the smaller things that have come up, such as energy, insurance and building costs. That is where I am coming from.

I will just say a few words on this and Dr. Coates or Dr. Fitzgerald might want to come in on it as well. The reality is that up until the financial crisis, it was assumed that any companies in the country that were not involved in exporting or importing significantly just got on with it. There was not a focus on-----

It still feels like that.

There was no focus at all. They were not eligible for any kind of supports. They were not thought about at all. It was as if when we end up subsidising a whole economy, it knocks the relativities out. It was the case that the micro and smaller companies that were not selling internationally were not the focus of Enterprise Ireland or a lot of the Government supports. That has changed very significantly, and Dr. Coates cited earlier on how much employment and productivity there is in the non-MNE sector. The volume of employment and the distribution of employment across the country were not really appreciated. We are a bit late into the game on this, and I take the point in relation to it requiring attention.

I think the action plan - and I need to talk about that - is very well aware of this issue. In the international statistics we do not do well for new firms being set up. We have to ask ourselves why we are at a lower rate of setting up firms than a lot of the EU countries. On the other hand, the firms that set up tend to survive better. We have a natural caution, which may be another result of the crash, but it is absolutely vital that we make sure the micro firms are covered. My understanding from the recent work that has been done in the committee on SMEs is that they are getting more attention. It takes time for the market to provide what is needed, which is a lot. If there is an understanding, for example, that procurement policies are moving in a direction which will allow smaller companies to engage, there will be a lag before that happens. However, it will not happen unless we absolutely make sure we are facilitating smaller firms engaging in these processes. Again, back in the day we did not do that. Let us admit to where we were not right.

I have a good example of that. I am also on the education committee. The hot school lunch programme we have is great. It makes sure that every child gets a lunch. A lot of that is very much aimed towards bigger companies that supply hundreds of meals. Sometimes I think about the centre that is opposite the school and whether it could be providing some lasagne or some ham rolls. However, it is prohibited from doing it because of a lot of these tender applications or the three-year opt-in for the process. Dr. Ruane is right that we have started looking at them, but we definitely need to delve more into the microenterprises and assist them more. Even in terms of helping and supporting them as well, I still feel, and I know within Government previously, the question would have been how do we support somebody. How do we support a painter and decorator to compete with a painter and decorator who is five miles down the road?

Economics would tell us that we should not be doing that.

Exactly, but-----

What is really needed is to get somebody doing something they were not previously doing, so for a painter and decoration, it is-----

It is an innovation.

It is an innovation. This is the crucial one because it gives dynamics to the market. Perhaps Dr. Coates might like to come in on this.

I am sorry to use a painter and decorator as an example when talking about innovation. Sometimes we-----

Sometimes the language does not necessarily help.

It does not match.

I am struck by the point the Senator made about energy costs because the council has been very focused on this issue in recent years. It certainly fed through to the action plan on competitiveness and productivity. There is a sense that post 2022 and the Russian invasion of Ukraine we saw this very significant energy price spike right across the EU. If we look at the data more recently, while the inflation has eased out of the system, energy prices did reset or at least fall back in many countries, but not to the same extent in Ireland. We reset at significantly higher energy costs. Whereas an MNC may well have the-----

What is an MNC?

Sorry, a multinational corporation, those really big US firms or whatever. They may well have some capacity to absorb that higher cost, SMEs, particularly microenterprises operating on extremely tight margins, find that very difficult.

Absolutely.

The action plan and the accelerating infrastructure task force report identify a number of things that we can do in terms of public investment that should feed through to energy costs. However, I would sound a note of caution as well. For my sins, I am also head of secretariat for the cost of business advisory forum and I certainly do not want to pre-empt the findings of that group. One of the things that struck me from talking to firms and to some of the regulators is that domestic customers get an estimated annual bill. They get a set bill template and a set of standard tariffs. All of this means that people can compare their bill from supplier A and supplier B, and then shop around.

It is a secret when it comes to businesses though.

As I understand it, that does not apply to the non-domestic sector, which includes SMEs. The answer here might not be less regulation. Perhaps it is, dare I say, more regulation, and giving a mandate to the CRU to introduce those same types of protections. At the very least, someone running a micro or small business should be able to compare and contrast and try to get those savings. Recently, under Dr. Ruane's stewardship, the council began undertaking a series of regional seminars in Limerick and Waterford and various places and talking to businesses. People would often point out that they did not have a huge amount of capacity or spare time but if someone could help them to do these things, then they could do that themselves. There is an element of empowering business owners. I am not sure the answer is always grants or a new webpage or something like that, but very simple, straightforward, practical, but impactful changes that could be made.

I totally agree.

This is a topic of interest to us. The energy issues have been raised previously here. I think Ireland ended up topping the non-residential electricity prices in the EU 27 at one stage, according to Eurostat. I did make remarks here about ESB Networks in particular, which I think was clearing a profit of around €700 million or €800 million a year. Representatives from ESB Networks met me afterwards to say that a lot of that is in relation to servicing debt, but it just seems extraordinarily high. I will put that on the witnesses' radar, if they are doing analysis on it.

The next speaker is the Leas-Chathaoirleach of the committee, Deputy Brian Brennan.

I wish Dr. Ruane well and I thank her for her work in the role. I wish her health and happiness in whatever the next chapter will be. I have no doubt we will meet somewhere again.

I am joining the IDA board in January.

Excellent, we will see plenty of her.

I should say that I accepted at the very last minute.

My background is hospitality and I had approximately 600 people working for me at one time, so I experienced the highs and the lows of business. Since I got into this new position, I have met farmers and people in hospitality right across the board. It is all about margin. If someone is not making a margin, they are a busy fool and should not be in business. This goes back to the points our colleagues were making in relation to SMEs. I feel there are many difficult days ahead when 80% of microenterprises and SME people are showing that we are going to have an increase in costs. The minimum wage is going up again and auto-enrolment is coming in. There are so many hits coming down the line. There are so many issues going on there.

I am concerned about where the witnesses feel Ireland is going. I am worried about the shape of the main street and these small businesses. I am from the very busy town of Gorey. In the last week, literally a month before Christmas, two shops closed down. In that town shop owners are being crippled by costs. Is it only costs or is it the way we are moving as a nation, with more online shopping? There are so many vacancies in shopping centres.

If you drive up the main street of any town in Ireland on a Monday, Tuesday, Wednesday or even Thursday night after 9 p.m., there is not a sinner. My opinion, based on my hospitality experience, is that social patterns have changed post Covid. Where will that bring us in terms of competitiveness in business? Where is Ireland going?

I said earlier there was a sense in which what was seen as the non-international trading sector looked after itself because it did not have to compete with a restaurant in Belgium or a hotel in Denmark, but at the centre of quality of life and well-being is economic sustainability. Well-being and quality of life are directly affected by the local environment in which we operate. We all operate in a place. We live somewhere and work somewhere and are affected if those places are not thriving. The Deputy has spoken of how that is changing. In my neighbourhood, I can think of five places which have closed in the past year. Some new ones have opened and some are opening but there are very long lags. It goes back to something that came up earlier, namely, the bureaucracy of the change-over and getting new planning permission means there is a hole in the main street for an age while we are waiting to get another business in. The Chair spoke of inertia. There is a slowness to delivering change.

Along with many businesses closing, many new ones have opened, though not necessarily in the same places. There is the issue of how we manage our local environment. We have to make sure the cost structure is such that the margins allow businesses to continue. There will be changes but we know what we do not want to end up with, which is a dead high street. That is neither safe nor attractive. It is not attractive to people to come and work in a country where the high street is dead, nor is it attractive for tourists. We have to keep that in mind. It is implicit in the action plan for competitiveness and productivity.

We are conscious of the idea of place making. The place has to be attractive to investment if we are to deliver new housing, etc. The rise of e-commerce has played a role over time but the Deputy is correct that the pandemic led to a general shift in consumer behaviours. For instance, a family that went out to the cinema and for a meal on a Friday night discovered in March 2020 that it was not an option, so they ordered in food. That then reset their patterns of behaviour at the expense of the retail and hospitality sectors.

There are also changing patterns of consumer behaviour in the on-trade. Alcohol consumption has fallen so rapidly, particularly among younger people, that there is an implication for somebody running a hospitality-type business. They are interacting with broad patterns of consumer change. We have done quite a bit of work with the Company Registration Office, drilling into its data. Even though businesses are closing every year in tourism, hospitality and retail, more businesses are opening. Those sectors and the number of people working in them are expanding.

The key issue is how the business owner is navigating the tightness of the margins. One thing we have come across through regional seminars, etc., is businesses responding by reducing opening hours. This seems to be a growing thing. A business that might have opened at lunch time now does not open until 5 p.m. or closes early or does not open on Monday or Tuesday. We need to be conscious that tourism plays a huge role in our economy, particularly in rural locations. We cannot have buses full of tourists arriving into a town and discovering they cannot get a cup of coffee on a Tuesday.

I am conscious of time and want to get two quick questions in. The first is on a highly topical subject, Mercosur. The narrative out there is it is all about farming, but it is not all about farming. We are all about free trade but there is a balance. We have to discuss the agriculture factor in it as well. In terms of competitiveness, if we allow a flood of cheap meat into Ireland, how do we balance that with the health of the nation?

Second, infrastructure has been mentioned. Our Government is committed to spending €110 billion by 2030 but the geopolitical situation in the world is so uncertain. Should we empty our coffers and put everything into infrastructure and not know where we stand? We are praised and when we go around the world, people ask how we are in such a strong position. How do we get that balance?

It is all about balance. The job our legislators have to do is achieve that balance on our behalf. It is inevitably a trade-off. This week Ursula von der Leyen has raised the issue of whether borrowing rules might be changed to facilitate better funding for the building of houses in Europe. It is not a static thing; it is not even static here in Ireland. We have many issues at the moment to balance, including Mercosur and the infrastructure issue. Prioritising which part of infrastructure should come first is a hugely difficult task, if you think about it. What should you do first? The Deputy might be in a constituency where he wants something to happen but if there is an earlier step in the infrastructure that has not been taken, it will not be realised in the right way. Going back to the Chair's point at the beginning, we need a level of co-ordination in infrastructure, given the backlog we have, that is much bigger than at any point in recent times.

On the issue of Mercosur, I will not, as a civil servant, criticise Government policy in that space. Going back to Deputy Gogarty's point on sustainability, Ireland and the EU as a whole would have to reflect on the carbon costs of importing ever greater volumes of food from ever greater distances. Clearly there is a cost and that is something Ireland and the rest of the EU have to take into account in the decision-making process.

I thank the witnesses for joining us. I missed the opening contributions but I wish Dr. Ruane well.

Picking up on Deputy Brennan's reference to our high streets, we now have a situation where hospitality, in particular, is competing with multinational corporations. It could be a decision whether to go for a pint or meal or to stay at home watching one of the large brands on a big screen. That is becoming more and more of a challenge. As part of that, viability is questionable. We have seen increases in energy and insurance costs. Last week we had a debate with the CRU on Irish Water's increasing of commercial rates by 9%, which is in line with the level of investment in infrastructure. I cannot understand how we justify a 9% increase just because it is in line with the level of investment in infrastructure by the Government. We need to look at alternative pricing models because it is unsustainable. People are getting the exact same products. We might be enhancing infrastructure overall but we cannot expect a business owner to pay 9% extra this year and for that to continue year on year in line with our commitment to improving our infrastructure and the billions we have put aside for that in the years ahead.

There is a debate in the Seanad today on the minimum wage. We have made a lot of progress on labour standards and benefits but it comes with a cost, whether it is minimum wage, living wage, holiday pay, statutory sick leave or, now, auto-enrolment. Do the witnesses have any thoughts on the balance between the benefit or appeal to the employer and that to the employee?

I will say a word on infrastructure and then pass the question over to Dr. Coates because the Department of Social Protection and the Department of Enterprise, Tourism and Employment did a lot of work in the past year on how these changes were coming so quickly and furiously that companies were not able to accommodate them.

That led to some rejigging and retiming, which is very important.

I want to go back to the first issue the Deputy raised about the funding of infrastructure. Earlier we had a discussion about the fact that we have - exacerbated obviously by the crash - a huge infrastructure deficit in a country with a rapidly growing population. Usually the way regulators tend to think about these things is that the cost of providing these new infrastructure projects should be paid for on a user-pay principle. We pay for it, we pay additional funding for the grid or we pay additional funding for other basic utilities. The scale at which it is coming through is very high. We need to discuss and think about the extent to which the State, which is ultimately the taxpayer, rather than the immediate consumer should be funding some of these pieces to the extent that is being done.

I do not mean to interrupt, but we have seen significant investment in our roads in recent years but we did not see the same level of increase in our road tax.

No.

We are actually discriminating against businesses with this level of increase, and it is simply unsustainable. The cost increases in areas like energy, insurance, Irish Water and labour are all coming far too quickly, and as Dr. Ruane says, furiously. It is leading to a serious viability problem.

They are coming from different sources. On the infrastructure one in particular, the issue is the fact that the scale of the investment in infrastructure means that the Government needs to make even greater capital provision for basic infrastructure than it has been considering, as far as I can see. That is my personal view on this matter. The notion of trying to fund it all, in the case of water or the electricity grid, by passing it immediately to consumer is not correct. I do not think we can do what we are doing because we are going to create what the Deputy calls a viability problem and a household survival problem in terms of some of the costs. We need to think about that more seriously and ask ourselves if we have made enough capital provision. I mentioned that we have concerns about the amount being spent on recurrent expenditure. The question is whether we need to make more of that. This is not actually changing the volume but who is funding it. There is a danger that we will reduce the viability of businesses because, as the Deputy says, they cannot afford to pay the water or the electricity charges that are coming with building the infrastructure. I am not referring to the service of getting the infrastructure, but the building of it. That big deficit is like a ton of bricks landing on the economy of this stage. We have to find a better way to do it.

Does Dr. Ruane have any thoughts on the employer versus employee piece? I am not trying to be divisive here, but there has been a lot of emphasis on labour pay and conditions. Someone has to pay for it.

I will pass that question to Dr. Coates.

The National Competitiveness and Productivity Council examined this issue previously. In 2022-23, we had a raft of new proposals for improved working conditions coming down the track but all arriving in the same short period of time. They included the introduction of statutory sick leave, the progression towards pension auto-enrolment, the transition to a living wage and a variety of other measures. The difficulty the council identified was not that any individual measure in isolation was negative, but that all of these arriving on businesses in a very narrow period of time presented a threat to viability for some firms. We need to bear in mind that many large firms would already have offered occupational sick leave schemes or occupational pension schemes and-or paid well in excess of what the living wage might be, so they face effectively zero impact. That looks very different for someone operating at the micro or small end of the spectrum who has quite a number of people working for the minimum wage and those kind of things.

Having done that work, the Department brought forward a set of proposals, which were accepted by the Government. One of these was to extend the transition period to the living wage, which pushed that out by two years. The second was to effectively halt the roll-out of statutory sick leave and pause at five days. A variety of changes were introduced but it is not a case of it being one and done. We need to continue to monitor the impact of these things over time.

The Government was very clear that it wanted to make that type of socially good, positive progress in terms of protecting workers and the most vulnerable, which is in all our interest. It is in nobody's interest that an individual working as a nurse or a childcare provider who is ill feels a financial need to go to work. That just creates problems further down the line and that became obvious during the Covid period when that was happening. Equally, we want to protect the enterprise base and ensure that people have jobs and those jobs pay well. I note again, and I think this came up earlier, in terms of the living wage proposals this year, that the proposal from the Low Pay Commission is for an increase of approximately 4%, as I understand it, which is in line with average wage trends overall. We should never make the mistake of assuming that all of those employers would simply keep their wage bills static in the absence of an increase in the minimum wage. The competition for staff, even for someone running a bar, a café, etc., would mean that someone would move if their wages were not to increase because their costs are increasing as well.

In relation to competitiveness, how does Dr. Coates feel we are managing the shadow economy?

I think that is an issue for An Garda Síochána.

I think the Deputy is basically talking about the informal economy. Is that what he means?

Yes, the shadow economy.

It has different names, for example, the grey economy-----

I have noticed this coming up more and more with different sectors, particularly the beauty and hair sector.

Tobacco is another one.

Someone on the high street paying rates, rent and X,Y and Z can be trying to compete with someone who is not on the high street. Has that come up for the council?

It is not something that has come up, although it did come up in that one project we talked about.

Tangentially.

For hairdressers alone, the figure is estimated at €60 million.

We did a piece of work on what we refer to as secondary employment, which is the issue of a person working more than one job. There are very good reasons why a person might choose to do so. The issue arises when people are not being treated as employees, necessarily, by the employer - let us say, delivery riders or something like that. That gives the employer who is doing that a cost advantage over somebody who is following the rules. We need to be very careful about this. I know the Supreme Court made a judgment two years ago, I think, to regularise that position but we need to be very careful. Allowing an incentive where one employer can ignore the law and employ people on terms and conditions that are completely beyond what is legally applicable means that employer gets a cost benefit that somebody else operating a business down the road does not have.

The issue is not necessarily on the council's radar. Is that correct?

It has not been on our radar thus far. Going back to when I was very young, there has always been this issue about people operating outside the system. One of the things that has happened over the years is that more and more people are now part of the formal system. It is not good or healthy to have an informal system where some people are operating to different rules than others. That is a cultural thing we need to deal with. I imagine this has probably come up with the small business group. It would be more the place it would sit rather than with the council.

In the various forums we engage with this does come as a simple issue of equity and fairness. As the Deputy said, if somebody is paying rent and rates, etc, for a premises on the main street and then somebody else is doing whatever it might be from their own home, it is not fair.

If members want to have a second round, we will have two minutes each.

Yes, I will try to come in as quickly as I can.

I am ahead of you, Deputy, unfortunately.

That is fine.

I was very interested in a lot of what was said. As I said, we could be here all day because there are so many strands to it. The committee has a role in relation to scrutiny. It has been such an insightful experience chairing this committee since I was appointed by the Taoiseach in June. We will have a meeting with the Minister and Department in January to get a technical briefing on the Department's work.

Going into that meeting, it is important for us to get an understanding. If the witnesses were to give us advice, what one or two points do we, as an Oireachtas, need to hit on? I think Dr. Fitzgerald is an employee of the Department so is probably restricted from commenting on that. What would be the most impactful thing? I know there are many findings; I have the witnesses' work before me.

It is all about delivery, holding people to account and making sure they are delivering. The Chair referred earlier to inertia. To beat that inertia means having a sense of urgency among everybody in relevant Departments to move on what is there. It is not good for democracy or acceptable that when there is something urgent to be done, that urgency does not pass through to all players involved. The action plan for competitiveness and productivity will be mapped out. They are beginning to report already. Members need to keep their eyes on those reports. I would also keep an eye on whatever the accelerating infrastructure committee is doing because it is so important to competitiveness. Rather than being happy to say, "There's the plan; it's on the shelf", we want to see the thing being delivered. That is crucial.

Absolutely. There is one point I forgot to make earlier. I always felt a national critical infrastructure project contained and referenced in the national development plan should have special designation by Government, whether that is an exemption from the judicial review process or bypassing the requirement for planning at local authority level. Looking at the steps involving An Bord Pleanála and so on, there are so many ways in which projects are stalled and slowed down. Then there are tendering windows, etc. The Department of Public Expenditure, Infrastructure, Public Service Reform and Digitalisation has an awful lot of outstanding questions that need answers, to put it very diplomatically. It is that criss-cross between the two Departments. I do not expect a response on that matter.

I would like to continue on what is considered sustainable economic policy. Last year, almost 150,000 immigrants came into the country and 70,000 left. Of those who came here, 30,000 were from Ireland and 5,400 were from Britain, but 58% came from outside the EU. Dr. Coates mentioned that the EU is a separate case because of the free movement of people. To stand still, we need 36,000 to 40,000 houses per year, so to cater for all the people coming in to work and add value to our economy, we are talking about building 60,000 houses. Is that feasible? Should we be more discerning about the types of workers we need? Obviously we need health professionals, construction people and bus drivers, for example, but the likes of software localisation can be done from anywhere in the world. Maybe in that industry it should be a case of "Go hifreann nó go Connacht - To Hell or to Connacht". Workers could go to Mayo, Galway, Roscommon and, especially, Leitrim, where schools need to be filled up, rural Ireland is basically dying and there are many over-shop properties. Maybe we should say that if a software company, for example, wants to come to Ireland, this is where it has to locate and it can take it or leave it. Should we be at that stage?

On a related point, Dublin has developed as a doughnut. What is the council's view on developing higher density in the city centre? Do we need a new city? I am asking about the economics.

Lastly, I did not get to raise this issue but it is hugely important. The witnesses mentioned the need to be self-sufficient in energy production because of our huge imported energy costs. What do we need to do to get to that? Do the witnesses think it will ever happen?

There is a lot there. In relation to building, over a number of years, stopping about two years ago, we all watched as incredible numbers of office buildings were built all over Dublin. Everybody wonders where that labour is now. There is less of it now. It has slowed down. That frees up labour to go elsewhere. There is a sense in which the market does some of this allocation for it, but why were offices being built? It is because the rate of return on building offices was higher than that on building houses, apartments or anything else. The rate of return on building accommodation is better than it was and we must make sure that continues to be the case. Otherwise, we will not get investors going into that area.

On people being placed around the country, we have mentioned the importance of place making. That is a strong feature of a sustainable, mentally strong and vibrant economy. We have not been good on that historically. We are getting better but much more could be done across the system to create that sense. You attract people to places; you do not force them to go to places. I have met many people on trains to Wexford, Galway and elsewhere who made the move out and now enjoy a different quality of life. They were not forced to do it; it was a decision they made in order to change the balance.

On Dublin being a doughnut and sustainability, I used to do a presentation on competitiveness before I was involved on the council. I had a picture of the M50. It was just like, "This doesn't make sense". Greater density in Dublin is crucial to Dublin's competitiveness as a city. Given the structure of the population, we need densification and planning. It is not just about accelerating infrastructure, but having the right kind of infrastructure in the right kind of place. We have a planning framework now to guide us but there are still tough decisions that will need to be made at national and local level on meeting targets.

Will the witnesses deal with energy briefly?

Clearly, we need to be more sustainable in terms of energy. Does Dr. Coates want to talk about planning and energy?

Yes. We have a great opportunity, in terms of our oceanic footprint, to move into offshore wind capacity and delivery. This is not undoable. Countries like Scotland, Denmark and the Netherlands have made significant progress. We need to do the same but there will be a lot of knotty and difficult planning and regulatory issues to address over time in terms of landing sea cables at ports, connecting additional capacity to the grid and upgrading the grid such that, where power is generated, it is not simply shed because the grid cannot even move it across the island. These things are doable and we have teams actively working on them. It will require commitment and drive from the centre to unlock all the issues we face.

On the density of build in Dublin, I am struck by the fact that many of the mixed-use developments, including apartments, built in the past ten years on the quays, north and south of the Liffey, and bear in mind that these areas are proximate to bus, DART and Luas, top out at seven stories. We need to be careful that, when we are putting the permissions and the finance in place and have the labour available, we make best use of it. In some parts of the city, such as the historic Georgian core, anything over a certain height is not appropriate-----

Yes, but they are building in the suburbs instead.

-----but that should not apply everywhere else. We should make best use of the land resource we have, particularly given the housing challenge we face. I am all in favour of another city, as long as it is in Kildare South.

That would be far too close to Dublin. Bring it to Offaly. We will not get parochial.

I have a question around the old saying, "America innovates, China replicates and Europe regulates." I sit on the infrastructure committee as well and often hear about a directive from Europe that is interpreted in Portugal with one page and when it comes to Ireland its interpretation ends up being 200 pages. Can the witnesses provide one example from the area of enterprise where a directive has come from Europe and we are over-regulating? That impacts on viability. Regulation is in direct conflict with innovation in that innovation is all about getting outside the box and regulation is about trying to keep someone in a box. Can the witnesses give me any example from Europe where we have over-regulated?

I cannot give a specific example but I have talked with environmental lawyers and planning lawyers and what they would say is exactly what the Deputy said, namely, that we turn something simple into something bigger. We do not tend to do principle-based regulation. We tend to get into the detail, which means that it can go from one page to 20 pages or 200 pages. This means that when it comes to be dealt with, the likelihood of lawyers and planning consultants being involved for long periods of time goes up as well. There is something at the beginning of how we do things that is not appropriate. Ireland is a common law country, as opposed to the rest of Europe - apart from Malta - which are all civil law countries. They are used to doing exactly what the Deputy is talking about. We need a much tighter, less regulation-intensive way of doing things. We need to go back to principles as opposed to practice. If we do practice, we can get things wrong very easily. When we come to have a better look at regulatory impact assessment I think it will show up that many of the regulations created the problems that we now have as opposed to solving problems we thought we might have.

I am not being critical in any way, but this is an example of the answer that is consistent, where we are talking about it on a very high level, whereas I think we need to start talking about very practical examples. It is kind of getting lost on us that, yes, there is a problem, we are over-regulated and there is too much paperwork and bureaucracy. Unless we home in on actual specific examples, I think we are going to be challenged here to try to actually address this. I fully agree with Dr. Ruane, by the way, but I think we need to start getting a list of examples of where the problems are.

There are definitely people who could provide those for the Deputy. What I am saying is that they are coming from the same basic source, which is not a principle-based approach but a detailed, practical-based approach, which basically explodes the regulation into something much larger than it should be.

Part of the key issue here is the State establishes different sets of regulators in different areas, gives them a mandate and a funding-----

I think we have five times as many now as we had 30 years ago.

Yes, and the Deputy will have seen the action plan on competitiveness and productivity that we produced a few months back. We have mapped out the various touch points and the extent to which those have grown, even in the past ten years. The key is to understand the extent to which the regulators work in splendid isolation, or speak with each other and understand how their different roles overlap or maybe are contradictory and where layers are being added, in that sense. Sometimes we point to a lot of the regulation coming out of the EU, and clearly that is the case. A lot of these regulations that have proven particularly problematic, such as the corporate sustainability reporting directive, or CSRD, and other things over recent years have emanated from Europe. Equally, we need to look at the way our own regulatory structures work because that is a matter under our own domestic control. The action plan I referenced contained a number of recommendations in that space. We are very anxious to see that those follow through in the next year or two.

Thank you very much, Dr. Coates and Deputy Clendennen. That concludes today's proceedings. Before we adjourn, I wish everybody a happy Christmas. I thank the committee officials for their assistance throughout the year. I also thank our witnesses from the National Competitiveness and Productivity Council for the information they provided. Thank you, Dr. Ruane, and congratulations on finishing your term. I wish you well on the board of the IDA. I also thank the three members of the secretariat of the NCPC, Dr. Dermot Coates, chief economist, Dr. Keith Fitzgerald, senior economist, and Mr. Jordan O'Donoghue, researcher. Nollaig shona daoibh go léir. I wish you all well.

The joint committee will meet at 2.15 p.m. on Tuesday, 13 January 2026 for a private virtual meeting. The next public meeting will be at 12.30 p.m. on Wednesday, 14 January 2026.