TOM LYONS The State’s competitiveness has begun to slip back after several years of improvement,

the National Competitiveness Council has warned.

NCC's chairman Dr Don Thornhill said giving people a higher capacity to spend by way of price moderation and "designed tax reliefs", rather than by pay rises, helped to protect international competitiveness.

Dr Thornhill was marking the publication of the council’s latest annual report which finds that Ireland’s competitiveness has improved across a range of indicators over the past number of years. However the indicators also show that more recently the country has again begun to lose ground in terms of relative cost competition.

“We gained a lot of competitiveness after 2008,” Dr Thornhill said. “It has now turned, although not very dramatically. This emphasises the need for caution and to guard against complacency when it comes to competitiveness.”

He said while it was understandable that there was a desire to put austerity measures behind us, Ireland needed to be watchful for any return “to the kind of things we saw between 2002 and 2007”.

While the NCC did not take a public position on pay, the chairman noted that there have been discussions recently about pay increases. The more important thing was that people had a higher capacity to spend.

“From a competitiveness point of view this can be done through price moderation and designed tax reliefs. This is a preferable way to do things from a competitiveness point of view. Examples of things that could be done are income tax reforms to give people more take-home pay and controlling healthcare costs.”

Increased health insurance premiums and health costs were both dragging on Ireland’s competitiveness. On water charges Dr Thornhill said that in the long-run it was a very positive change.