Widespread regulatory reform has been proposed to the Government as a non-inflationary way to sustain economic growth and to raise real income by improving competitiveness, efficiency and market performance, in a new report by the OECD. The advice will form a backdrop to Ministers' deliberations when they consider the terms of a Government Action Programme in Cabinet, later today. But preliminary indications would suggest that progress will be slow in advance of a general election as powerful commercial interests continue to flex their muscles.
The Taoiseach, Mr Ahern, has suggested that the necessary administrative framework will be put in place to monitor and co-ordinate a programme of deregulation across the public and the private sectors. The Tanaiste, Ms Harney, will commission reports on various areas of economic activity, including the legal services. And reviews already under way in relation to the licensing of pharmacies and the drinks trade will be speeded up. But it all smacks of a "look busy" approach, while ducking hard, short-term decisions.
More than two years ago, our own Commission Authority strongly advocated deregulation of the drinks trade and said that anyone who obeyed the law, provided suitable premises and was of good character should be allowed to sell alcohol. The report was ignored. And the Government embarked on a series of minimal changes designed not to antagonise the powerful vintners lobby. Last year, the Competition Authority drew attention to the monopoly-style situation that also exists in relation to pharmacies and urged deregulation. The Government responded by ordering a review. And, in order to protect the small shopkeeper, it rejected a proposal that the ban on below-cost selling of groceries should end.
The OECD has identified those same areas - amongst many others - in its report and has urged early action. In response, the Government is hastening slowly. But in spite of a political reluctance to confront entrenched organisations at this time, Mr Ahern has acknowledged that extensive change must eventually come. Freeing up markets, minimising regulatory barriers and promoting greater competition would all contribute to making Ireland a better place for consumers, he said, while attracting trade and foreign investment.
Perhaps the strongest argument in favour of regulatory reform is its negative impact on inflation. The OECD has identified past reforms as being largely responsible for holding down our inflation levels while the economy boomed. And it argued that, in order to prepare ourselves for economic shocks and to build capacity to sustain future growth, we should push forward with the deepest possible structural reforms at this time.
There is no doubt that a more efficient and effective economy is a desirable objective. Moving from labour as a source of growth to a more productive use of resources is a key challenge. And the cost and length of future economic downswings could hinge on such change. A report that Ireland had slipped slightly, from fifth to seventh place, in the world competitiveness rankings in the year 2000 has simply underlined the need for further deregulation. The Swiss business school, IMD, found that an increase in industrial disputes, along with a shortage of skilled labour, had made the State less attractive as a location for manufacturing. It also criticised a lack of openness by banks and financial institutions; a lack of priority for employee training and a generally inefficient infrastructure.