I very much appreciate the significant decisions made by my predecessor, Mr Charlie McCreevy, when he successfully steered our economic ship through the troubled waters of the recent economic downturn during 2002 and 2003. During that period he set, and met, pragmatic budgetary targets which were commended by the IMF for their “exemplary track record of sound economic policies”. The necessary adjustments he made to public expenditure then - which protected existing levels of public services - were made in the face of much unsolicited advice to increase borrowing or increase taxation to justify higher public expenditure. Such advice would have threatened our job creation capacity, resulted in an increase in unemployment levels and damaged our competitive position.

The insistence of Government to correlate public expenditure to the reduced growth rate of our economy during that period, and the implementation of that policy by my predecessor, has meant that we came through the international economic downturn in a better position than our competitor economies. Our labour market remained very resilient during that period and our employment growth remains robust. We are now in a position to ensure that the benefits of our economic performance, which is growing at more that twice the EU average, continue to be shared by all members of our society.

Since I became Minister for Finance I have been very conscious of the need to ensure that we maintain and strengthen our competitiveness. My decision in Budget 2005 to make no changes to indirect taxes was motivated by my desire to support a reduction in inflation and, in so doing, underpin our competitive position. Our inflation rate is now very favourable when compared to our fellow eurozone economies, indeed we now have our lowest inflation rate since we joined the eurozone. This has helped increase consumer confidence and consumer spending.

Keeping in place budgetary measures that help keep our inflation rate at the level we now enjoy and which correlates increases in public expenditure to the rate of our economic growth will help maintain our competitive edge. Furthermore, I want to ensure that our model of social partnership, which has helped ensure sustained industrial peace here and ensure a business environment conducive to job creation, remains in place.

I have mentioned competitiveness on a number of occasions and what I mean has been cogently set out by the National Competitiveness Council as: “the ability to achieve success in markets leading to better standards of living for all. It stems from a number of factors, notably firm level competitiveness and a supportive business environment that encourages innovation and investment, which combined lead to strong productivity growth, real income gains and sustainable development”. Competitiveness is essentially about growth in productivity. Productivity is a measure of the efficiency with which goods and services are produced and is the key long-term determinant of the nation’s living standards.

Better Regulation is also a key issue for competitiveness and economic growth. This Government is committed to ensuring that the following principles of good regulation: being necessary, effective, proportionate, transparent, accountable and consistent are rigorously applied in the regulatory process.

The argument has sometimes been made that our high productivity is sufficient to allow for higher wage increases than our competitors. However, most commentators acknowledge that high levels of productivity are concentrated mostly in the modern sectors of our economy. We have successfully brought down the inflation levels and we must now ensure that wage competitiveness is maintained.

National developments in prices, wage rates, as well as exchange rates, can impact significantly on competitive performance. For this reason I see the next national agreement as crucial for the future of the country. We must ensure that wage increases are moderate. For public service pay we must continue the process of modernisation and any pay increases must be linked to the achievement of specific objectives that will help build a better public service and ultimately better the country.

However, I think all concerned with the public service pay systems as it developed over the years saw the flaws in it. A system of relativities between sectors had developed and led to a situation where groups which had no apparent connection getting similar increases.

To overcome this we developed the benchmarking system which, at its simplest, is designed to compare the jobs and pay of staff in the public service with similar jobs and pay in the private sector while allowing for the particular attributes in each sector. As you know this exercise began in 2000 and was completed in 2002 and gave average increases of 8.9%. Indeed, the eventual outcome was probably below what some had expected when the process began in 2000. To put this award in context, there were no significant special pay increases above the nationally agreed increases in the public service in l999, 2000, 2001 or 2002. This contrasted strongly with what was happening in the public service earlier in the 1990s - and in parts of the private sector in the late 1990s into 2000. The first payment under the benchmarking increase was made in December 2002 with the final payment being made in mid - 2005: that is a full five years after the exercise began. I would suggest that this more co-ordinated approach is a better system than the one it replaced.

Another benchmarking exercise will begin later this year to report in the latter half of 2007. This will be similar to the previous exercise. I do not know what will emerge but insofar as pay increases in the private sector would seem to be close to national pay agreement levels I would not expect that there are huge divergences out there. If pay increases in the private sector continue to be held at the nationally agreed norms, there is no reason to think the next benchmarking exercise will find the need for significant, if any, increases. However, this is a matter for the Body to assess.

I also think that people have to acknowledge the fact that in return for pay increases there are now specific objectives in the different areas of the public services which must be achieved to entitle payments to be made. The achievement of these objectives is vetted by an independent Group in each sector. While some of the objectives are not attention grabbing they all are playing a part in helping to develop the public service as a more efficient service.

The current agreement has also yielded industrial peace in the public service. This is in contrast to the previous years when we had stoppages by a large number of groups across the public service, in schools, hospitals and central administration.

I would not claim that the benchmarking process is perfect or cannot be improved but it is a marked improvement on what went before it. We must continue to improve and refine the system.

Ireland is an open international economy. Our prosperity is intimately linked to the health of the world economy and is heavily reliant on foreign direct investment. This investment is critical to employment in Ireland both directly and indirectly.

We depend on international trade. In order to support our current level of income and wealth we need to be an active player in the international economy. Given our small size the only way we can do that is through effective participation in the European Union. To do anything to put that effective participation at risk would be to risk our current prosperity. These considerations are critical to our consideration of the European Constitutional Treaty negotiated during the Irish Presidency. It is the legal framework which will facilitate our effective participation in the European Union while meeting our legitimate aspirations to continue economic prosperity. I hope the people here to-day will help to ensure the message of the importance of this Treaty to Ireland is well supported when the debate develops in the coming months. The success of our economic strategy is mostly predicated on Ireland’s full and continued engagement with our fellow member States and the regulation of the single market.

Thank you