PROPERTY TAXES and water charges need to be introduced to avoid further increases in income taxes, which would erode competitiveness, the Government has been told. The recommendations come in a six-page note from the National Competitiveness Council (NCC) which has been sent to the Government.

In the document, seen by The Irish Times, the State's in-house competitiveness think tank has pressed for the implementation of a series of prioritised reforms.

Calling for the introduction of, among other things, a property tax and water charges, it says further income tax increases would have a damaging effect on competitiveness and make Ireland less attractive to highly skilled and highly mobile foreign workers.

Referring to spending by Government departments, the NCC urges an end to the traditional method of assessing needs from the starting point of the previous year’s budget allocation.

This should be replaced by “zero-based budgeting” which requires the continuous assessment of all spending programmes.

The agency also urges the Government to grant wide-ranging powers to a soon-to-be-established independent fiscal council. The council will oversee the management of the public finances and must be established under the terms of the EU-IMF bailout.

The NCC wants its powers to include a “capacity to stress test taxation and spending scenarios”.

While competitiveness gains have been made since the onset of recession, owing to falling costs, the document urges the Government to add to these gains by taking “structural policy decisions that will deliver more long-lasting, durable competitiveness gains”.

The NCC repeats previous calls for the liberalisation of domestic economic sectors to generate greater competition. It highlights legal services, medicine, energy and the public service as being in need of opening to competition.

It welcomes the inclusion of scheduled liberalisation measures for the legal and general medical practice sectors in the terms of the EU-IMF bailout.

Sectorally, the NCC believes the Government should focus on export opportunities in education, agriculture and tourism.

To boost the pharmaceutical and medical devices sectors, which now account for more than half of Ireland’s goods exports, the NCC believes a streamlining of the approval system for new products and processes is needed.

In an implicit criticism of the Central Statistics Office, the NCC says its resources must be focused on those sectors which are most important for the wider economy.

The NCC urges that its two-year-old proposals on education and training be “progressed immediately”, with a particular focus on the quality of teaching in schools.

The document notes Ireland was among the world’s most competitive economies from the late 1990s to 2003. This marks it out from other “troubled” peer countries which never achieved the sort of export success enjoyed by Ireland and proves high levels of competitiveness can be achieved.

The NCC was established in 1997 to measure the Irish economy’s competitive position vis-a-vis comparable economies and to make recommendations on measures to enhance competitiveness.