I welcome this opportunity to speak about the new partnership agreement, the Programme for Prosperity and Fairness. I am proud to say that I have a particular personal association with the development of the partnership process and I am glad to continue that involvement now as Partnership 2000 draws to an end.
The negotiations on the programme were held against the background of the recent NESC report, Opportunities, Challenges and Capacities for Choice, which maps a vision for Ireland in the early years of the new millennium. The report restated, in our current environment, the basic reality on which the partnership process is based, namely a recognition of the fact that we must compete successfully in a global economy; that our actions and policies must be consistent with that competitive challenge and with each other, and that consistency of approach over time must be underpinned by a consensus based on the fairness of the outcomes.
There is a temptation in times of prosperity to forget these basic facts. We may assume that past economic success is a guarantee of continuing prosperity. We might conclude that maximising wage increases in one company or sector can be achieved without affecting the rest of the economy or the security of jobs. We might believe that policies on taxation and expenditure can be insulated from the labour market or wage increases. We might want to pause or slow down the pace of change on structural reform, thinking that we have done enough already.
Such complacency would be disastrous. We could, all too easily, slip back into old ways of leap-frogging pay claims, irresponsible fiscal policies or undermining our stated goals through inconsistent behaviour. As the NESC pointed out, we now have a capacity to make choices; we are no longer constrained by the external pressures of crisis in the public finances or of unemployment or of qualifying for membership of economic and monetary union.
The challenge we face as a society is to make the right choices, to seize the opportunities to sustain our recent success. More than that, we have the opportunity to transform the quality of life of our people. This is about tackling effectively the consequences of economic success; developing our infrastructure; bringing about real balance between the regions, and between urban and rural communities; and developing real global strengths in R&D and the information society. It is also about ending the exclusion of blackspot neighbourhoods, tackling school drop-out rates and literacy problems and giving a second chance to those who missed out on our recent economic boom.
The Government has recognised this challenge. It brought forward initiatives, such as the national minimum wage, as a radical step towards a fairer Ireland. It conceived and brought to reality a national development plan with unprecedented but realistic ambitions to transform this country over the next seven years, largely based on our own resources and supported by the EU investments which we negotiated. It has also negotiated this ambitious new programme with the social partners.
The Government has faithfully and fully implemented the terms of Partnership 2000, even though it did not negotiate it. It recognises the value of social partnership and of continuity in the strategic direction of policy in the interests of stability and confidence. We have found that this in no way inhibited our ability to implement our programme or to meet the test of democratic accountability. It is, therefore, alarming to hear some suggestions from the Opposition that it might not feel obliged to implement the new programme if it found itself in Government. That must sound odd to the social partners. It must be worrying to all those who recognise the key role which social partnership has played in underpinning our current prosperity.
Notwithstanding the wide-ranging nature of the new programme, the key principles underpinning it may be summarised as follows: first, to underpin Ireland's competitiveness and develop our economic prosperity on a sustainable basis; and, second, to use that increased prosperity to enhance our quality of life in the context of a fairer and more inclusive society. The new programme sets out detailed but flexible operational frameworks by which these over-arching objectives will be pursued. Over the period of the programme, up to and including budget 2003, there will be increases in net take home pay of up to 25% or more when the taxation and pay elements are taken into account.
This will build on the process of tax reform already begun, especially the introduction of the tax credits system, the removal of substantial numbers of people from the top tax rate, the increase in allowances and the widening of tax bands. The new programme gives a sharper focus to the needs of people on low incomes, including the objective, over time, of removing from the tax net all those who earn the minimum wage. Increases in tax credits and the development of the tax credit system are the priority areas for resources over the course of the programme. The programme also supports the policy of establishing a single standard rate income tax band for all individual taxpayers.
In the area of social inclusion, there is provision for a substantial increase in resources, amounting to £1.5 billion by 2003. The new programme, however, goes well beyond resource considerations. Many of the proposals are about getting things done, not only about spending money. Examples in that regard include the development of initiatives to maximise the involvement and participation of local communities in the democratic process; the identification of targeted intervention measures for areas where cumulative disadvantage is pervasive; the encouragement of economic and social development in rural communities; and the promotion and consolidation of the emerging social economy.
Within the social inclusion area, a key component in the new programme centres on the issue of income adequacy. Substantial progress will be made over the lifetime of the programme towards a target of £100 per week for the lowest rates of social welfare. In addition, the level of old age pensions will be improved in line with the commitments in the review of the Government's own programme. Measures such as these will mean real, tangible improvements in people's day to day lives.
The new programme also involves a concerted effort to address issues affecting the quality of people's lives. In the area of housing, for example, a key action is to ensure that the supply of zoned serviced land is sufficient to support the required housing output through increased residential densities and better design where appropriate.
Public transport is another key issue. The programme provides for a public transport partnership forum which will facilitate consultation on the effective delivery of the major investment initiatives set out in the national development plan. Healthcare is also an issue which is central to quality of life concerns and, for that reason, a range of measures are set out in the new programme covering, for example, hospital capacity, health promotion and services to people with disabilities.
Regarding the issue of public service pay, it is accepted in the programme that the traditional approach to pay reviews in the public service, based on analogues and relativities, has given rise to serious difficulties in the past. The parties are committed to making arrangements for an alternative approach which will be grounded in a coherent and broadly-based comparison to jobs and pay rates across the economy. The programme provides for the establishment of a public service benchmarking body to examine pay and jobs in the public service and across the economy and to make recommendations thereon. The benchmarking body will be asked to produce its report and recommendations by the end of 2002 so that the parties will be in a position to discuss the implementation of its recommendations within the context of any successor to this programme, or whatever other arrangements may be in place when it expires. This represents significant progress in dealing with a very complex and long-standing issue and I welcome it as such.
In addition, the programme includes provision for clear links between public service pay and the implementation of the modernisation programme at sectoral and organisational level across the public service, as well as the continuation and development of the partnership process introduced under Partnership 2000. I believe that the programme will significantly enhance the responsiveness of the public service to the challenging demands which it faces, not least the successful implementation of the national development plan and the programme itself.
I want to deal with some of the concerns that have been expressed about the pay terms of the programme. Some have argued that the increases could threaten competitiveness. The social partnership process has produced an impressive range of benefits for the people of this country. That has been possible because of the compromises reached in successive agreements and because of the sacrifices which many people made in pursuit of the common good and the national interest.
Now that the economy is performing strongly, has done so for the past few years and is projected to continue to do so, it would have been unfair and untenable to propose that the benefits of social partnership would involve little reward or sharing. Such an approach would not have yielded an agreement in the first place.
The programme is predicated on achieving an annual average GNP growth rate of about 5.6% over the period 2000 to 2002, provided there are sustained improvements in productivity, that international competitiveness is maintained, that emerging supply side constraints are overcome and that significant budgetary surpluses are recorded in each year of the programme.
Another concern that has been expressed is that inflation might erode the value of the pay increases and provide too little real reward for workers. Recent figures have been unsatisfactory. External factors, including oil price increases and the euro exchange rate with sterling, have impacted on inflation here. The entirely appropriate increase in duty on tobacco has also contributed. However, all reasonable observers are confident that the current inflation numbers will show significant reductions before the end of the current year and that the average inflation rate over the period 2000-2, inclusive, will be of the order of 2%-2.5%. The Minister for Finance will be taking such measures as are appropriate to ensure that low inflation is maintained.
When the taxation changes and pay increases operative over the period of this programme come into effect they will deliver substantial real increases in take home pay. For example, increases of the order of 10% or more in take home pay for the average worker in the current year will produce very substantial real increases. These increases and our overall prosperity require adherence to the pay terms of the new programme. The Government for its part has lived up to and will live up to its commitments. Equally, pay developments in the public service, the private sector and the commercial State companies must be consistent with the terms of Partnership 2000 and with the Programme for Prosperity and Fairness, if ratified.
I am aware that the Association of Secondary Teachers of Ireland withdrew from the Irish Congress of Trade Unions during the recent national pay talks over the PCW "early settlers" issue and I note that according to press reports they have decided to submit a claim for a 30% increase in teachers' pay. This claim has not yet been submitted to the Teachers' Conciliation Council which is the forum at which such claims would be discussed. In the event of such a claim being submitted I wish to make it clear that the Government cannot contemplate any response to such a claim other than the application of the pay and other measures contained within the proposed Programme for Prosperity and Fairness.
The programme provides for direct pay increases of 15% to teachers over the period of the agreement. In addition it has been agreed in the context of the acceptance of the Programme for Prosperity and Fairness to apply a 3% increase to the salaries of PCW "early settlers" with effect from 1 October 2000. As teachers are included in this group they will receive direct pay increases of 18% during the life of the programme. In addition teachers will benefit to a very significant extent from the taxation measures announced in the budget and proposed in the new programme.
The combined effects of the announcement made by the Minister for Education and Science in December 1999 on additional teaching posts in schools and the provisions of the Programme for Prosperity and Fairness will provide 1,400 extra teaching posts in post-primary schools over the period of the programme. These additional posts will improve the working conditions of teachers generally.
If there is one lesson to be learned from the way public service pay developed in recent years it is the impossibility of trying to single out any group as apparently unique and deserving of special treatment. The early settlers provision – which was, crucially, agreed with unions representing both early and late settlers – and the new benchmarking body are designed to restore stability to public service pay and provide a coherent way forward. The Government cannot, and will not, put this at risk by dealing with any group outside the confines of the Programme for Prosperity and Fairness.
As well as providing for major improvements in living standards for all, the Programme for Prosperity and Fairness contains a wide range of measures to enable us to compete successfully in a rapidly changing world. The programme recognises the significant competitiveness challenges facing Ireland arising from the information revolution, globalisation and EU enlargement. As a result of EMU membership, any loss of competitiveness could be punished severely.
The programme addresses these challenges with a particular focus on promoting lifelong learning as a national priority; securing a leading position for Ireland in the global information society; investment in research and development, innovation and upskilling to enable enterprise to move up the value chain of economic activity and a continued focus on reforming our regulatory and competition systems as well as modernising the public service.
The programme also contains a package of measures to develop the key sectors of the economy, including indigenous and foreign owned industry, small business and services, tourism, construction, energy, the food industry, forestry and the marine sector, as well as our agriculture sector.
I am confident that the Programme for Prosperity and Fairness will provide the best possible grounding for further economic and social progress in this country. The next step is for the organisations which agreed the programme to proceed with their different ratification procedures. In that regard, I particularly welcome the recommendations in favour of acceptance by the national executives of three of the country's largest trade unions – SIPTU, IMPACT and MSF. I look forward to a successful outcome and to working with the social partners in implementing the programme in the period ahead. I thank all the many people who worked so hard during the three month period to bring the Programme for Prosperity and Fairness into being.