Redundancy Contributions (Variation of Rates) Order, 1975: Motion.

Minister for Labour (Mr. M. O'Leary)

I move:

That Dáil Éireann approves the following Order in draft:—

Redundancy Contributions (Variation of Rates) Order, 1975,

a copy of which Order in draft was laid before Dáil Éireann on the 12th March, 1975.

The purpose of this order is to increase as from 7th April, 1975, the rates of weekly contributions to the redundancy fund. My authority to make this order is contained in section 28 (3) of the Redundancy Payments Act, 1967. There is an obligation under section 5 (1) of the same Act to obtain an affirmative resolution from each House of the Oireachtas and I am now complying with this statutory requirement in this House today.

The purpose of the Redundancy Payments Acts is to compensate employees who lose their jobs through no fault of their own. Our system of redundancy payments recognises that employees build up property rights to their jobs and that when they lose those jobs they are entitled to compensation for this loss. This compensation is paid in the form of a lump sum payment and a series of weekly payments related to length of service, age and previous earnings.

Western economies are at present suffering from the most severe disruption experienced since the second world war. Unemployment in the United States of America is now more than 8 per cent, an increase of almost 100 per cent on 1973 levels. The recession in America is the deepest experienced since the war, and the OECD suggest that real GNP could fall by 4 per cent. For the OECD area as a whole, the estimates of growth have been reduced, indicating the world-wide nature of the present recession.

All countries of the EEC have been affected by the slow-down in world trade brought about by the increase in oil prices. Unemployment in the United Kingdom is now more than 750,000. In France unemployment is higher again. Germany now has almost 2 million unemployed and on short time. Ireland has also been affected and during the last three-quarters of 1974 unemployment rose and brought with it a large increase in the number of redundancies. In an open economy such as ours it is inevitable that our economic well-being depends to a large extent on events outside our control.

The necessity for seeking increases in contribution rates arises in part from the fact that the incidence of redundancies which qualified for payments under the Redundancy Payments Acts was greater in 1974 than expected and the reserves of the redundancy fund have accordingly been depleted. In 1973, statutory notifications of 7,504 qualified redundancies were received from employers. The figure notified for 1974, was 11,202.

The reason for increases in the contribution rates is not entirely due to the employment situation. Because of the exhaustion of the reserves of the redundancy fund, I have had to make the interim arrangement with the Minister for Finance under section 27 (2) of the Redundancy Payments Act, 1967, for what I might describe as overdraft facilities from the Exchequer. Money borrowed in this fashion must be repaid with interest and I must provide for this repayment.

The payments out of the redundancy fund are to a large extent dependent on the rate of wage increases and social security benefits. Contribution to the fund are, however, not linked to increases in other areas.

Wage increases were a factor in the depletion of the fund's reserves during 1974 inasmuch as higher lump sums and weekly payments were payable to redundant workers. In a situation of increased unemployment, expenditure on weekly payments tends to reflect economic conditions. In the second half of 1974, expenditure on this front increased and I am providing for a continuation of this trend into 1975.

A contributing factor in the depletion of the funds reserves, coupled with the other factors already mentioned, was the improvements which I effected in the redundancy scheme last April. These improvements brought non-manual workers' earnings of more than £1,600 a year into the redundancy scheme thus increasing the numbers eligible for payment. I also increased the number of weekly payments payable to workers of more than 51 years of age and raised the limit of the total of weekly redundancy payments plus social welfare benefits to 100 per cent of pre-redundancy pay. These improvements have added substantially to the cost of the scheme and are in line with the Government's commitment to protect the living standards of the less well-off sections of the community.

The redundancy fund was established under section 26 of the Redundancy Payments Act, 1967. Section 27 of the Act provides that the fund will be financed by way of weekly contributions by employers and employees. There is no contribution by the State other than possible periodical repayable loans of the type I have already mentioned.

In the draft order which I have laid before the House, I am proposing an increase of 5p in the weekly contribution, divided as to 3p for employers and 2p for employees, with effect from 7th April next. Accordingly, if both Houses approve of my proposals, the contribution rates as from 7th April, will be as follows:

male worker 18p, of which the employer will pay 13p and the worker will pay 5p,

female worker 17p, of which the employer will pay 13p and the worker will pay 4p.

I expect the new rates of contribution to bring in an additional £1.3 million to the fund over 12 months. Contributions to the fund are incorporated in the social welfare stamp and the money so collected is transmitted to my Department by the Department of Social Welfare.

Within this statutory obligation to have a redundancy fund, the general aim is to try to maintain the fund at a level sufficient to meet the necessary expenditure and to have a modest reserve in hand at normal times. It has not been my intention that the redundancy fund should build up a large reserve and consequently in times of economic setback it is necessary to increase the contributions to meet increased obligations. An element of uncertainty is, of course, implied, related primarily to the employment situation, and changes in the rates of contribution become necessary from time to time.

Turning to the future prospects for employment, account must be taken of recent developments. The Industrial Development Authority last year approved projects which will provide more than 25,000 new jobs. This is the largest ever number of jobs approved in any year since the inception of the IDA. The present year will be extremely difficult due to the fall off in investment which is evident in all major economies to which I have referred, but the IDA are intensifying their marketing activities and have set themselves a higher target of 23,000 job approvals for the current calendar year. In his recent budget speech the Minister for Finance announced increases in the public capital programme designed to create employment. The allocation for capital investment in, and loans to, industry was increased by £26 million. This represents a 41 per cent increase on the 1974-75 estimate. The purpose of this increase is to create new jobs to replace those which have been lost.

In response to growing unemployment Córas Tráchtála Teoranta initiated in January a special action programme to assist exporters experiencing short-term difficulties in their main markets. Vigorous marketing drives are being undertaken in 17 countries with a special emphasis on those economies which have the capacity to import Irish goods, notably oil producing countries including Nigeria and the Middle East. The initial response is encouraging and the number of different marketing activities in which CTT are engaged is about three times the level of past activity.

On the question of manpower policy I stated publicly last year in the event of unemployment increasing the Government would increase the amount of money available to AnCO, the Industrial Training Authority, for the expansion of their training facilities. This commitment has been honoured and the total provision made in the budget was for £5 million. This was an increase of £3 million on the amount for the nine-month period up to December last. Since much of the expenditure is supplemented by grants from the European Social Fund, AnCO will have available to them a total sum of about £9 million for current expenditure in 1975.

This provision will enable an extra 2,000 adults to be brought into full-time training and will mean that the total number trained by AnCO during the present year will be more than 6,000. AnCO will be paying special attention to the problems of redundant workers and their retraining for expanding industries. A major benefit of this increased training is that when the upturn in the world economy, which is expected towards the second half of this year takes place, Ireland will be better placed to take advantage of the economic recovery. We will, it is hoped, have a stock of highly trained work people ready to take up employment as new and existing industries expand.

Recent indications from the monthly survey of business opinion and from the trend of unemployment statistics would suggest that we have passed the worst period of unemployment, and that the situation is likely to improve substantially in the immediate future.

I ask the House to approve of the draft order entitled, Redundancy Contributions (Variation of Rates) Order, 1975.

Mr. G. Fitzgerald

I did not get a copy of the Minister's speech but I listened very carefully to it. I oppose this order which increases the rate of the redundancy payments contribution. I was disappointed at the amount of information the Minister gave the House. I want to be very explicit. The handling of the redundancy situation in general and the employment situation by the Government has been deplorable and to the detriment of the Irish worker. In recent times this worker was burdened with an increased contribution on the social welfare stamp. In a very short period this is the third increase in that stamp. Despite what the Minister for Labour or the Parliamentary Secretary to the Minister for Social Welfare might say, the overall effect is that the working man is being asked to pay a weekly contribution of £1.95p. Particularly for the lower paid sections of the community, this amount being imposed by the Minister for Labour is the straw that broke the camel's back.

First, there was an increase in the health contributions, tonight we had the Committee Stage of the Bill which imposed an enormous increase on the social welfare part of the stamp and we now have the added increase on the redundancy payment. I was disappointed that the Minister did not explain about the size of the reserves, the amount of money needed, excess of income over expenditure and vice versa, for the current year. It would appear that these are normal matters about which the House should have been given details. Instead he went on to tell us how many jobs it was hoped to create this year.

We in the Cork area were told recently that a major industrial enterprise which would have employed 1,000 jobs on construction work and 600 or 700 jobs at the finished production level, has fallen down and has been shelved temporarily. Am I to deduct 2,000 jobs from the Minister's figure for the jobs to be created this year?

There are many other reasons why I oppose this motion. I am concerned about employment all over the country. At present there are 102,000 people unemployed. I am disappointed at the lack of Government action on this subject. I cannot accept the Minister's point that this is a downturn. We are in the second half of March—a period which normally led to a major downturn in the unemployment situation.

Surely that small downturn in that period must be regarded as a very serious one, one of concern to all of us and particularly of concern to those people who are not only unemployed at present but those who, as a result of this and the other measures taken tonight, may be facing further redundancies.

I want to bring to the attention of the Minister the situation that exists at present. I am not making a case for the employer, as such, but I am concerned about the position of the employee now. Many firms up to the present date—and I am sorry to say there are far too many—have found it impossible to implement the final phase of the fourteenth round wage agreement, have found it difficult and, in many cases, impossible to implement the fifteenth round. Again, there is an escape clause in this new wage increase. Is it not now apparent that workers in such industries are not keeping pace or progressing with workers in other industrial sectors? Is this extra imposition of an increase on the employer going to affect very many more jobs and create a situation more serious than the one at present obtaining?

Of course, I am glad to say this is a measure which was introduced by a Fianna Fáil Government. At that time redundancy was regarded as a safeguard or compensatory measure, or one of consolation to a worker who, because of a particular set of circumstances, might be laid off. It was never contemplated that redundancy would become such a well-known, feared and dreaded word in Irish homes. In addition, there is being created a lack of confidence, because of job losses. Again, I must be terribly critical of the Minister tonight for going over old ground, playing the old record that has become so boring, of the situation obtaining in other countries. I think it was in Saturday's Irish Times we read an economic correspondent's appraisal of the contribution of the Government to the present hopeless inflationary situation. To a very large extent that leads to job losses and the redundancies we now face. I must be critical also of the lack of effort by the Government, by the Minister and his Department. The Minister did not impress on his colleagues the necessity for remedial action to be taken in time to prevent the unemployment situation reaching its present proportion. I do not want any Minister telling me that was not possible because I can tell him in many ways and places where such assistance would have saved quite a number of jobs.

If this measure—which I regard as the last straw, breaking the camel's back—together with the others going through the House tonight puts even ten more men out of work—as I fear it might—I believe on fairly strong evidence that the total cost of an employee's stamp, plus holiday pay, superannuation contributions and so on will now be in the region of £8 per week. I am concerned about the firm employing, perhaps, 100 men reducing that number in order to save paying this increased contribution by ten or 20 as the case may be or a company employing, perhaps, ten people reducing that figure to eight and a company employing four reducing it to three. I am afraid the Minister's action in addition to that of the Minister for Social Welfare will have detrimental effects on many industries throughout the country added to the inability of the firms I have mentioned to keep up-to-date with the fourteenth, fifteenth and now the new wage agreement.

That creates an undesirable situation because there are people who just cannot keep pace. They have to bear the increased cost of living being experienced by every other person but because of their particular line of employment or the problems inherent in it they have to settle for proportionately less money. Preventive measures should have been taken by the Government. In my opinion an emergency exists, an emergency that makes it incumbent on the Minister of the day to take any measures open to him to remedy the situation.

We are given to understand that in the first nine months the pay-related benefits scheme is in line with projected revenue, with projected income. We are given to understand also that the expenditure on this scheme is only approximately one-third of that projected. If that be the case, surely the Minister could seek to have the surplus sitting in that fund, at a time when we cannot afford to have surpluses existing in any fund, transferred as an emergency measure to the redundancy fund giving him the £1.3 million he seeks. That would be a very simple operation. I am glad the Minister mentioned specifically what it is hoped to earn in revenue on this scheme through this contribution. That was something we failed to elicit from the Parliamentary Secretary on the question of the social welfare stamp.

We are concerned because we are leaning now on the working people, on the people already leant on by social welfare and by way of increase in health contributions. I feel it will create further unemployment which will not help the situation. In addition, there are the extra increases that have been imposed on the price of the stamp over a period. I accept that there have been increases in the contributions paid out over the years— the contribution towards redundancy, when it was considered to be a compensatory measure, which I understand in 1968 was approximately £400,000, but which last year was almost £3 million. The Minister has not given us figures for the current year. He has not said what condition reserves are in. He has intimated that there is an overdraft. He has not indicated its size. That is information that should correctly be laid before the House. The remedy being taken, again, is the extra imposition of taxation with no remedial action having been taken in time to rescue the many jobs that could have been saved had Government action been implemented in certain fields of industry and not have this frightening unemployment figure, this frightening lack of confidence, discrimination against workers in certain industries because of their employers' inability to meet the different wage increases agreed over the past year.

I want to emphasise again the fact that I am concerned that each time a Minister of this Government speaks he does so with emphasis on the outside factors affecting our economy. That tune is worn out. He tells us also of the pie in the sky and of the jobs that are coming. I sincerely hope these jobs are coming but I have already instanced one major shelving in Cork and I want to know if that has been included in the figures the Minister has given this evening. There is also the precarious situation of the school leavers this year. What opportunities are there for these people? Where do they go in an employment situation such as the current one?

If I may go to the rates for a moment, we are talking about an increase for the employer of 3p, an increase for the male employee of 2p and for the female employee of 2p. However, if we look at the percentage increases on these rates we shall be amazed to see that in 1972 the total contribution was 8p, 5p from the employer and 3p from the employee, and now the contribution is 18p, 13p from the employer and 5p from the employee, an increase of two and a quarter times; in the case of the female employee the 1972 figure of 6p has gone to 17p, nearly three times.

This is something that we on this side of the House cannot accept. We believe the lack of action in aiding industry and the creation of inflationary conditions, have contributed enormously to the present redundancy situation. The imposition of a further burden of taxation means that under this Coalition Government we have gone from one budget per year to two budgets per day. We have had one enormous imposition tonight on working people in relation to the social welfare stamp; and we have the second one within half an hour.

We intend, on behalf of the people who are suffering under this extra weight, to oppose it by our vote as well as by our voice.

Minister for Labour (Mr. M. O'Leary)

It is understandable enough that Opposition speakers should seek to keep the facts of what is happening in the world out of this discussion, but of course we cannot, since the subject matter we are dealing with here relates to certain of the unemployment problems in the country at present, an employment situation which is very deeply affected by what is happening both in our main markets and what is happening in general to investment around the world in other developed countries. The tune may be an old one and the Deputy may be tired of hearing it, but if one is to speak realistically of the situation before us one must refer to that.

In speaking of this fund one must advert to the encouraging features that are in the immediate future, the kind of jobs that are being brought to the country by the Industrial Development Authority and by Córas Tráchtála which, I suppose, are the main State agencies for the creation of new jobs. These State agencies have reported very encouraging information for the coming year in the number of new jobs expected here. It is only honest to remark that this problem of the downturn in all of the economies with which we deal must, as long as it persists, continue to affect performance here at home.

The Opposition spokesman, Deputy Fitzgerald, referred to an economist whose comments he read in Saturday's Irish Times, as to the culpability of the Government towards certain of the economic problems we now face, and the contribution which Government expenditure had made towards home inflation. The Opposition cannot have it both ways. Every day at Question Time the Minister for Local Government is assailed to increase the amount of cash available to building to save employment. The same thing goes for other Ministers in the various Departments. Those who attack Government expenditure in the capital area are attacking the main weapon available to the Government to maintain employment in areas that are threatened with growing unemployment. Who is there to say that in the building industry, without Government assistance and aid, aid which has been given by the Minister for Local Government, there would not be far greater unemployment in that industry?

Mr. G. Fitzgerald

The Minister accepts there is unemployment in the building industry?

Mr. M. O'Leary

Of course there is unemployment in the country. There are 102,000 unemployed.

Mr. G. Fitzgerald

Does he accept there is unemployment in the building industry?

Mr. M. O'Leary

There is unemployment in the country at present.

Mr. G. Fitzgerald

In the building industry?

Mr. M. O'Leary

Certainly, there is a degree of loss of jobs in that industry but it is not as serious as the Deputy opposite would suggest. As the Deputy knows, we are building more houses than any other Administration has done in the history of the State. That again is a matter of statistics. The degree of our unemployment, which is not as bad as in other countries, is mainly due to international recession. The Government are not attempting to evade their responsibilities in stating that that is the major cause of the economic situation before us.

In regard to Government expenditure, the Deputy may have noticed the conclusions of the European Economic Community's Finance Ministers yesterday when they called upon the Irish Government not to be disheartened by the present deficit in our balance of payments but to continue our attempts to maintain home demand, to keep up the level of capital expenditure in an effort to protect employment as far as possible against these adverse international circumstances.

The Deputy contended that the increases looked for here may cripple employers. He paints a picture of employers letting their workers go because of the increase we are looking for here in the stamp. I have been connected with two increases in the stamp. The last increase was totally the responsibility of the employer. There was no increase asked of the employee. On this occasion we are looking for such an increase, but it is a reasonable one when you think of the extra demands there are on the fund, demands which are in part attributable to the increasing number of redundancies and in part also to the improvement in the scheme itself. The scope of the scheme has been widened. Because of the improvements brought in last year we have included in the scheme non-manual workers over £1,600 a year and there are also the improved benefits available to the worker in the older age group. All of these benefits make extra demands on the fund and that is why we are recommending 5p extra on redundancy contributions, apportioned 3p on employers and 2p on both male and female employees. This, it is hoped, will bring in additional £1.3 million to the fund over the 12-month period.

The Deputy sought details of the reserve position. The full account for the year 1974 will, in due course, be laid before the House in accordance with section 26 (8) of the Redundancy Payments Act, 1967. However, it has not been my pride and joy each year to point to the level of credit and say this is the success of the fund. Rather it has been my attitude that the less that was in the fund the better in the sense that, even in the good times, we should constantly improve benefits payable from the fund. In my opinion and that of my officials concerned with this matter the level in the current year would not permit us to carry out all the obligations of the fund without this increase at present. When account is taken of liabilities from previous years and claims on hand at the end of the year, the actual reserve in the fund makes it necessary to seek this increase now.

Mr. Davern

Could the Minister say what is the reserve in the fund?

Mr. M. O'Leary

The Deputy should confine himself to the childish things he usually deals with. This is a serious matter. It is late at night and he should be at home in bed.

Mr. Davern

Listen, Mr. Bangkok——

Mr. M. O'Leary

In looking for this increase we believe we are asking for a realistic figure and that there are solid grounds for giving advances to those who may be involved under these provisions. The Deputy did refer to the unemployment situation and said there had been an improvement but one would have expected, ordinarily, a better improvement in March. Yet, over three weeks there has been a drop in the number on the live register and, coupled with the seasonal upturn and what some of the authorities regard as a general improvement in the employment situation later this year, there should be an overall improvement in the employment situation. Although I accept that an Opposition Deputy may properly draw attention to the problems we are at present facing in employment, I would say that the level of expenditure by the Government shows our concern about the matter which will continue to have our active consideration.

I have pointed out the amount of cash we are spending in the direct manpower area. In the current year, between the social fund and home resources we shall be spending about £9 million. That is the way to prepare. The present recession can only be temporary and we must be in a position to avail of the recovery when it comes. I hope that when the recovery does take place we will have these people trained in this recession period. That is why this year we shall be spending the largest amount ever spent on manpower training in the history of the State. Nine million pounds is an enormous sum and will stretch all our facilities to the maximum. We shall not spend any of this money on a building programme. It will be spent solely in using existing facilities and arranging for staff to take on extra shift work. As the unemployment situation leaves us with more young people seeking extra skills we would hope to provide them with those skills.

The Deputy mentioned the postponement of the Dupont enterprise in the Cork area. That is purely a postponement, I understand, and the company continues to be interested primarily in the Cork area as an area of development. They have made that clear in statements to date but those figures are not included in the amount before us.

Mr. G. Fitzgerald

Was there any consideration given in consultation with your colleague to transferring some of the surplus funds that appear to be available from the pay-related scheme?

Mr. M. O'Leary

There really is not a surplus.

Mr. G. Fitzgerald

We were told in the House that there is approximately £5 million of a surplus.

Mr. M. O'Leary

I am not aware of that. The amounts I have sought here are the amounts necessary within the context of the fund to meet the demands to be made on it in the course of the year. The surplus which the Deputy says he has been told exists on the other fund would not assist me to the extent necessary.

Mr. G. Fitzgerald

In an emergency situation such as this why not ask for them? The Minister is only looking for £1.3 million——

Mr. M. O'Leary

The redundancy fund should, as far as possible, try to be self-sustaining. That is what we are trying to ensure.

Mr. G. Fitzgerald

We disagree on what has caused the present situation but we would accept that we are over the worst of it or nearly over it. In that situation would it not appear that a temporary measure rather than a permanent imposition of an increase on workers would be sufficient?

Dáil Éireann debate -
Wednesday, 19 Mar 1975