: I move:
That Dáil Éireann—
(1) takes note of the Green Paper, Development for Full Employment; and
(2) at its rising this week, do adjourn for the summer recess.
It is proposed to resume after the summer recess on Wednesday, 11 October.
I propose, first, to review the state of the economy, both in its national and international aspects. This is the base on which we must build. Next, I will look at some of the options in the Green Paper on Development for Full Employment. Finally I would like to say a few words about Northern Ireland.
1977 was a good year for the Irish economy. Our growth rate of over 5 per cent put us at the top of the EEC league. Industrial production showed a substantial rise, agricultural output increased, employment grew, exports remained buoyant and inflation dropped sharply. All the indications suggest that 1978 will be another good year. Economic growth is likely to be even higher than it was in 1977.
Production in manufacturing was up 9 per cent in the first two months. The mid-May consumer price index shows that inflation has fallen to 6.2 per cent, the lowest year-on-year increase for over eight years.
The continuation of inflation at over 20 per cent per annum, which it topped in 1975, could have wrecked our economy. The fall in inflation was not all our own achievement; international influences helped. But the acceptance of reasonably moderate wage agreements, and steps taken by this Government, for example, the removal of rates from private houses, have been important also. Now that we have the inflation rate down let us keep it down.
One of the effects of cutting inflation is that consumer confidence has returned. People no longer feel the same pressing need to save simply to meet rapidly growing bills for essentials, or because they fear for their jobs. Consumer demand has been buoyant this year with year-on-year increases in the retail sales index and new car registrations in the early months.
Business confidence has also increased. This confidence was clearly discernible immediately after the change of Government. Investment activity is strong with imports of producers' capital goods 21 per cent higher in the first four months of this year than last year and with cement sales, a good indicator of building activity, 18 per cent higher than in the corresponding five months in 1977. The most recent industrial survey undertaken jointly by the Confederation of Irish Industry and the Economic and Social Research Institute shows that businessmen forecast increased activity in the months ahead. The value of agricultural exports has grown markedly in the first four months, rising by 40 per cent compared with last year. In the same period the value of industrial exports rose by just over 20 per cent. Predictably, with the overall expansion in the economy, imports have also risen. However, the balance of payments deficit remains within manageable proportions.
On the assumption that exchange rates remain relatively stable and the basic pay terms of the national wage agreement are generally adhered to, the average increase in consumer prices for 1978 as a whole is expected to be in the region of 7½ per cent, roughly half that recorded in 1977.
Perhaps the most dramatic evidence of the improvement in economic performance can be seen in the sharp fall in the number on the live register since the start of the year. The total on the register reached a peak of 113,400 in the second week of January. By 16 June the number had decreased to 99,490. This was a fall of almost 10,000, or 9 per cent, on the total 12 months previously. In fact, the numbers on the live register have not been below 100,000 since January 1975. Undoubtedly, the present level is still unacceptably high, but we are now demonstrably making significant progress. A fall in unemployment as indicated by the numbers on the live register does not necessarily mean that there has been an increase in the numbers employed.
The flow of immigrants or emigrants can produce this apparent paradox. In fact, there has been some comment to the effect that emigration has resumed in 1977. This comment is based on the figures for net passenger movement by sea and air which show that for the year ended January 1978, outward movement exceeded inward movement by about 13,000. This trend is not as recent as some people would like to make out: the figure for the year ended February 1977, for example, showed a net outflow of 6,700. While there was a net inflow overall in the previous few years, it is estimated that there was a substantial outflow in the 20-30 age group, reflecting the difficulties young people encountered in finding employment at home.
However, the figure for migration, based on net passenger movement, is not a reliable indicator. In the last two intercensal periods, 1961 to 1965 and 1965 to 1971, this same method produced an estimate of emigration one-and-a-half times greater than the actual figure as revealed by the census. If we had a census in 1976 we might now be in a better position to know what the facts are. Unfortunately the niggardly and penny-pinching outlook of our predecessors prevented us from having a census in 1976. Now some members of the Opposition are asking why the proposed census of 1979 which is designed primarily to pave the way for the establishment of an independent commission for the electoral process is not embracing facts that would have been disclosed in 1976 had a census been taken then.
Whatever about the details, I accept that the estimates now being quoted, particularly those relating to emigration of young adults during the past few years, indicate a disturbing trend. They show in particular the urgency of attaining the employment targets we have set ourselves.
It would be beneficial, I think, to look at just precisely what the background to these targets is.
Between 1974 and 1976, total employment fell by more than 30,000. In 1977, it rose for the first time for many years, admittedly by only 3,000. This year our projection is that the increase will be of the order of 20,000. We hope to attain this in two ways. First, the Government and public authorities generally are embarking on schemes and works which give employment directly or are directly conducive to the taking on by firms of additional workers. Next, we regard it as an essential prerequisite of progress that our fiscal and economic systems are such that enterprise and effort are encouraged and rewarded.
Immediately on coming to office, we took steps to implement a special programme of spending £100 million for the creation of 20,000 jobs in the public service, building and construction and youth employment. The arrangements for the continuation of this programme through 1978 were outlined by the Minister for Finance in his budget statement.
Almost 8,000 of the planned 11,250 additional posts in the public sector have now been formally authorised and about 4,400 of these posts have actually been filled. Recruitment procedures have been speeded up to ensure that posts created under the job-creation programme are filled with minimum delay. Most of the posts yet to be created are in the health and education sectors, and these are expected to materialise during the next few months.
The building and construction target is the creation of 6,610 extra jobs on building projects. Of these 1,670 were created in the latter months of 1977 and a further 1,400 jobs have been provided so far this year. The projects are being closely monitored to ensure that employment targets are met.
In addition, we have provided substantially improved investment and taxation incentives for industry and a record allocation of public capital expenditure for industrial promotion. Special attention has been given to the development of small industry. Expenditures for promotion of both domestic sales and exports have been significantly increased and the Government have established an Industrial Development Consortium to study opportunities for extending our industrial base with particular attention to the development of our national resources.
Unemployment among those who are under the age of 25, according to the EEC Labour Force Survey figures for 1975, constituted at the time approximately 44 per cent of the total unemployed even though the group represented only 30 per cent of the total labour force. We have the highest rate of population growth of all EEC countries. While this poses problems it is also our greatest asset, provided we can manage it properly and provide an adequate supply of suitable jobs for the expanding workforce of young people.
Initial progress on the two principal youth employment projects announced in the budget—the Work Experience Programme and the Environmental Improvement Scheme—was slower than anticipated because of organisational and other problems. The work experience programme is, however, expected to come into full operation after the summer holiday break. Work has now commenced on the environmental schemes in many local authority areas. The Department of Education temporary grants scheme for youth employment will, it is expected, provide assistance for projects which will provide temporary employment for more than 1,000 young people.
The Government have increased also from £10 a week to £14 the premium to schoolleavers under the Employment Incentive Scheme. However, action of other kinds is also necessary if we are to solve the youth employment problem, because unfortunately the signs are that youth unemployment would remain at a high level if we were to rely on economic growth alone to provide the jobs that are needed. The EEC Commission have recently put to the council proposals for support from the Social Fund for regions which have a high rate of youth unemployment. These envisage aid premiums to encourage the recruitment of young people by employers and programmes of recruitment of young people for newly-created jobs in the public interest. This matter will be before a meeting of the Council of Labour Minister this week. We must not merely provide jobs for young people but we must ensure that they are given the opportunity to develop to their maximum potential. Despite the improvements which have been made in recent years in our training programmes we still have a long way to go, and the rapid pace of technological change requires a continuing updating of training arrangements.
Our second line of approach depends on the creation of an environment in which enterprise and initiative can expand. This implies attention to both international and national trends.
With an economy like ours, buying and selling abroad the equivalent of more than 90 per cent of the value of all it produces, it would be naive to expect that international trends will not affect us.
The major problem is the exiguous growth rate in the European Community this year. Estimates are that it will be less than 3 per cent. Next year if nothing is done it may well be about the same. This is insufficient even to maintain employment.
Both currency difficulties and the new protectionism intensify the difficulties of recovering from the recession of the mid-seventies which is now happening all too slowly. On the other hand there is one impelling reason for growth which no country or group of countries can ignore. This lies in the numbers of unemployed in Europe, in the United States and in the major trading countries of Asia. Whatever the obstacles, this pervasive evil must be tackled. Europe cannot live for long with six million unemployed. All history shows that the penalties of failure will not be merely economic. If nothing is done, if the growth rate to which I have referred is maintained at only about 3 per cent there will be an increase in the six million unemployed in the EEC countries as a whole. Even if we attain the 4.5 per cent growth rate projected for mid-1979, it is expected that at best it will only keep the level of the unemployed at the six million now obtaining.
Current trends and how they can be got moving in the right direction will be discussed at the European Council of Heads of State or of Government of the European Communities in Bremen on 6 and 7 July next. The conclusions of the Bremen Council will provide a basis for the approach by the Community to the Bonn Summit later in the same month, in which in addition to the Community, the United States, Japan and Canada will be involved— representing countries which together amount for more than 80 per cent of all world trade.
The spread and intensity of the concern felt by governments throughout the world at the present situation and the reviving confidence in some countries lead me to believe that recovery will be further sustained. It is partly on this improvement that our hopes for further growth are built.
But whatever happens internationally, it is on ourselves here that the main burden of responsibility lies. We have never shirked this truth. No country owes us a living and it is no one's business to make the way easy for us. During the past year when international conditions were by no means favourable we have achieved rates of economic growth which were far greater than the average. We have increased our industrial and agricultural exports. Construction and tourism have expanded. We have brought our inflation down and decreased unemployment substantially. The question remains whether we can continue this progress if international trade and investment does not pick up —or continues at its present unsatisfactory level.
I believe that we can. First, we have the experience of growth when world conditions are not good. Next, we are starting from a lower base than the countries of the European Community both as regards income and employment.
Finally, the problems which affect us are different. We are not extensively involved in the industries where the highest overcapacity exists or which are in need of fundamental modernisation. Indeed, with redundancies here in manufacturing running in recent years at an average of 7,000 or 3 to 4 per cent of the labour force engaged in manufacturing, much of our traditional industry has already suffered the sort of restructuring which Europe is facing. The haemorrhage is now, I may add, slowing. In the first quarter of this year redundancies were running at the annual equivalent of less than half of their peak rate. And the new industries we are attracting are advanced in terms not only of technology but of productive capacity and marketing ability. In the months of April, May and June this year I, personally, have attended at the opening of factories or of industrial construction work representing part of a programme of investment by three firms alone, which will total over £450 million in a short period of years. This is the sort of progress we are making—and will continue to make for so long as we maintain a climate here which favours initiative and investment.
This brings me to a central issue in our strategy. We cannot progress if we try to operate a taxation system which penalises investment and effort. In particular, we cannot progress if the effect of a particular form of taxation is to penalise Irishmen for investing in their own country, while letting others reap the rewards—so long as they live abroad. We cannot prosper if we adopt forms of taxation which take away the proceeds of productive investment but permit gains from investment in houses, works of art, furniture and so forth to go scot free. That is why we have abolished the wealth tax and modified the capital gains tax. That is why we have introduced changes in the structure of company and personal taxation. The cost of these changes is negligible in comparison with the benefit. You cannot with one voice ask people to invest and employ and with another demand that they hand over to the State the proceeds of their risk and effort.
The details of our strategy for the future, based on a realistic appreciation of both the difficulties and the opportunities, internationally and at home, are described in detail in the Green Paper on Development for Full Employment. The options which that paper describes are intended to provide the basis for the discussions which the Minister for Economic Planning and Development and other Ministers will be having with the social partners. The central theme of these discussions will be how to achieve full employment within five years, within a framework of financial responsibility.
This raises a further major question. At present, the public sector borrowing requirement stands at an estimated 13 per cent of Gross National Product compared with 10.2 per cent in 1977, 11.5 per cent in 1976 and 16.3 per cent in 1975. Borrowing at this level is necessary in times of recession—or to get the economy moving. But it cannot be sustained without grave dangers.
The first danger is that the Government by borrowing too much will leave too little for private borrowers wishing to expand in agriculture, industry or business. I do not need to expand here on the dangers of excessive borrowing abroad—which leads to substantial outflows of money from this country and adds to our inflation.
On a more basic note, excessive borrowing increases taxation and can narrow dangerously the options open to the Government. Taking account of all the loans repayments and dividends received by the Exchequer on the loans it has issued in the past, the cost of borrowing has risen from about 13 per cent of the total Exchequer tax and non-tax revenue in 1972-73 to a figure estimated to be over 17 per cent in 1978. In other words, almost £1 in every £5 of total Exchequer receipts this year will be pre-empted to service debt.
Finally, with the moves now afoot in Europe for a greater convergence of economies, a more rigid system of exchange rates, and the upward trend in interest rates, we cannot sustain a level of borrowing which is even suspected to be contributing to our inflation.
Borrowing is used in part to finance the capital programme. And the capital programme is the way through which the Government provide hospitals, schools, houses, roads, money for industrial and agricultural development, harbours, telecommunications and all the other social and infrastructural works and services on which economic growth, in part, depends. More significantly, the capital programme is an important instrument for the creation of employment. How then can the Government reduce borrowing at a time when they are seeking not only to maintain but to increase employment? The answer lies in part in the nature of the services financed by the borrowing. This year the deficit on the current budget is estimated at £405 million or almost half of our total borrowing.
If we are to sustain the capital programme and avoid massive increases in taxation—both of which are essential to our central aim of creating employment—we must concentrate on the current budget. In 1979, unavoidable commitments such as the additional cost of servicing the national debt, the carryover effects of increases in public sector pay and numbers and the extra full year costs of the social welfare increases in this year's budget could add as much as £150 million to current expenditure. Clearly, therefore, the need to reduce borrowing and at the same time moderate the growth of current expenditure will impose constraints. We must look to those programmes whose cost is disproportionate to the benefit or which have become unconnected with reality.
This is not a purely negative approach. I have spoken of the changes in taxation which we have made to encourage enterprise in manufacturing and service industry generally. We will support this policy by a shift in emphasis in capital spending towards schemes and projects which are productive. The central question that must be faced in looking at every aspect of public expenditure is "In what way does this programme or that contribute to the maintenance or improvement of conditions for full employment?"
There are parts of our infrastructure, particularly in roads and communications, which are in urgent need of improvement. The works would in themselves provide substantial employment both directly and in ancillary industries like cement, machinery hire, maintenance and equipment. More often than not, the yield to the community from ambitious projects to improve the quality of our transport or communications systems is higher than the cost to the Government of raising the money. It may not be possible to quantify that kind of yield on a balance sheet but certainly it is reflected in greater efficiency and greater expansion of efficiency in communications and in telecommunications generally. The direct benefits to manufacturing and service industries for maximum efficiency are obvious and real. The Government intend, therefore, to look with particular interest to the need for developing these parts of our infrastructure.
Similarly, the cost of serviced land is determined like that of any other commodity, in part, by the relationship of supply and demand. There is scope, with an expanding construction industry and the need for more housing, for increasing the supply of this land by accelerated programmes for the provision of water, roads and other services. Increasing the supply is one of the most effective ways of dealing with the price of development land.
The allocations we are making for grant and loan capital for new and expanding industry are together the largest single item in the capital budget. These aids are additional to the tax incentives and remissions which are an integral part of the drive to provide industrial jobs. And what I think is particularly significant about this combination of direct and indirect aids is the fact that it reflects the determination of the Government to encourage self-sustaining growth in our economy in every possible way.
In relation to agriculture, we will be acting in the belief we expressed that this sector can and should provide the main thrust for the recovery of the national economy. We intend that the volume of farm output must be raised and more of what we produce processed and packaged through the consumption stage. In the White Paper published last January we gave quantitative expression to these views in setting the ambitious targets for increases of 25 per cent and 40 per cent respectively, for agricultural output and exports over the period 1977-80.
Of course, what we do has to be done within the framework of the common agricultural policy of the European Community. This policy has again been subject to criticism. The Government are firmly committed to preserving intact the fundamental principles of the common agricultural policy and will resist any pressure to have its basic structure changed. They will support development of the policy in ways which do not compromise its principles and which will improve its effectiveness.
I believe that the developments agreed at this year's price-fixing meetings of the Council of Agricultural Ministers not so long ago generally corresponded to these criteria and in so far as they related to this country specifically, fully justified the description of the package by the Minister for Agriculture as the best achieved for us since our accession.
Together, the general price increases and the agreed change in our green £ will boost agricultural returns by about £75 million this year and £100 million in a full year. The deal will involve a gain to the balance of payments of about £70 million in a full year and about £50 million this year. Equally important was the agreement on the allocation of substantial Community funds for arterial and field drainage schemes in the west of Ireland and in areas along the Border. The EEC are going to contribute £21 million towards this programme, which provides a valuable opportunity to bring more land into full production. This initiative and that taken in relation to structural reform in the Mediterranean areas represent a significant new departure in the agricultural policy of the Community which has now given practical recognition for the first time to the need to give special assistance to the less developed areas. In other areas, we secured undertakings for the early submission of proposals that would further relieve monetary anomalies threatening the expansion of our meat processing industries. The package generally should give tremendous encouragement to our farmers to expand output and improve efficiency in production and marketing.
There may be concern in some circles about the low level of the increases in common prices. On a longer term perspective, I believe that such concern is misconceived and, indeed, that with our comparative advantage, a continuation of this trend might well be to our advantage, in reducing competition from high cost producers and in minimising the accumulation of surpluses which provides ammunition for critics of the CAP. I would urge on farmers and farmers' representatives to look seriously at this particular proposition.
With the favourable prospects opening before us, we must leave no opportunity to increase output and efficiency unexplored. It is primarily for our farmers and processing industries themselves to take the necessary steps. However, public policy also has a major role to play. Already the Government have taken a number of major initiatives, as foreshadowed in our manifesto, and the Green Paper set out a number of further possible policy changes. These will be discussed with the farmer and industry organisations over the coming months. On the basis of these consultations, the Government will take decisions which, while they may not lead to a rapid increase in output, due to the time lags involved in farm production, will, I am confident, lead in the longer term to the realisation of our objective of making Ireland the world's premier producer of quality food.
Large as it is, public sector revenue and expenditure does not and cannot alone attain our objective. It can have a large but not a determining influence. Other major influences will be what happens in relation to wages and salaries and on the industrial relations front.
Of the many forms of income, pay is by far the most important, making up approximately 70 per cent of national income. For the Government the development of incomes generally is of paramount importance, firstly, because of the size of the public sector pay bill. On the basis of existing commitments, including the carry-over costs of the 1978 National Agreement and of new posts created in 1978, the pay and pensions bill for 1979 is likely to exceed £1,000 million. This is before any consideration of the position when the present national agreement expires. Clearly, with a pay and pensions bill of this size already committed, the scope for further increases is limited.
Next, though the import returns show a satisfactory increase in the volume of capital goods for further production, there are indications of a rise in the volume of consumer goods coming into the country. An accentuation of this trend could aggravate our balance of payments to the point where corrective measures would be necessary. These could affect the prospects for employment.
Finally, incomes are an important element in the determination of costs. If they rise too rapidly prices go up also. I know that this is a complicated area. The argument about whether price rises cause incomes to rise or vice versa has been the subject of much discussion which is not relevant here at this time. What is central is the fact that the level of increases in income is one of the factors which will determine whether we can attain full employment in this generation because the economy cannot bear the weight of an expanded programme of public capital spending to improve the quality and efficiency of our infrastructure and generate or underpin jobs and, at the same time, an excessive volume of increase in incomes.
The pay agreement reached last March goes marginally beyond what we had originally proposed. Few experience directly the negative effects of pay increases larger than are economically justified. Unfortunately cause and effect here are widely separated. The euphoria induced by the higher quantities of money in the pocket is seldom associated with the joblessness which often follows. I have stressed the changed emphasis that is necessary in public policy for the provision of the extra jobs which every representative union and group argue are essential. A similar change in emphasis in attitudes to income increases is also essential. The recent OECD report on our economy brought this out clearly when it said:
On the basis of the movements in real earnings and the progress made towards reconstitution of the profit share in 1976 and 1977, the pay agreements in those two years made a significant contribution to improving the employment and inflation performance.
Whether income increases are as a result of union bargaining, settlements following negotiations by professional bodies or adjustments in prices leading to higher profits, they must reflect the real value of increased production or services—or the establishment of a firm base from which further investment can develop. Otherwise they would cause inflation, contribute to unemployment and thus run directly counter to the most fundamental aim of Government.
A responsible attitude to increases in income is an essential pre-condition for the creation of employment. The proper conduct of industrial relations is of at least as great an importance.
Since the introduction of national agreements, Irish industry has experienced an overall improvement in the number of working days lost due to industrial disputes. This improvement is particularly significant when compared to the upward trend in days lost due to strikes experienced in other countries over the same period. Of the externally owned manufacturing firms operating in Ireland the great majority —more than 80 per cent—had no strike problems at all in the period 1972-1976. In that period of five years only 13 firms out of a total of over 500, that is of foreign-owned firms, could be said to have had significant labour problems—defining that expression as two strikes or more, and more than five days lost per worker.
However, certain recent developments on the industrial relations scene are giving cause for concern. Last year 421,145 man-days were lost due to industrial action and 65 per cent of the strikes which occurred were unofficial. Moreover, it has to be recognised that lengthy disputes in what, in modern conditions, are basic commercial services cause disproportionate harm. It is particularly unacceptable if those with secure jobs use their position in such a way as to destroy the job prospects of others worse off than they are. An accentuation of this trend would call for the most fundamental appraisal.
The reasons for the high incidence of unofficial strikes are difficult to establish. A breakdown in discipline and a lack of communication between union and the shop-floor may be a contributory factor. It is equally true that discontent among workers about their pay and working conditions, if allowed to fester for long periods, can lead to outbursts of wildcat action arising from apparently trivial causes. Managements have an obligation and a responsibility for ensuring that sufficient resources in terms of manpower and expertise are made available for maintaining and improving communications with their workers, and for establishing and improving, where necessary, agreed procedures within the enterprise by which grievances can be aired and resolved.
Government also have responsibilities. It is now many years since we had any significant changes in our industrial relations structures. For this reason, the Minister for Labour, on 5 May last, established a Commission of Inquiry on Industrial Relations to undertake a wide-ranging review of the industrial relations system and to make recommendations for improvements.
In what I have been saying I have deliberately refrained from referring to the welfare services. The size of the shock which our society has suffered in recent years from the rapidity of changes within it and from the extent of unemployment has made the old approaches to welfare irrelevant. It is no longer enough to say that this or that benefit has increased by this or that amount, or that so many new schemes or services have been introduced. The commitment of this Government to the maintenance of the present level of the welfare services for those in need and the improvement of their effectiveness and relevance is not in question. We have always held that economic advance is valuable to the extent that it makes possible and is used for the improvement of the quality of life and is concentrated to the greatest possible extent where the need is greatest.
Our approach in this area is based on the belief that the right to work is the most fundamental of all aspects of welfare, and that the improvement, through sound policies, of the real value of benefits is more relevant to needs than the allocation of ever spiralling amounts merely to counter the effects of inflation.
The reaction of the Opposition parties to the Green Paper shows obvious signs of blinkered thinking. They cannot free themselves of a view of our society and people which obliges them to conclude that the community commitment required to achieve full employment will never be forthcoming. In so concluding they also tacitly accept that unemployment is incurable, and, at a stroke, write off as worthless the career prospects of a vibrant new generation of Irish people.
The voters in the last election told Fianna Fáil that they wanted two things. They wanted a Government which they could trust and in which they had confidence. They also wanted a Government which played fair with them. This is how my Government have worked and will continue to work. I should like to thank on behalf of the Government the country generally for the co-operation we received over the past 12 months in getting this country moving again. We have kept our trust with the people by implementing our manifesto promises.
In so far as the Green Paper examines the real possibility of accelerating our progress towards full employment, it is necessary to embark upon a major process of consultation and discussion.
The aim is to put an end to unemployment within five years. To benefit the many thousands currently unemployed together with our young people who have not yet embarked upon careers, those already in employment are being asked to consider accepting a slower rate of increase in the standard of living than they might otherwise expect to gain during a period of rapid growth. In short, it is proposed that part of the new growth will be distributed in such a way as to fund employment in private or public sectors for all those who seek jobs. The Government are confident that the people will accept the principles underlying these proposals and will support a programme of action which will produce the full employment to which all sections of the community profess their commitment.
In making public these proposals the Government are not absolving themselves from the duty to direct the Irish economy along the road to full employment. It would not be appropriate to embark upon a dramatic new policy of this kind without first seeking to win the people's support for it. It is for that reason that we wish to have public discussion on the proposals. But in the final analysis it is the Government who will decide the nature and the scale of the action to be taken.
The Opposition parties are stunned by the novelty and dramatic nature of these proposals. These cynics search for an ulterior motive which does not exist.
