asked the Minister for Finance if the Government agree with the Report from the Committee on Costs and Competitiveness.
Ceisteanna—Questions. Oral Answers. - Report of Committee on Costs and Competitiveness.
27.
I would refer the Deputy to the Government statement issued on 9 October 1981. This noted the report as a useful contribution to the public debate on the economic situation and one which outlined factors relevant to the discussions between the social partners on incomes increases.
The answer is either yes or no. I have not got an answer. I take it that the Minister's approach is somewhat similar to that of the Taoiseach. For the benefit of this House, could he explain to me, and perhaps to some other individuals who might be somewhat stupid like me, how that recommendation of 9.5 per cent made by the committee after some weeks of study, overnight became 6.5 per cent? Would the Minister please explain how this modern mathematical achievement was reached and what criterion was used, in some detail, please?
In some detail. To deal with the first part of the Deputy's question, if I might amplify to assist him in this matter, the Taoiseach met the Executive Council of the Irish Congress of Trade Unions on 14 August 1981 and outlined his approach at that stage to the situation. He said that the logic behind the setting up of the committee was that an objective assessment was needed of the level of cost increases which the economy can bear. There was no question, he said back in August, of a binding norm from the Government's point of view. He indicated that the assessment would be open to discussion by any of the parties concerned. Congress would also be entitled to seek their own advice. He said that he felt that the availability of objective data would be helpful, at any rate, to congress in their own efforts to convince their membership of the need for a moderate settlement.
It was made quite clear by the Taoiseach, when the body was being established and subsequently when its report was published, that it was not considered to be a binding norm but that it was felt, in the interests of the country, that all those concerned in income determination — whether employers, trade unions or Government—would be helped by having an objective assessment of what the country could afford in terms of maintaining its existing, already very low level of competitiveness vis-á-vis the other countries.
The situation in regard to the figure that was recommended by the committee is as follows: the report itself contained, in paragraph 4.2 the following statement——
Cut the waffle.
There is no waffle. I use my words carefully.
The Minister knows that I know how the figure became 6.5 per cent, but tell the House.
The Deputy should listen to what I am saying. It is stated in the report that the assumption was that exchange rates would remain unchanged at mid-1981 levels. This is, the report said, a technical working assumption only and does not represent a prediction that this is the most likely outcome. Indeed, it said, no allowance is made at this stage for the recent decline against EMS currencies of both the dollar and sterling. Unless these declines are rapidly reversed, they will have the effect of significantly reducing Ireland's gain in overall competitiveness in 1981.
As a result of that, subsequent to the publication of the report, the committee felt, in the light of information which became available subsequent to the report being completed, they should issue a press statement. This was their own press statement which was based on the considerations to which I have referred—the decline in Ireland's competitiveness since the sums upon which the original report had been based had been completed. The report is as follows, press release of 9 October 1981.
We have all read that press release. That is not the question.
Since the Deputy has asked the question, he must listen again to the press release, because it is the answer to the question. Perhaps if he knew the answer, he would not have asked the question.
The Minister knows the answer as well as I do, but I am obviously not going to get it.
I quote:
Our report was prepared in mid-September and based on the best information then available. Since that time, it has become apparent that the autumn currency changes are likely to prove lasting. This has obvious implications for the level of Irish competitiveness in both 1981 and 1982. On the basis of current exchange rates it is estimated that in order to maintain competitiveness average 1982 costs should be no more than 8 per cent above the average level at 1981. In applying this norm, account must be taken of the carry-over of cost increases from 1981. In the case of wages and salaries, subject to the present National Understanding, the carry-over dictates that a single phase increase paid at the expiry of the understanding could be no higher than 6.5 per cent.
That is the press release which represents the views of the three economists themselves, on the basis of information which became available to them subsequent to the completion of the arithmetic in the report, but the possibility of such further information requiring an alteration in the figure contained in the actual report was, as I have already indicated, adverted to in paragraph 4.2 of the report. Anyone who read the report should not be surprised that, in view of the developing trends, the three economists concerned wished to make a further statement indicating the position in the light of the further information available.
I do not accept that answer. However, I do not intend to pursue the matter further because it is obvious that I will not get the answer. The Minister knows as well as I do that that is not the correct position. Would the Minister not now agree that that com- mittee's recommendation — and mind you that all emanated from the Fine Gael election document — rather than being helpful or constructive in any way in achieving a national wage agreement or a national understanding, was the most harmful effort ever made by a Government and contributed enormously to the fact that no meaningful discussions took place this year — and I emphasise the word "meaningful"— on a new national understanding or wage agreement?
Obviously this is a matter of political debate. I completely disagree with the statement just made by Deputy Fitzgerald. The committee gave the community a great deal of very useful information about the impact of inflation and how in the inflation we have experienced in the past few years some people have gained and others have lost a terribly large sum of money.
In pointing out the often very damaging socially re-distributive effects of inflation, this report will be of lasting benefit to the community and assist us as a community in seeking to combat inflation. As far as its impact on the wage discussions is concerned, I am convinced that the availability of objective information on what the country can afford can do no one any harm. I am surprised that the Opposition should suggest that information like that contained in the report about our true competitive position should be concealed from the public.
Would the Minister confirm that it is his intention, as stated in the House yesterday by the Minister of State at the Department of Social Welfare, to tie the social welfare benefits to the consumer price index and not to use this 6½ per cent norm in determining the increases which will be applicable to those on social welfare benefits?
As the Deputy is no doubt aware, I will be making announcements on the Government's policy on social welfare in the budget. It would be premature for me to make statements about what will be contained in the budget in advance of the budget. It would be most unusual and contrary to normal precedent. I am sure the Deputy will be quite happy to wait for the budget.
Is the Minister denying the statement?
I am not denying the statement. I was not in the House when the statement was made.
It has been pointed out that inflation is the curse of the country. What attempt did the Minister's budget make in July to control inflation? What attempt does he intend to make to control inflation if he has learned a lesson from the committee's report?
We have gone into the reasons for the July budget on numerous occasions. It has been clearly accepted by the public at large that that budget was inevitable because of the total inadequacy of the January budget for which the Deputy's party were responsible. I repeated on so many occasions the need for taking the difficult choices taken in July that there is no need whatever to go back on it now.
Would the Minister not accept, even at this late stage, that the worth-while benefits of that report were undermined by the change from 9.5 per cent to 6.5 per cent? If the Minister's argument were taken to its logical conclusion, would he not agree that 6.5 per cent should fluctuate and change with every single change in exchange rates?
The economists involved were concerned that their recommendations should be as up to date as possible. It was perfectly normal for them, on the basis of information which became available to them after the report had been completed, to wish to bring their recommendations up to date in the light of that information. That was a decision taken by them independently.
Who made the information available?
When the Leader of the Deputy's party attacked the integrity and independence of the economists in this context, they rebutted his charge vigorously, a charge, I might add, which he should never have made.
The remaining questions will appear on the Order Paper for Tuesday, 17 November, 1981.