This legislation is a product of the social charter produced in 1989 and subsequently enshrined in the social Protocol to the Maastricht Treaty in 1992. It will affect 271 multi-national companies in Ireland. Although Ireland has only 0.5 per cent of the labour market in Europe it will be represented on 25 per cent of the works councils because of our high dependency on multi-national companies.
Anybody who followed the recent dispute at Packard Electric will be sensitive to how employees are informed and consulted on matters relating to their employment. In this instance employees were informed on the main evening news at 9 o'clock that they would lose their jobs. If there is any way not to do business and to be sensitive to the concerns of employees it is to make them aware of fundamental decisions with regard to their work through news or media reports. If this legislation had been in place the only good thing about it would have been that the employees would have been consulted differently, although they would have lost their jobs.
It is very hard to be against the concept of partnership as any successful business or endeavour must work on that basis. The most successful companies have a highly motivated labour force. Many American companies are not unionised, yet they have highly motivated labour forces because the managements realise that the key to success is to have workers involved, to consult them and have them motivated.
Competitive factors must be considered with regard to rates of pay. Companies must be profitable if they are to succeed. There are, however, many other fringe benefits of the social kind which are commonplace in large companies and which employers realise benefit the company. By helping the employee they are helping the enterprise to grow and succeed.
Since 1987 we have all fostered the notion of partnership. The PNR, the Programme for National Recovery, the PESP, the Programme for Economic and Social Progress, and the current programme, the Programme for Competitiveness and Work, have all been based on the fundamental premise that we must work in partnership, that the main social employers, the main social partners, employers, trade unions, government or whatever, must work in consultation and partnership with each other.
My main problem with social partnership is that if it is really to be a social partnership it must be inclusive. While the partnership in place in this economy has been successful in ensuring industrial peace, we have paid a high price for it and have not succeeded in dealing with the high level of unemployment. If we are to have a successor to the Programme for Competitiveness and Work and genuine social partnership we must widen the ambit of that partnership and ensure that key sectors of the economy are not excluded from participating in it because, if they are, it is not a genuine social partnership. I am especially concerned that the Irish National Organisation of the Unemployed is not represented when social partnership deals are negotiated.
This measure will apply to 271 companies. It also applies to all companies in Europe with 1,000 employees and who employ at least 150 in two member states. However, the legislation will not apply to the UK, which obtained an optout from the social charter. This means that it does not apply in England, Scotland, Wales or Northern Ireland. The other economy with which we share this island, Northern Ireland, will not have the impediments that are imposed through this legislation.
Europe has brought enormous benefits to all its member states and citizens, but Europe's biggest failure has been its incapacity to deal with the high level of unemployment in the European economy. Some 17 million people are currently unemployed in Europe, the population equivalent of four smaller member states. If Europe is to complete on the same basis as many of the other trading blocs such as Japan, the US, many of the Asian Pacific countries, New Zealand or Australia, it must deal with the high level of regulation in the European economy which is acting as a barrier and an impediment to enterprise and job creation.
In the context of this legislation, it is worth considering the comparative unemployment figures between some European countries and other areas. In Ireland the official level of unemployment is 13.5 per cent, it is over 13 per cent in Belgium, just 12 per cent in France and 11 per cent in Germany. However, in the US it is 5.5 per cent, 3.1 per cent in Japan, 6 per cent in New Zealand and under 9 per cent in Australia. If Europe is not to continue to be the sick man in terms of trading blocs participating in the global economy, as recently described by my colleague, Deputy Michael McDowell, it must become less regulated, freer and more competitive if it is to generate the kind of job opportunities for its citizens we all wish to see.
Good as works councils may be, they will not benefit the unemployed. Although the workers in Packard Electric learnt of the loss of their employment in an insensitive, harsh and cruel way, the existence of workers' councils might have ensured the message was delivered in a more sensitive and reasonable way. It would not have saved the jobs because that plant had become uncompetitive vis-á-vis the plant in Coventry and other parts of Europe. Of a total pay bill of £15.5 million for the last full year of production in 1994, £5.5 million went to the Government in tax and PRSI, which is 35 per cent. Every worker taking home £160 cost the employer £232. There was a gap of £72 between what the worker took home and the cost to the employer, which was made up in taxes and PRSI — penal and cruel levels of tax.
If we are to generate additional job opportunities, provide more employment possibilities and end social exclusion, the greatest poverty fighter of all is a job. People excluded from participation in the economic development of their country and community end up isolated and marginalised. They lose their dignity and self respect. Most social conversation begins with work and what one does. Too many people — 285,000 — cannot answer those questions. They are often embarrassed, isolated and made to feel second-class citizens.
When we approach any legislation on enterprise and employment, we must ensure that we use our critical faculties and examine the effect it will have on this area. When the IDA's competitors in Wales, Scotland, Northern Ireland or Britain go out to attract mobile investment into those countries they will have one advantage over the Republic of Ireland. This legislation will not be an impediment.
Many may say it is not a major impediment, but it is often small things that affect key decisions. Uncertainty is the enemy of investment, and anything that adds an extra layer of bureaucracy or an extra burden becomes a disadvantage and a barrier to employment. That is one of my concerns about this Bill. It says much about this legislation that many companies are already eagerly trying to establish procedures that will exempt them from having to comply with the statutory obligations that will be imposed under this legislation.
Companies are worried about what is called the institutionalisation of consultation. It will involve expense. There will also be difficulties and Deputy Kitt dealt with some of them. One is the issue of confidentiality. In the world of business and investment confidentiality is crucial. Strategic development and planning very much depend on being able to keep one's cards close to one's chest. If a company is about to merge with another company or to engage in a take-over bid and information about that gets into the wrong hands it can cause major problems for the strategic development of the company. We are talking here about large companies, transnational corporations. Investment is mobile. We saw that in the case of Packard Electric and the very many other decisions that were made. In a matter of minutes companies can make decisions that affect thousands of workers. We must ensure that we have procedures in place that protect workers but that mainly protect the enterprise and employment. That has to be our concern.
It is not a fact that only companies that are unionised look after their workers well. Many of the American corporations have located in Ireland. We have 400 American multinational companies in Ireland and this country is the single greatest success story for multinational investment from the United States. Although we are a small country we have one third of the investment in some key sectors, and the reason we have is mainly because of our very low level of corporation profits tax on manufacturing enterprises. Last year, for example, the Irish subsidiaries of multinational companies made pre-tax profits of £5 billion. On that they paid just over £450 million in corporation profits tax. Had they been paying corporation profits tax at the European norm, which is between 30 per cent and 40 per cent — in Germany it is more than 40 per cent — they would have paid an extra £1 billion in corporation profits tax. That is the key reason for industries investing here. There are other factors, for example, the skill of our workforce, the fact that we speak English, the quality of life in Ireland. All of these matters affect the decision of so many American multinationals to locate here. The single biggest factor is the low level of corporation profits tax on manufacturing enterprises.
I make that point because it shows that where an advantage is provided the economy gains enormously and employment opportunities are created. Thousands of our citizens work in those enterprises simply because the decision was made to locate the enterprise in this economy, and that decision was made on the basis of the tax regime as it affected corporation profits tax. Equally, many companies may make a decision not to locate in Ireland if barriers are put in their way. It is not in Ireland's national interest to be at the top of the queue in Europe to rush for more regulation, more legislation, more intervention in the market. Because of our peripherality and the small size of our market, we have many disadvantages when it comes to attracting investment. We have to maximise the advantages and not to rush to put impediments in the way. The IDA's competitors in Northern Ireland, Wales, Scotland and Britain will be able to tell foreign multinational companies that if they locate in their countries this legislation will not be imposed upon them.
I want to deal with the enormous costs this will involve and which must be carried by the enterprise. These include the cost of establishing the negotiating team to negotiate the terms on which the works council or forum will be established, the cost of travelling to and establishing meetings — we are talking about transnational operations, and of providing for employees who will be absent because they have to attend works councils. Those costs may seem small to us. We think of multinational companies as being big and rich. They are big but they operate within very tight margins. The more barriers we put in their way the less competitive they will become, and the more non-competitive they become the more likely they will be to shy away from countries like Ireland. I am not suggesting that any company will leave Ireland because we are transposing this legislation into Irish law, but in the context of new investment into Ireland this legislation will go down as a liability on the balance sheet when companies are weighing up whether or not to invest here.
The first priority of politicians in this House, of Governments, and of those who are interested in the development of this economy has to be to tackle unemployment. Everything we do, particularly the way we approach legislation that comes from Europe, will have to be looked at with the blinkered eyes that are often necessary if we are to put in place the kind of radical measures that are necessary to deal with unemployment. We are constantly told that the economy is performing well. As far as the fundamentals are concerned it is. We have a high level of growth and low interest rates, mainly because the German economy is in such a bad state, leading to low interest rates throughout Europe generally. We have low inflation. We have much in our favour, but the one thing we have not managed to do is to translate that growth, that performance in terms of the fundamentals, into new job opportunities for our workforce. That is a failure on our part and on the part of successive Governments. The reason growth has not been translated into jobs is that it is a jobless growth. Enterprise, exports and endeavours are growing but with fewer people. That is a reflection on much of our employment legislation. It is particularly a reflection on our system of high taxation on work.
When I look at this legislation I wonder whether it is necessary and whether it will do much good. Where companies are forced, through statutory obligations, to do things, they have a negligible effect. If an employer does something only because he has to, if an employee is consulted only because there is a statutory obligation on the employer to do so, the consultation is probably not worth while. Successful companies have good consultation procedures in place for matters that affect the daily lives of their workforce. Does it really matter to a worker somewhere in Ireland what is happening in the plant in France? It matters if they are going to lose their jobs to the people in France, but will they be able to stop job losses just because they have been consulted about what is happening in the French plant? Sometimes I wonder whether we are bringing in legislation for the sake of it without really examining the benefits. I doubt very much that enormous benefits will flow from this. It applies to only a tiny number of companies. It probably will not apply where it is needed most. Neither will it apply to any of the indigenous Irish companies.
Only some employees in Ireland will have the benefits, if there are benefits, of this legislation. Many others will not. In the United Kingdom this legislation will not apply. Perhaps the Minister will clarify how exactly the legislation will work in the context of the UK. Is it the case that if a subsidiary of a multinational company is located only in the UK this will not apply, but that if there are subsidiaries in the UK, Germany, France, etc., the legislation will apply to all subsidiaries other than the ones based in the United Kingdom? Will the Minister outline in her reply how this might work? In 1974 a subcommittee of the employer labour conference recommended the establishment of works councils in all places of work with 25 or more employees. Although the recommendation was made, the conference did not ratify it. I wonder why.
Social partnership has been fundamental to the economy since 1987. It will continue. It has been responsible social partnership in the main. Unemployment is the most serious problem affecting the economy, contributing to a high dependency on drugs, to more pressures on the health service, to increased levels of crime and increased dependency on drugs and other addictive substances such as alcohol and so on. If as the Forfás report suggests we halve unemployment and get the unemployment rate down to between 6 and 7 per cent, that is perhaps the lowest unemployment level as we can realistically achieve. I believe we will not achieve this through this Bill but we will do it, as the Forfás report so rightly says, through fewer regulations, less bureaucracy, lower taxes and more competition. We will do it only through ensuring that Ireland becomes a competitive economy in which to locate because it is encouraging of the entrepreneur and does not place impediments on those trying to create employment.
It is a poor commentary on our performance as an economy that we tend to take the view that everybody else in Europe is doing it, we should be doing it. It is interesting that when it comes to European Union labour or social legislation, Ireland is always among the first to implement it but when it comes to adhering to environmental directives under which we incur expense we are very good at looking for derogations because we know we cannot afford it. When it is as black or white as that we understand it and are good at negotiating special terms, but when the benefits or effects are less clear or somewhat confused — one does not see the negative effects of the legislation as one reads it but only when one looks at what happens in the real economy as far as jobs and enterprise are concerned — we are not so good at being able to see the negatives of European legislation from the Irish economic point of view and we are not so good at looking for a derogation.
I am neither a Eurosceptic nor a Euro-enthusiast but I like to think I am a Euro-realist. There are many things that are good about the European Union but there is a great deal wrong about it and it is losing out. The German economy, traditionally the most successful, is becoming one of the weakest economies. If one of the wealthiest economies, not only in Europe but in the world, cannot afford much of the social legislation it implemented, can Ireland, one of the poorer member states, afford to be first at the door when it comes to implementing much of this legislation?
I will not call a vote on this because it would be misunderstood and I am not sure it would have any great effect. I am not certain that this legislation will bring benefits to Irish workers or that it would have done anything to save Packard Electric. If this was a Bill about reducing tax, reducing the level of bureaucracy or cutting out some of the red tape that frustrates employers trying to operate in a real economy, it would be far more beneficial for workers, the economy and society generally.
The Minister asked that we would go through all Stages of the Bill this evening. Normally I would not be keen to do that because I do not think it is a good way to deal with legislation but there are no other speakers in the Chamber and if the Bill collapses we will be free for the next two and a half hours. We might as well discuss Committee Stage as sit in our offices wondering what amendments we should table tomorrow or next week. I will oblige, although reluctantly.
I put this Bill alongside the Protection of Young People at Work Act which is already causing enormous headaches. Only recently I had a group of 17 year olds who used to work quite happily in public houses to earn pocket money. We have legislated against the opportunity they had and they could not understand it. Sometimes we feel that unless we legislate and unless there is a statutory obligation, good cannot happen and evil cannot be stopped. I do not subscribe to that theory. Bad employers will be bad employers with or without this legislation. Good employers, with or without this legislation, will motivate their staff and will see why it is so necessary to have a highly motivated workforce. I do not believe that at the end of the day it will be of enormous benefit to the workers, to the unemployed, or to entrepreneurs. Given that Britain has opted out from this legislation and that it will not be imposed in Northern Ireland, we are putting ourselves at a disadvantage when it comes to investment. I believe we do not have the luxury to do that.
