Vol. 515 No. 4
5 Mr. J. Bruton asked the Taoiseach the communications, if any, he has had with the social partners since 15 February 2000 regarding the Programme for Prosperity and Fairness; and if he will make a statement on the matter. [5901/00]
6 Mr. J. Bruton asked the Taoiseach if he will make a statement on his meeting with the social partners on 7 February 2000 prior to the publication of the Programme for Prosperity and Fairness. [5927/00]
7 Mr. J. Bruton asked the Taoiseach if he will make a statement on the Programme for Prosperity and Fairness agreement. [5928/00]
I propose to take Questions Nos. 5 to 7, inclusive, together.
The negotiations on the Programme for Prosperity and Fairness concluded with a plenary meeting in Government Buildings on Monday, 7 February last. The Tánaiste and Minister for Enterprise, Trade and Employment, the Minister for Finance and I took part along with the social partners – representing employers, trade unions, farmers and the community and voluntary sector. In the course of my remarks on this occasion, I recalled the impressive record of achievement of social partnership to date, both in bringing about the much needed recovery from the disastrous early and middle 1980s and in underpinning a period of sustained growth since then. I also emphasised the Government's view that the new programme is fundamental to ensuring continuing economic success and to building a fair and prosperous society.
I have not had direct contact with the social partners since the launch of the programme. The organisations concerned are currently in the process of seeking to secure its ratification and they have to be given the time and space to do that. However, I took the opportunity in the course of the statements in the House last week to address some of the concerns which have been expressed about the pay terms of the new programme. That, on the one hand, concerns have been expressed that the new programme offers too much in terms of pay and, on the other, that it does not offer enough, shows that in reality this is a balanced agreement. As we know from experience, the one sure-fire way to ensuring the worst fears of proponents of both views are realised would be to abandon the partnership approach and embark on a free for all. Some of those most active in opposing the agreement have always opposed these agreements, many on purely ideological grounds. Most people are sensible enough to see through that and to recognise the value of continuing the partnership model.
I reiterate what I said in the House last week that the very substantial pay increases which the programme produced, and our overall prosperity, require adherence to the pay terms of the programme. As I said then, the Government for its part has lived up to, and will continue to live up to, its commitments, but equally pay developments in the public service, the private sector and commercial State companies must be consistent with Partnership 2000 and with the Programme for Prosperity and Fairness, if ratified.
I gave a detailed overview of the programme in my statement last week and I do not propose to go over it again. I would simply repeat that the Government firmly believes the Programme for Prosperity and Fairness provides the best possible grounding for further economic and social progress. It deserves support as a balanced outcome to wide-ranging and intensive negotiations with the social partner organisations. I look forward to a positive outcome to the process of ratifying the agreement and to working closely with the social partners in implementing the programme in the period ahead.
Have any of the social partners expressed concern to the Taoiseach at the fact that inflation is running at about 4.4%, a good deal higher than the rate even at the time the agreement was finalised?
I had no detailed discussions with the partners since the meeting on 7 February. I think the Deputy knows my view on inflation. Over the period of the programme, 2000 to 2002, the projected rate will be between 2% and 2.55%. Within his powers, the Minister for Finance must take whatever measures are appropriate to ensure that inflation limit is maintained.
What measures can the Minister for Finance take to deal with inflation now that we are part of the euro zone?
These questions should be directed to the Minister for Finance. All our powers are not gone. Deputies can see what we did in our fiscal policies this year. Inflation is high because of the price of oil and the increase in the cost of cigarettes. If these were taken out of the equation our rate of inflation would be about 2.6%.
Is the Taoiseach suggesting we might reduce the price of cigarettes next year to reduce inflation?
No.
What are the options?
We made the decision to increase the price of cigarettes for good health reasons and I hope it will prove successful over time. As Deputy Bruton knows, price stability is created not just by exchange rate policy, but by confidence in the economy and control of public expenditure. Taxation measures can be taken if necessary to keep inflation down. Estimates by independent economists indicate that inflation will peak later this year and we will then move back to a rate of around 2.5% for the life of the programme. We must always keep a careful watch on inflation. I will not say I do not care about inflation as that would be irresponsible. We must be careful and reflective on an ongoing basis in terms of price stability and this is the role of the Central Bank as part of the European Central Bank.
Does the Taoiseach agree all evidence suggests that no matter how much the price of cigarettes is increased it does not appear to have any impact on consumption patterns, and that if anything it has a greater impact on smuggling patterns? Did the Minister for Finance not have available to him what was available to previous Ministers for Finance, including myself, namely, a very clear indication that an increase of 50p in the price of tobacco would have a very discernible impact on inflation in the current year, given the basket of commodities in the CPI? Having regard to these two points, the fact that the Government did not need the additional revenue and that the increase will not affect health, why did the Government knowingly jeopardise the ratification by the social partners, particularly the trade union members, of the current agreement by unnecessarily increasing the rate of inflation? Did the Minister for Finance tell the Taoiseach he was going to do this anyway?
Of course the figures were available and the Government knowingly made the decision taking into account the CPI factor. It does not follow that people will pay any price for cigarettes and that consumption will not decrease. Evidence from other countries indicates that the level of smoking is decreasing, although perhaps this is not indicated among younger people. The evidence is that smoking kills people.
Smoking has increased in the UK and revenue has decreased.
Yes. I think it is fair to generate revenue through taxation on cigarettes. People who smoke pay higher taxes which are used to finance the health system, and I see nothing wrong with this. If I disregarded the CPI context, I would have probably introduced a larger increase – perhaps 15p or 20p – six or seven years ago.
It just increases illegal smuggling.
If there is to be a disproportionate increase next year in the price of cigarettes for health reasons, will the Taoiseach consider reducing some other indirect taxes by an equivalent CPI amount – petrol would have been a good option this year – so that there is a neutral CPI effect?
That is something to keep in mind. We contemplated doing that this year, but decided not to. It could be done on an excise rather than a VAT basis, something which is open to the Minister for Finance in the budget.
