At the outset I would like to acknowledge the Deputy's consistent commitment in this area. The primary aim of his Bill is to establish on a permanent basis a High Pay and Wealth Commission within the existing structure of the Central Statistics Office. The main functions of this commission would be to research levels of pay and wealth in the State. Its research would promote a fair income distribution across the economy and inform public policy in determining rates and measures of taxation. It would carry out an equality audit of each budget, stand as a member of the European Household Finance and Consumption Network and would also have a specific remit to address the issue of high levels of executive pay.
There is one central reason the Government cannot support these proposals and I will deal with it shortly. Before that, however, it is timely to remind ourselves of both how the economy has been turned around, what the Government has done to protect the most vulnerable during the crisis and how it has brought forward measures to reduce inequality over that period.
The country has witnessed a paradigm shift in the economy over the past few months and significant changes are taking place at the level of both employment and unemployment. Unemployment has dropped by one third since 2012 and is now at its lowest level in six years. The ESRI is of the view that it will fall below 9% over the next 12 months. Almost 90,000 more people are at work since the launch of the first Action Plan for Jobs in 2012. This increase has been in full-time jobs rather thancasual or temporary jobs, with full-time jobs accounting for 86% of the jobs growth. A full 29,100 net new jobs were created last year alone, most of them full-time jobs. Tax revenue has increased by €925 million, primarily as a result of the improving economy, while the social protection bill has fallen by €240 million in line with falling unemployment levels. These figures illustrate the success of the Government's twin track approach of creating the conditions for job growth and helping people back to work.
The second element of Government's strategy is to reduce taxation on low and middle incomes. In this context, 410,000 low paid workers have been removed from the USC charge net over successive budgets. This policy of targeted tax reductions for workers will continue in the next budget. The third element of the Government's strategy is to introduce targeted welfare supports for people returning to work, particularly for the low-paid. From April, the Government will pay €30 a week to mothers or fathers returning to work from long-term unemployment for each child for the first year and €15 per week per child for the second year. As a package, the Government expects these measures to have a transformative effect on incentives to work and on the well-being of those at work, as well as having a significant positive impact on income distribution
Throughout the crisis, the Government has been committed to maintaining employment rights, protecting the most vulnerable workers and ensuring that in delivering a cohesive societal response, those who could carry the greatest burden did so and this process is continuing. The changes introduced in budget 2015 will be such that the top 1% of tax units by income will pay 20% of all income tax and USC collected in 2015, up from 19% last year. In contrast, the bottom 76% of income earners will pay only 21% of all income tax and USC collected.
Historically, the distribution of income, even in good times, has ebbed and flowed depending on capital utilisation and the share of labour in productivity growth. Globally, we are in that part of the cycle where the gap is widening. Here, by contrast, many commentators have noted that the impact of the policy responses to the crisis was such that income inequality actually fell during the crisis and remains below the levels of the peak of the boom, particularly following the redistributive effects of Government tax and welfare policy decisions, as has been acknowledged in a recent TASC report, which Deputy Broughan identified earlier. An ESRI paper of last July indicated that this reduction in income inequality was brought about through progressive changes to the tax system and the preservation and improvement of welfare floors. Specifically, while the rise in numbers unemployed in the period to 2012 moved a lot of people downwards in terms of income distribution, the maintenance of the welfare floor, in spite of the crisis, provided significant support. At the same time, the wealth and income of high earners fell dramatically over the period. For example, data from the Revenue Commissioners for the years 2007 and 2011, the latest year available, shows that the number of taxpayers with incomes over €100,000 fell by 15% between 2007 and 2011 and the total income of those earning over €100,000 fell by 23% over the four years. Research produced by the ESRI for the Equality Authority indicated that there were no materially different impacts of budgets 2009-2013 on a gender basis. This reflects the fact that the taxation and welfare systems do not discriminate based on gender.
The data illustrates that the burden of taxation increases required to protect those on low incomes or none was placed on the shoulders of those who could it bear it most, even though many had seen their own incomes hit by the effects of the crisis. This was the correct policy choice. It was different from that adopted elsewhere in the EU and globally where, in many instances, income inequality has increased significantly over the period. Making work pay, enhancing dignity at work and reducing inequality are cornerstones of this Government's agenda and are at the very heart of what I am seeking to do in government.
Regarding pay negotiations generally, I should mention that last month I established the Low Pay Commission on an interim basis to examine and make recommendations annually on the national minimum wage, with a view to ensuring that it is adjusted incrementally over time, having regard to changes in earnings, productivity, overall competitiveness and the likely impact any adjustment will have on employment and unemployment levels. I expect to put the commission on a statutory footing within the next couple of months and to receive its first recommendation by mid-July. Last month I also commissioned a study to fill the gaps in our knowledge of the prevalence of zero-hour and low-hour contracts and their impact on Irish employees.
I expect to have that report in the third quarter of this year.
The Government has also moved on a number of fronts in regard to wage setting mechanisms, more recently in approving legislation to provide for the return of registered employment agreements and their sectoral equivalents. This legislation will provide for the reintroduction of a mechanism for the registration of employment agreements governing terms and conditions in individual enterprises. I know Deputy Broughan will welcome that. This will enable workers and employers negotiate multi-annual pay rates and, for both sides, will bring budgetary and income certainty. The Bill will, separately, provide for a new statutory framework to replace the former sectoral REA system. Again, this will bring income certainty for the workers concerned. At the end of 2015, Cabinet approval was obtained to legislate for an improved framework for workers who seek to improve their terms and conditions where there are no arrangements to do this through collective bargaining. This legislation will mark the fulfilment of one of the most significant commitments in the programme for Government, which indicated that reform in this area was needed. I expect this legislation to be enacted this year.
Turning to Deputy Broughan's proposal, this is not a case where tweaking in committee could improve the measure. The single substantive proposal in the Bill is unacceptable because it would be wholly inappropriate to locate the body envisaged by the Deputy within the Central Statistics Office. As the Deputy must be aware, the CSO is committed to informing public debate through the provision of official statistics. The establishment of the proposed high pay commission as an office within the CSO would be entirely inconsistent with the mandate of the CSO as set out in the Statistics Act 1993. This Act charges the CSO with "the collection, compilation, extraction and dissemination for statistical purposes of information relating to economic, social and general activities and conditions in the State". That Act provides that the director general of the CSO shall have sole independent responsibility for the exercise of the functions of the CSO in deciding the statistical methodology and professional standards of the office, the content of statistical releases and publications, and the timing and methods of dissemination of statistics compiled by the office.
In addition, the first principal of the European statistics code of practice is that of professional independence. The code of practice makes a specific reference to statistical releases being clearly distinguished from political and policy statements. Official statistics, produced impartially and without bias, provide an essential underpinning for public debate. I am satisfied that the Bill would blur the lines between official statistics and policy and would as a result completely undermine the perception of independence of the CSO and its director general in the performance of their statutory mandate. The CSO's national employment survey already provides the best measure for assessing pay in the State. The 2011 data will be published in the near future, with data for the following years to be published shortly afterwards. One of the future objectives for the CSO is to publish the annual data within ten months of the close of year. This new method allows an annual publication of higher quality data with significantly reduced cost, and a considerable reduction in burden on respondents. However, there is all the difference in the world between publishing the data needed to inform debate, on the one hand, and taking part in or even leading that debate on the other. Quite simply, that is not a statistical function.
Both Deputy Broughan and I belong to a tradition that proclaims, "from each according to his ability, to each according to his needs". We believe in a progressive system of taxation and the use of the tax and welfare systems, and other public spending programmes, so as to re-distribute wealth. Both of us, and many others, will have noted the trends in income distribution and income differentials that developed during the boom. We are determined to ensure that the recovering economy will not be built on such unstable foundations and will demonstrate a more manifest commitment to fairness. However, in moving from the general disavowal of "down with this sort of thing" to a more specific proposal, Deputy Broughan has come up with a suggestion that falls short in many respects because it falls between so many different stools.
The Deputy points out in his explanatory memorandum that there was a high pay commission in the United Kingdom. This was an independent, non-governmental inquiry, organised by public-spirited private citizens, into high pay across the public and private sectors. Its report led to the establishment of the high pay centre, again an independent non-party think tank, focused on pay at the top of the income scale. While the high pay centre asserts that it is "resolutely independent and strictly non-partisan", it does believe that policy and market failure in relation to pay at the top of companies has resulted in socially and economically damaging outcomes. It is a reforming, campaigning body. Public representatives in this jurisdiction would no doubt welcome the setting up of more think tanks, focused on various aspects of public policy and with various competing proposals for reform. I would also welcome such a development. What we would not do is confuse the role of a campaigning think tank with that of an independent State agency, in particular an agency whose critical functions, domestically and in our dealings with the European Union, require a strictly arms' length relationship with Government and a complete removal from policy formation and party political interference.
Of course it is entirely legitimate that both policy makers and the public should have information about levels of wealth and income across society. We rightly expect that work to be done by the Central Statistics Office and by other agencies, including the Revenue Commissioners. Very few would argue that it is not legitimate to hope, as the Deputy puts it in his explanatory memorandum, that increased understanding and knowledge would "help to improve decision making and the development of fiscal and budgetary policy to ensure a fairer income distribution and address the ever growing levels of income inequality in our society".
As the Minister responsible for setting up the low pay commission, I reject any effort, and I accept that this effort is not being made here, to make any facile comparison with that body, an entirely different body with a different remit. It is public policy to establish a statutory floor for pay, as everyone in this House accepts. The function of that commission will be to examine and make recommendations annually on the statutory minimum wage and it will look at other matters relating to low pay over the next period of time. It will also be required to ensure that its recommendations are evidence-based. Final decisions will be made by responsible Ministers. The low pay commission will not be seated in, or interfere with the independent working of, any other agency of the State.
If Deputy Broughan wants an independent repository of statistical information, he should call for that. If he wants an independent, non-governmental policy think tank, he should call for that. If he wants Government policy initiatives on the issue, that is the stuff of political debate in this House and elsewhere and he should call for that as well. What we cannot have is a proposal that ends up being none of these things because it tries to be all of them at once. I hope Deputy Broughan understands this point, and the manner in which it is being advanced. The CSO's established professional independence and neutrality should not be used in a way that may confuse its functions. There is nothing independent or neutral about such concepts as "fair levels of remuneration", "appropriate structures for the reform of pay", or "best practice models of income distribution". Put bluntly, assessing fair pay is an art not a science. It is the type of thing we should be doing in this House. Statisticians are no more competent to debate these issues than are staff nurses, teachers or stenographers.
