That Seanad Éireann approves the Programme for Competitiveness and Work.
Vol. 139 No. 12
That Seanad Éireann approves the Programme for Competitiveness and Work.
This Government's main priority is the creation of more jobs. In this respect the Programme for Competitiveness and Work does not stand alone. We have also clearly expressed this aim in the Programme for a Partnership Government, in our approach to the National Development Plan and in the 1994 Budget. Indeed, the continuous process of change evident in so many aspects of today's society is embodied in the spirit of the new programme. I will begin by referring to the economic background against which the programme was negotiated and in this context reflect briefly on prospects for 1994.
The prospects for the Irish economy are improving significantly. I expect GDP growth of at least 4 per cent, a rate which, when compared with the forecast for the European Union as a whole of about 1.25 per cent, is a healthy prospect. Allowing for the tax and other changes which I announced in the budget, real personal disposable incomes are likely to increase by over 3 per cent. Assuming some reduction in the savings ratio, which is currently at a high level in response to lower interest rates and greater confidence, there should be a strong recovery in the volume of consumer spending. Investment activity should also pick up this year as interest rates remain low and as the building related increase of over £120 million in public capital spending which I outlined in this year's budget takes effect. This represents a very substantial boost to building activity and to jobs in this sector. It should lead to an increase in the volume of building investment this year of at least 5 per cent, with total investment activity expanding in volume terms by about 3.75 per cent.
With the outlook improving in some of our key trading partners, industrial exports should grow by over 7 per cent in volume this year. As in previous years, the increase in exports will exceed the growth in Ireland's export markets. Although import growth is expected to pick up and the deficit on invisibles may widen, the balance of payments surplus should remain in the region of 6.25 per cent of GNP. Despite recent successes in increasing the share of foreign markets, complacency must not creep in. We must continue to make further gains through improved competitiveness and through improving our marketing strategies. The Programme for Competitiveness and Work will greatly assist Ireland's competitiveness position. I will return to this later.
The Exchequer borrowing requirement and the general Government deficit in 1994 — at 2.7 per cent of GNP and GDP respectively — will again be very low by international standards. While our national debt to GNP ratio remains very high, it will resume the downward trend which was temporarily interrupted by the devaluation of the Irish púnt last year. Further progress in reducing the burden of the national debt has been recognised by the social partners as a key issue to inform fiscal policy on which implementation of the measures outlined in the programme depends. Continued pursuit of these fundamental goals should also help to keep interest rates low and to enhance confidence of domestic and foreign investors alike in the sensible manner in which we are continuing to manage the economy.
The recently published labour force survey for April 1993 confirmed what I had been saying last year: that the information available to me from tax and PRSI receipts indicated that the employment growth which I had predicted in last year's budget was holding up well. While employment actually declined in every other European Union country except Luxembourg, the labour force survey results show that in the year to April last employment here grew by 7,000. Taking account of the long run decline in the number engaged in agriculture, non-agricultural employment rose by about 16,000 or about 1.5 per cent. At the very least, it can be said that we are converting output growth into worthwhile progress on employment, which has been the ultimate objective of policy in recent years. This year we can expect to see non-agricultural employment growth of about 24,000 which, after allowing for some emigration, should permit a modest fall of 5,000 in average registered unemployment this year.
The proposed pay arrangements for the period of the programme are set out in the draft pay agreement which forms part of the document. In the lead up to the pay negotiations the Government made it clear that any new agreement would have to address two important issues: employment needs and fiscal discipline. The Government considered that the broad thrust had to concentrate on improving competitiveness through pay moderation and on aiming for a settlement at a level which would enable resources to be allocated to employment creation policies. I am happy that the draft pay agreement which has emerged satisfies these aims. I will now comment on the main features of the new agreement.
The pay agreement covers a period of three years and provides for general increases totalling 8 per cent over that period. However, due to the arrangements for phasing in of these increases, the overall cost will be 7.5 per cent over the three years. There is a provision for floor increases of £3.50 per week in both the second and third phases to protect the incomes of lower paid workers. Modifications to the proposed agreement have been agreed for the public service and the construction industry to take account of their particular circumstances.
The special arrangements in the public service are designed to ensure that — in cost terms — pay increases in the public service over the three year programme and the cost in the first year will be the same as those applying in the private sector. The public service agreement is for three and a half years with general increases totalling 8 per cent. The starting date in the public service is five months later than in the private sector, other than in the construction industry where there is also a five month pay pause. Floor increases of £2.80, £2.10 and £2.10 per week respectively are provided for in the second, third and fourth phases to meet the needs of lower paid workers.
The later starting date I referred to earlier, combined with the staggered starting dates proposed in the public service, are designed to provide the necessary space for dealing with outstanding claims or unfinished business under the local bargaining clause of the Programme for Economic and Social Progress. Negotiations on this unfinished business will entail agreement on flexibility, improvements in efficiency and effectiveness and other offsetting measures, and the outcome of any claims will be implemented in four phases over the lifetime of the agreement as it applies to the public service; that is, three and a half years.
There has been much loose talk about the special arrangements for the public service which I wish to dispel. I wish, in particular, to say a few words about the handling of "unfinished business" in the public sector lest there be any confusion about these arrangements. First, during the currency of the Programme for Economic and Social Progress pay agreement many private sector employments concluded settlements with their workers under the terms of the local bargaining clause, clause 3, which applied from the second year of the Programme for Economic and Social Progress for them. Secondly, public service workers were specifically debarred under the terms of the Programme for Economic and Social Progress from making claims under clause 3 until the third year of the Programme for Economic and Social Progress agreement; that is, starting from 1 January 1993. Thirdly, while practically all groups of public service workers did lodge claims last year, only a very small minority succeeded in having the processing of their claims concluded before the expiry of the Programme for Economic and Social Progress.
I am pleased that the terms of the agreement as it applies in the public service provide the necessary space to conclude negotiations on the outstanding claims within the cost parameters of the overall agreement in parallel with developments in the private sector. The arrangements for unfinished business will entail the processing of outstanding claims in one of two ways — option A or option B as they are known.
Under option A it will be open to the groups concerned to pursue their outstanding claims on what has come to be known as a restructuring basis: that is, a basis which involves meaningful negotiations on changes in overall structures or work practices or existing conditions. Under this option it is expected that these issues will be brought to a conclusion, including the timetable for implementation, by mutual agreement. The taking of industrial action is expressly ruled out. Any such agreement must have regard to the needs for flexibility and change and the contribution to be made by employees to such change and must result in savings and in improved quality of service. These are the criteria by which such negotiations will be judged.
Under option B, which is an alternative to option A, each group may pursue a single cost increasing claim for an amount not exceeding 3 per cent of the basic pay cost of the group concerned in accordance with normal industrial relations procedures, including adjudication. Negotiations in such cases must also take into account the need for efficiency, change and the contribution to be made by employees to such change. In such cases, the draft agreement provides that the outcomes must be implemented in four instalments on 1 April 1994, 1 June 1995, 1 June 1996 and 1 June 1997.
By any standard, an agreement which limits the outcomes of negotiations on outstanding claims for special improvements in pay or conditions of public servants to 3 per cent over three and a half years is a reflection of the genuine concern of the social partners for the special needs of the economy at this time, that is, the need to ensure that public servants play a real part in improving competitiveness, expressed in their case in the price or cost of the vital services they provide and in the efficiency and effectiveness of service provision. While option A — the restructuring approach — permits the conclusion of agreements which may marginally exceed the 3 per cent figure, I am confident that the results, to be measured in the form of improved quality of service to the public, efficiency and effectiveness, will be judged to be worthwhile.
I would also like to refer specifically to the special agreement reached on the amount of 1 per cent which has been agreed for payment on 1 April next. The agreement emphasises the full commitment of the Government and congress to approach the negotiations on our unfinished business on the basis that real changes involving savings and improvements in effectiveness and efficiency will be achieved. In that context, and in that context only, the draft agreement provides for a payment of 1 per cent from 1 April next to groups whose Programme for Economic and Social Progress claims have not yet been processed to finality.
As to how this will operate, the intention is that for each group of employees, their outstanding claims will be discussed and arrangements for processing them, on the basis of the options set out in the agreement, will be settled. When that has been done, an amount of 1 per cent of the basic pay of the group concerned from 1 April of this year will be available either for payment then, if the group concerned so desires, or for use in any subsequent negotiations. While the payment is available to every group pursuing an outstanding claim under the Programme for Economic and Social Progress, it must be offset against the outcome of the subsequent negotiations.
A significant feature of the draft pay agreement is that it debars the making or processing of any further claims during its currency both in the private and public sectors. This will provide a period of certainty for both private and public sector employees concerning pay trends over the next few years and will contribute to the improvement of our wage competitiveness which, as I have already mentioned, is central to employment growth.
In addition, there is an industrial peace clause which commits employers, trade unions and employees to promoting industrial harmony and continuing to resolve differences through the available industrial relations machinery, thus helping to achieve a high degree of stability in industrial relations during the period of the agreement.
As I have said before, increases in the Exchequer pay and pensions bill well in excess of the rate of inflation, which has become the norm in recent years, cannot be continued indefinitely. It has recently become necessary to critically appraise the whole system of public service pay determination and to devise a more appropriate system which better reflects the economic realities of life in Ireland in the 1990s and is seen to effect an improvement in the quality and cost effectiveness of our public services. In the new programme, the Government and congress have reiterated their commitment to having changes made in the public service pay determination machinery. Discussions will be concluded shortly with a view to having new arrangements in place at an early date, hopefully by the target date of 31 March this year.
The cost of pay increases in the public service over the period of the programme will increase the Exchequer pay and pensions bill by an estimated 2 per cent in 1994, 2.7 per cent in 1995 and 2.8 per cent in 1996. There will also be a carry over of costs into 1997, arising from the special phasing of the public service increases, but this will be accommodated by the extension of the term of the public services agreement by six months to 30 June 1997. It is a source of considerable satisfaction to the Government that the overall increases in the agreement in both the public and private sectors are generally in line with projected inflation over the period of the programme and are set at such a moderate rate.
Over the past six years of centralised pay bargaining based on the consensus approach, our competitiveness, as measured in terms of hourly manufacturing earnings in common currency, is estimated to have increased against our main trading partners as a group, with even stronger gains being achieved relative to the United Kingdom. The pay terms of the new agreement provide an opportunity to make further headway. The increases agreed between the parties to the new programme are in line with expected low inflation over its three year lifetime and can therefore be regarded as being moderate. Furthermore, the basic pay increases are lower than those expected among our main trading partners as a whole.
This does not mean we can relax our efforts. The rate of pay increase in our main trading partners has been slowing for some years now, reflecting among other things the impact of recession. The margin between gains or losses in competitiveness is narrow. For example, because the last phase of the Programme for Economic and Social Progress was not implemented by all employees on 1 January 1993 but instead, in accordance with local arrangements, was paid throughout that year, a carryover of this phase from 1993 will add to pay cost increases in 1994 in the public sector. Consequently, there may be little or no gains in competitiveness in 1994. The reductions in employers' PRSI for the low paid which I announced in last January's budget will, however, contribute to a positive employment outcome not only in 1994 but in the following years.
Competitive gains are expected in both 1995 and 1996 arising from the pay terms of the new programme. This prospect depends on strict adherence to these terms. Given the vulnerability of so many thousands of Irish jobs to price competition, particularly from the United Kingdom, we cannot afford to drift from the pay terms agreed by the parties to the programme.
The moderate pay terms proposed in the draft agreement provide the necessary certainty on wage costs to facilitate business planning over the next three years. This must give Irish industry a considerable edge in this regard over our international competitors. Furthermore, the good industrial relations resulting from the consensus first attained under the Programme for National Recovery, continued under the Programme for Economic and Social Progress and now proposed under the new programme will continue to provide a stable industrial relations climate favourable to employment growth over the next three years.
All of my colleagues on ECOFIN would dearly love to have such a climate. There are major strikes taking place in approximately two thirds of European countries. We did not want to talk about our industrial relations climate in the past. If we examine the figures over the last three years, we can feel proud of our position when compared to the major strikes taking place in Germany, France and the Netherlands. All the social partners should be credited for creating this climate.
Theo Vidal recently said that one can have figures that look good but if several million working days are lost through strikes — as we had for many decades — one is losing competitiveness and productivity. Some commentators dismiss this as a factor. Obviously one must allow for the fact that they were either not aware of our industrial relations climate in the past or are seeking to ignore it. Those who know what bad industrial relations can do would be wise to take into account the cost benefits accruing from such an agreement. To leave it out of the equation is similar to losing three days of a working week. It makes no sense at all. It amuses me to hear some people say this. I suppose they will explain themselves eventually, but maybe they will never have to.
The new programme spells out the aspirations of the Government and the social partners in relation to public services for the duration of the programme. These aspirations must be seen in the context of a need for significantly greater restraint on public expenditure than has existed for the past three years, particularly in relation to current expenditure. All the undertakings in the programme are subject to this requirement. The areas where the most significant developments are to take place are employment generation, an area-based response to the problem of social exclusion, in agriculture and education.
With regard to what has been said about the National Development Plan, I would like to explain again the present position. Discussions are currently underway with the European Commission on the National Development Plan covering the period from now until the end of 1999 with a view to agreeing the Community support framework which will set out the broad national and sectoral strategies for the use of EU Structural Funds.
The system works as follows. The national authorities decide the development strategy and, on the basis of this, put forward their proposals for expenditure in the structural area, including the use of Structural Funds and domestic resources in the development plan. This plan is then discussed with the European Commission and on foot of those discussions the Community support framework is agreed. The Community support framework will set out inter alia the development objectives, the priorities adopted for Community assistance and the indicative financing plan. Following the adoption of the CSF the operational programmes are approved and these set out in more detail the objectives and measures for each of the main sectors. The programmes are the logical and the legal basis for the commitment of EU aid.
In addition to expenditure proposals which will be aided under the Community support framework, our plan includes investments to be aided by the Cohesion Fund, to be aided under the Structural Funds Community initiatives programmes and the EFTA Cohesion Fund for the period. These are governed by different administrative procedures from the CSF and are not part of the current negotiations. The plan also includes eligible national structural expenditure not proposed for European aid and 1993 expenditure, including 1993 expenditure of European aid.
I wish to reiterate that the Government is confident that it will prove possible to draw down the full EU aid projected in the national plan over the six year period up to 1999. Our overriding economic and social objective is to resolve our critical unemployment situation. This has been confirmed in the most positive way possible in the new programme. Ensuring that taxation policy is pro employment is, therefore, essential. This means continuing the process of tax reform now underway for a number of years, aimed in particular at increasing the rewards and incentives for working and reducing the costs of employing workers.
This year's budget, which complements the new programme, made significant steps in implementing our taxation strategy. It was specifically aimed at lightening the tax burden on earned income. As well as abolishing the temporary 1 per cent income levy, the budget provided for substantial increases in the basic personal allowances and in the standard rate tax bands. These measures will afford relief to all income taxpayers, including those on relatively low incomes.
Moreover, additional measures targeted directly at assisting the low paid were also introduced. Tax reform inevitably involves choices and trade-offs and we must recognise that it is not simply a matter of reliefs. In the income tax and PRSI codes focusing reliefs and reductions on the lower paid inevitably involves some clawback elsewhere in the tax code. It was necessary, for example, to look to the areas of excise and the RPT for some of the funds and we feel quite justified in doing so. Without these trade-offs the real benefits of restructuring our tax and PRSI systems could not be realised.
The central review committee, which has operated successfully during the lifetime of the Programme for Economic and Social Progress, will continue to monitor the achievements of the targets and objectives of this new programme. In order to effectively carry out this role the committee will oversee the development of effective regular measures to monitor the numbers at work and to undertake such analysis and review of domestic and international issues as it considers appropriate in order to identify further action in support of work.
The new programme has a specific focus — tackling the unemployment crisis, a concern which is shared by the whole community. The measures outlined in the new programme coupled with the complementary policies in the National Development Plan, the Programme for a Partnership Government and this year's budget, demonstrate the Government's total commitment to resolving this problem. We must ensure that the policies in the programme designed to maintain and improve competitiveness and to increase growth are translated into real jobs. That must be the main aim we must try to achieve.
In 1987 we set ourselves the task of working on the ICTU report from the autumn of 1986 dealing with the jobs crisis. That was the forerunner to the Government setting out in March 1987 to negotiate the Programme for National Recovery, which proved to change radically the country's finances. The position then was that we had an Exchequer borrowing requirement of 13 per cent of GNP and we had so many difficulties in the economy they seemed insurmountable. With this programme we are now looking at an EBR of 2.5 per cent, 2.5 per cent inflation, pay increases at 2.5 per cent and a growth rate of 4 per cent——
Unemployment going up.
——as against the European Union growth rate of 1.25 per cent. If this is not the recipe for generating real, sustainable jobs in the future then I am not too sure what is. It must give us rewards. From their different perspectives the social partners have undertaken a radical and brave initiative in this programme. I am sure it will be even more successful than its two forerunners. I commend it to the House.
I welcome the Minister to the House. I am conscious that I will have only a couple of minutes at this stage.
The Senator will have three minutes now and 17 minutes after the sos.
I look at this document with interest. This is the Programme for Competitiveness and Work and the last few pages of the document contain the annexes dealing with agreements on pay and conditions, public service pay and co-operation at the level of enterprise. The Minister has informed us of and reiterated the Government's position regarding the programme, but I have no doubt that in real terms this programme is about pay.
If the Programme for Competitiveness and Work is to reach the same pinnacles as its much vaunted predecessor the Programme for Economic and Social Progress, then we really are in trouble. Let us look at the Programme for Economic and Social Progress and what was achieved. The Minister spent a little time telling us about it before he finished his address. There are 95,000 more people out of work, a 40 per cent increase, and the Minister hails it as one of the best things that ever happened the State. There were 40,000 more young people forced to leave our shores because our Government failed in its duty to provide them with a job and with hope to stay here. More and more tax is being taken from the pay of those dwindling numbers fortunate enough to have jobs and to be able to afford to stay in Ireland. We should remember that with this year's budget the Minister will collect £667 million from the people. In the last month, although nobody realises it yet, petrol prices have increased by 9p per gallon.
I welcome the Minister of State, Deputy O'Shea, to the House. I am disappointed the Minister for Finance is not here to hear the views of the main Opposition party in the Seanad and the main speakers in the debate.
The Programme for Competitiveness and Work follows the Programme for Economic and Social Progress. The Programme for Economic and Social Progress left 95,000 more people out of work, which represents a 40 per cent increase, and 40,000 more young people were forced to leave our shores because our Government failed in its duty to provide them with work. More taxes are taken from the pay packets of those dwindling numbers fortunate enough to have jobs and to be able to afford to stay in Ireland. That is the sad record the Programme for Economic and Social Progress leaves behind and I am not sorry it has gone. Unfortunately, the Programme for Competitiveness and Work is set to take its place.
In common with its predecessor it was agreed in negotiations between those who are economically and politically powerful in the State. It has been brought into existence at the expense of consumers, the owners of small businesses, those in vulnerable private sector employment, school leavers and other first time job seekers. It also enshrines an economic doctrine which is fundamentally flawed. According to the wise men who drew it up, it dictates that there should be equality of treatment between the private and public sectors. That means that those employed in secure jobs in the public service should receive the same and sometimes more pay as those exposed to the fierce winds of joblessness, redundancies and company closures. This is most inequitable as it gives more to those with no job fears while taking that money from the taxes of those who everyday face the desperate prospect of the dole queue.
There might be some argument for this if it was lower paid civil servants who were benefiting, although they do have job security. Under the Programme for Economic and Social Progress secretaries of Government Departments received an increase of 101 per cent, while clerical assistants and similar grades received only 36 per cent from a lower salary base. That is injustice on top of inequity.
Lest I be misunderstood, every employee, whether public or private, should receive a just salary for his or her efforts. When times are good they should receive the biggest pay increases possible. However, times are not good. Unemployment is hovering near the 300,000 mark and the Government has no feasible policy to reduce it. The western bishops can testify to that, as they have asked the Government to formulate such a policy.
On top of these problems, the Government has only two words in its policy vocabulary; "spend" and "tax". The proof is in this year's budget in which a further £667 million in tax is to be collected from the Irish people. Does the Government not realise people are sick, sore and tired of too much tax? Does it not know that this burden of taxation stifles all initiative and enterprise?
This new programme will add to that burden. Employers in industry will be forced to pay increases they cannot afford. That will cause more companies to go to the wall, which means more unemployment benefit for the former employees and more taxes to pay for that. There is also the bill for public sector increases.
The grandly named Programme for Competitiveness and Work will live up to its title in some respects at least. It will create competitiveness among the hundreds of thousands of people who will have to queue for job interviews. They will have to compete with their friends and peers in an unseemly scramble to find work. It will also create competitiveness among those unfortunates who will have to join the dole queues to get unemployment assistance. It will create work for social welfare and tax officials, who will be busier than ever coping with the toll of human misery it will create and collecting the extra taxes to pay for its justification.
This is another sad reflection on a Government which promised the earth at the polls and has delivered nothing in performance. This programme is built on the £8 billion provided for in the national plan. During the negotiations with the EU on the plan at a summit meeting in December 1992, the Taoiseach said the financial package for the plan had been agreed. Shortly after Mr. Delors from the EU Commission totally denied this declaration.
Since then the following statements have been made. They should be noted because the plan will play a major part in the payments under the PCW. In December of 1992 the Taoiseach informed us that £8 billion over seven years had been secured. In May and June of 1993 the Taoiseach and the Tánaiste promised to use the veto if Ireland did not receive that sum. On 20 July 1993 the Tánaiste announced agreement for £7.84 billion over seven years. We were never informed that the figure for 1993 of £1.1 billion, which had been negotiated by the former Taoiseach as part of the previous plan, was included in the figure of £7.84 billion.
On 1 October last the EU Commission announced the allocation of £7.2 billion over the period. That also included the £1.1 billion, so the figure was really £6.1 billion. In October, November and December of 1993, the Taoiseach, Tánaiste and Government continually claimed the draw down from Structural Funds would be £8 billion because of the quality of the programme. On 23 November in this House the Minister of State, Deputy Fitzgerald, denied the need to adjust the plan to take account of the £7.2 billion figure.
When we mentioned this matter yesterday I indicated that passing references to Structural Funds would be allowed. You are making a full speech on the funds, Senator Farrelly. I ask you to keep to the motion.
The Programme for Competitiveness and Work is totally concerned with the plan and how people will be paid from the funds invested.
I indicated passing references were permissible but I hope the Senator's whole speech will not dwell on it because he would be out of order.
On 18 February the Minister for Enterprise and Employment, Deputy Quinn, abused a senior official and the Minister for Finance, Deputy Ahern, denied there was any problem with the plan. The Taoiseach said in the Dáil that no new plan was required. On 1 March the Tánaiste admitted on "Morning Ireland" that the plan would have to be adjusted, with some programmes being dropped. Those are the facts which relate to the overall thrust of the agreement with the social partners.
The manner in which the proposal was dealt with causes concern. The situation is serious and reports from our MEPs indicate they fear it has done serious damage to Ireland's relationship with Brussels. It is right and proper, considering what was said over the period of months, that the Taoiseach should apologise to the President of the EU Commission about the way this affair was handled. It has done nothing for our reputation in Europe, which was excellent and built up over the past 20 years.
The Minister mentioned the budget and its importance, given the way matters have developed since 1987. He said that the GNP borrowing requirement at the time was 13.3 per cent. I was in the Lower House for the four years previous to that — I am delighted that Senator O'Kennedy has arrived because he was there too as Opposition spokesperson on Finance — and the then Government could do nothing right as far as the Opposition was concerned. However, the fact is that when we took office interest rates and inflation were at 22 per cent. By the time that Government left office, even though the GNP requirement was 13.3 per cent, interest rates and inflation had to be brought under control before any decisions or spending in real terms could be reversed. I recall the Opposition saying that if inflation was reduced, it would do nothing for the overall progress of the country. However, until such time as inflation was substantially reduced——
Who said that?
The Opposition said it at the time and I remember the former Taoiseach saying it also.
Show me the extract.
There was no credit given for the work that was done. The party of the Minister of State, Deputy O'Shea, was with us in trying to carry out that task. This is what made it possible to do the things that were done at the time, and it was supported by the main Opposition party even though it was unpopular.
The Minister also referred to the decision in this year's budget, which has much to do with this programme, to abolish the 1 per cent income levy. It should never have been introduced in the first place. It was a further tax on work, which amounted in real terms to 2 per cent. The disastrous probate tax was also introduced last year. In 1973 the Government abolished death duties. I attended a meeting last night and I had five questions about probate tax from people who were concerned for others who are elderly. The fear in relation to these policies is that they are introduced one year and changes then have to be made in the following budget because they were a huge mistake. The Minister hailed the great changes that were made, but the measures should not have been introduced or supported by the Labour Party in the first place.
The Minister told the House that the actual unemployment figures will drop insignificantly this year and over the next number of years. Given the changes that must be made to the National Development Plan — a plan which the powers that be did not even consider worth its while to show to the Members of Parliament before it was sent to Europe, for the obvious reason that the money was not there at all — we must be told soon of the schemes the Tánaiste talked about on 1 March on "Morning Ireland" that will have to be dropped and the effect this will have on employment and the work that will not be done as a result. We should be informed of this constituency by constituency or county by county. We want to know whether programmes which have been announced will go ahead over the period of the plan. Nobody wants major increases in taxation to make up for the inaccuracy of the proposed plan that was sent to Brussels. The Taoiseach, the Minister of State, Deputy E. Fitzgerald, the Minister, Deputy Quinn, the Tánaiste and the Minister for Finance have all said that the plan will go ahead as proposed and that the shortfall will be made up from the national reserve. Taxpayers are essentially the national reserve; if that is to be the case, the people should be informed now of what it will cost to implement the plan in full, although I do not think it can be implemented in full.
In relation to the figures in the plan, the Taoiseach said that if we aimed low, we would have ended up low. Given that approach, he must have spent Saturday nights watching Mike Murphy's programme, where people "shoot for the stars", before the plan went to Brussels. It seems as if he continued shooting for the stars despite the negotiations, at which a different figure was agreed. The figure is substantial and nobody is complaining about it. However, people are complaining about the hype over the £2 billion extra that we will not receive. The people of Ireland are not entitled to be misled in that way. There is no reason why after the negotiations, where we got £6.2 billion to be spent over a seven year period, we could not have made the best of it, produced a plan and put it to work.
The Minister has hailed this programme as one of the best things that has ever happened. The various annexes, which deal with pay, sum it up. This is what this programme is about. The National Development Plan was the cornerstone of the programme and it has fallen apart. The Minister again said today that we will draw down all the funds. If that is the amount of funds required for the implementation of the plan, the Minister and the Government should state what amount of money will have to be collected from taxpayers to fulfil the Cabinet's dreams in this regard.
I welcome the opportunity to vigorously support this motion. Work and competitiveness are inextricably interlinked. Until we achieved a competitive environment vis-a-vis our main trading partners in Europe, the prospects of maintaining existing employment, much less of increasing it — although that is now happening — would not have been realisable. It is important to recognise that we learn from our experience and mistakes and that we apply the lessons vigorously and effectively in the interests of the overall economy. This in effect is in the interests of workers and, more importantly, of those awaiting employment. There were lessons to be learned. I acknowledge that I was among those who were happy to see those lessons learned and applied when we came back into Government in 1987.
At present, growth in GDP is 4 per cent, a level for which we had to continually aim. The European average is 1.25 per cent. It is well above the highest in the EU, which comprises our main trading partners and competitors. The Exchequer borrowing requirement of 2.7 per cent of GNP is well below the level in Europe. The inflation rate projection for this year is 2.5 per cent, slightly above the level for the last two years but well below the average in the EU; the same applies to interest rates.
This achievement did not happen by magic or overnight. The decisions which we took when we returned to Government in 1987 laid the foundation for the competitiveness which is now an essential element of the programme which I support.
It is important that we learn from our mistakes, and in this respect I regret that the Government, when I was Minister for Finance in 1980-81, was unable to adhere to the parameters that were set in the budget, especially in terms of public sector pay and special pay increases. In this context I refer to the special pay increases that were subsequently demanded, and regrettably conceded, to teachers, gardaí, nurses and prison officers. The consequence was a spiralling increase in public sector pay. Those of us who returned to Government in 1987, and who had experienced the consequences of that concession, determined to ensure that from there on, irrespective of criticism from the Opposition, strong, effective decisions on all fronts would be taken, despite constant criticism in the Dáil.
These decisions laid the basis for the sound economic condition in which this country now finds itself vis-a-vis its trading partners——
The Government had support from the Fine Gael Party.
I acknowledge that support as far as it went, and it was significant. Perhaps we were all learning at the time. However, such support was not universal in the House and it was not consistent over that period.
We must learn from our mistakes, and I hope our partners in Government today, the Labour Party, will learn from their mistakes and their traditional pattern of considering good Government as one which spends, and opposing any restriction or control on public expenditure as being a measure of an unconcerned and uncaring Government.
The evidence suggests that both partners in Government are adhering to those strict, fiscal parameters which will lay the basis of competitiveness. Any concession to this discipline will come back to haunt not only the Exchequer but those in employment, those seeking employment and especially our young people.
The greatest social democrat in Europe in recent times, Helmut Schmidt, former Chancellor of the German Federal Republic, whom I was privileged to know over a long number of years during my period on the General Council of Ministers and at the European Council, always claimed that the only guarantee workers and trade unions had was that of discipline. Herr Schmidt believed, and I recall him saying this to the former Taoiseach, Jack Lynch and myself on many occasions, that the important thing was that we would enter into binding commitments with the trade unions. I am pleased to say that since 1987 these commitments have been an essential element of the success of the programme.
The resulting discipline sought to ensure that there would be no more constant jumping, linkages, relativities and special claims. In this respect I pay tribute to the Irish Congress of Trade Unions, especially to the role played by congress when the former Taoiseach, Charles Haughey, the Taoiseach, who was then Minister for Finance in succession to Mr. MacSharry and the other Ministers responsible for the economy met congress and advised that we had to face realities together. We advised that if we conceded on all the fronts where there were claims waiting to be paid, especially in the public service, we would all sink together. I am happy to acknowledge that ICTU, under an enlightened leadership made a positive and disciplined response. The Programme for National Recovery and the Programme for Economic and Social Progress are evidence of that response.
This is the programme that is being pursued at present. I have some reservations as to whether our colleagues in Government would be capable of, much less enthusiastic for that kind of discipline, but I welcome the fact that the evidence now demonstrates that for them, as for all of us, there has been a belated recognition that security and competitiveness can only be achieved through the kind of control and discipline to which I have referred because external investment will not be attracted to a country where there is rampant inflation and spiralling interest rates.
It is too easy for Deputies in their constituencies to complain that there is no investment when the reality is that the only basis on which investment will materialise is if foreign investors can see, not only in this year but in the years ahead, a secure base for the money they may invest in this economy. If this is true for the external sector, it is even more so for the indigenous sector which must compete with conditions elsewhere. The food industry, with which the Minister is involved, is competing with others on a wage cost criterion. If our wage levels or demands are higher than the French, the Germans, the Dutch or the Belgians — much less higher than the hugely developing economic region comprising of the Asian countries of the Far East — then our competitiveness as an open economy is undermined immediately.
Regarding the capacity of our young people and investment in education, I am, and always have been, a vigorous supporter of investment in education. The added value of knowledge and the application of that knowledge through research, processing and so on, are essential. I am not so vigorous in my support for the plethora of training schemes and administration because I cannot see the benefits in the same terms as investment in education. If adjustments have to be made in the National Development Plan, I hope that there will be no compromise on the fundamental priority in the education sector. That sector is the guarantee of the future and will equip our young people to compete with and beat the best of them, as they have proved they are capable of doing.
I welcome the indications that small industry is being targeted as a priority because the experience in Japan, the USA and Germany has shown that this sector was the engine of growth in the economy. This sector is the tight, cohesive and firmly rooted element in any community, especially ours. It is part of the community, is committed and determined to ensure that its ventures are successful.
We are living in a world of mobile international investment and there is no sentiment in that world. Multinationals will move to a more profitable climate if wage, interest and inflation rates are lower than here. No sentiment or political appeal will influence them. Our only guarantee is to maintain the level on which this programme is firmly based.
Since indigenous industry has nowhere to go it is essential that we support it in relation to income tax levels because it cannot avail of the tax breaks which multinationals enjoy. I welcome the steady reduction in income tax levels since 1987. I will not make a virtue of this because nobody should proclaim themselves virtuous and attribute blame to the other side. However, the controls we put in place in 1987 enabled us to reduce the top level of income tax from penal heights. I am happy that strategy is being pursued and that the low income sector is being targeted.
I could not make a contribution to this debate without referring to the agricultural sector. No sector of the community suffers more from high inflation and interest rates than the agricultural sector; equally, no sector benefits more from low inflation and interest rates. Representatives of farming organisations criticised me as Minister for Agriculture — Senator Farrelly will remember this — when I volunteered to reduce the level of expenditure on ACOT and An Foras Talúntais — the two bodies were combined into what is now Teagasc. I owed it to my colleagues in Government to be consistent with my views. I was disappointed when criticised by the organisations which demanded that we set an example by controlling public expenditure. It is like a parody on St. Augustine, make us pure but not yet, or make the rest pure but not us, or do as we say but not to us. In the Dáil I was constantly criticised about ACOT and charging farmers for services which had previously been free. I said in the Dáil that a service worth getting is a service worth paying for, particularly by larger farmers. Teagasc is allocated approximately £12 million less of taxpayers' money than if I had not taken that difficult decision. I was a member of a Government which took difficult decisions.
The banking sector must look at its role in this economy. It is not a privileged establishment which descended from above, people in pinstripe suits whose motives will never and should never be questioned. Profit is an essential component in the private sector but many things are done in the name of banking, nationally and internationally. The Swiss banking system — I mentioned this more than once — encourages, through the safe haven concept, tyrants and pirates to put money made off the backs of suffering people. No banking system has a right to secure itself in profit.
The success of the German and Japanese economies was based on a partnership concept with the financial services. They did not see themselves as being there to draw profit on a good day or to make money from farmers when things were going well and to call them in when things were tight. They saw themselves as part of a joint venture. They trained and equipped people as entrepreneurs and they took the risk and shared the profit with the customer, but they were also prepared to share losses with the company.
No sector of the economy has a God given right to say their business must be in profit at all times. I accept this sector must make a profit to maintain confidence, but there is no rule in the economic management of financial services or economies which sets the banking sector apart from others by saying it must be guaranteed profit.
As we move towards this programme of competitiveness with Europe and the world, the banking sector must take a new approach to programmes the Government launch. It must get involved, share and recruit expertise. The days of doing an administrative job are gone because one can now use a card outside a bank. We need experts in the banking sector and in other sectors who will become involved, advise and share in the success or failure of a business.
This programme is well timed. As the Minister, the Taoiseach and members of Government said, it is part of the overall comprehensive strategy which is the basis for the Programme for a Partnership Government, the budget, the Programme for Economic and Social Progress and the Programme for National Recovery. This is an essential component and is in line with the publication of the report of the task force on small business which the Minister for Enterprise and Employment, Deputy Quinn, launched yesterday. These are parts of a composite whole.
The best laid plans, which are important, informed and researched in enterprise, will inevitably fall apart unless overall discipline, which is not easy to maintain — there are always demands for special interests — is adhered to. In the confidence it will be adhered to, I am happy to support this motion. We can look forward to the competitiveness vis-a-vis our European partners which we are effectively demonstrating each day and to employment opportunities, which is the key if not the exclusive priority for all our people.
I would like to share six minutes of my time with Senator Quinn.
Is that agreed? Agreed.
I support the motion. Despite comments from this side of the House, the Programme for Competitiveness and Work represents consensus, discussion and negotiation in the most democratic form and process of consultation I know. The Government negotiated and consulted with representatives of the social partners, on both sides of the labour spectrum and those representing the public service, the private sector, workers, employees and employers. All aspects of Irish life were represented. It was perhaps the most wide ranging form of negotiation and consultation in which I have been involved.
I support this programme even though I do not come from a principled position of being for or against national agreements. Times dictate different things at different times. It is important to put on record what has happened since the Programme for National Recovery in 1987, followed by the Programme for Economic and Social Progress in 1990. In 1987 we had a debt GNP ratio of 137 per cent. This was the worst in the EC. We had an Exchequer borrowing requirement of almost 13 per cent. This was an impossible set of macroeconomic indicators to deal with. At that stage we had the highest interest rates in Europe. Our growth was negligible after previously having had high growth. Inflation was high.
After six years of a disciplined approach to the economy from all the social partners, which was a consensual approach by people prepared to make a patriotic commitment to and invest their labour in the State, the debt GNP ratio is now well below 100 per cent. The Maastricht Treaty requires us to achieve a ratio of 60 per cent by the late 1990s and we are well on the way to reaching this. Our Exchequer borrowing requirement is about 3 per cent and is one of the lowest in Europe. It is far lower than that of the UK. Interest rates are as low as they are in Europe. More importantly, inflation last year was 2.5 per cent. It is forecast to be at a similar rate for the next two years. This would exceed our most optimistic objectives of some years ago.
Most important of all, last year Ireland had a growth rate of 4 per cent; average growth in the EU was 2 per cent. These factors are significant. Over the last four years our exports have grown each year despite all sorts of adverse circumstances. They even grew during the period of punting against European currencies in late 1992 prior to devaluation. The prophets of doom were saying our level of exports would fall, but with a currency 10 per cent higher than we had after devaluation we still managed to increase our exports.
It is important that this is said from this side of the House. That is not to say that everything is fine. We have the great problem of 295,000 people unemployed. For the last two or three years we have asked how these factors will impact on the unemployment rate. We have been looking over the last three or four years at the daunting prospect of unemployment exceeding 300,000 before the end of the century. This can be easily forecast by adding to the unemployment figures the difference between the 25,000 people entering the labour force each year and the number of jobs being created each year, which is about 10,000 or 12,000.
In the background to the budget document and in his speech today the Minister referred to the projection of the Department of Finance that this year the unemployment figures will be reduced by 5,000 or 6,000. If I were the Minister for Finance I would be ashamed to say this publicly because I would be setting myself up to be knocked down. However, I am not the Minister and I am looking at the situation from the point of view of someone who has been concerned about and involved with job creation schemes over the last three or four years. I recognise when a corner has been turned and I believe that this is now the case. I may be an optimist but the fact that we are hoping, even in a time of low or zero emigration, to reduce the number of unemployed this year is important. With the single exception of Luxembourg, Ireland was the only country to have a substantial gain in the numbers at work during the last calendar year.
It is also significant that a survey conducted by the Small Firms Association some weeks ago found that people working in small businesses were very optimistic and a substantial number expected to take on one or two extra employees during the next 18 months. A problem associated with our growth in exports has been that most of it was in low employment intensive industry which was not indigenous and the profits of which were being repatriated or were not being reinvested in this country in the way we would have wished. It is important that much of the growth is now taking place in middle tech and indigenous industry. I welcome provisions in the budget which have been implemented to ensure that movement between being unemployed and employed becomes bureaucratically easier and is facilitated in income tax terms. These are some of the issues which have brought a focus on the needs, demands and objectives of all the social partners.
What is certain about a document like this, which represents a consensual position, is that no one is happy. It represents wins and losses, depending on whether one thinks the bottle is half full or half empty. Each of the partners involved in negotiating it can sell it as either being a loss, in the sense that it does not contain all of what they wanted, or a gain because it contains half of what they wanted and is, therefore, a move forward. It is a matter of political expediency for others to decide whether or not they are for it. From where I stand, representing workers on the ground, I think it is a reasonable attempt to move forward.
Nobody is ever happy with programmes like this. From 1987 to 1990 trade unions felt they had been sold a pup, they had given too much and the pay awards were far too low in the context of the huge economic growth in that period. The facts proved them right. Conversely, between 1990 and 1993 the employer bodies, IBEC in particular, sang the same song about their position. They felt that increases in wages and costs in this period outstripped growth and that they lost out. We are all certain that it is better to have discipline in the economy and a concerted and consensual approach to growth and development than to have everybody trouble shooting on their own. These programmes have contributed enormously to and have raised awareness of the importance of industrial relations.
Senator O'Kennedy made a point about training and I agree completely with him. I have sympathy with the "mere civil servant" in Brussels who questioned the amount of money we were putting into training. We cannot train people who are not ready to obtain benefits from training. If, for example, somebody cannot read or write, it is no use putting them into a major course. I have always taken the view that we, and I, have failed to convince the powers that be of the close connection between investment in education and the creation of employment at a later stage. If people do not develop in the education system they will not gain from training or employment opportunities and they will not be innovative enough to move forward.
One of the great benefits of the salary agreement in this document is that it recognises it is imperative that change takes place and that flexibility be achieved before pay increases are awarded. As a trade union general secretary, I applaud that move forward. Without flexibility, movement or openness to change we are going nowhere as a country. I am particularly happy that within the public service the 3 per cent will be paid only on the basis of flexibility being offered by people such as those who pay my salary, which is to be welcomed.
One of the important aspects of this programme for workers on the ground is the elimination of the 1 per cent employment levy, for which there is a broad general welcome. It was anti job, regressive and should never have been introduced. Similarly, I want to mention some of the improvements proposed for the education area. We have recognised the various changes which have taken place in the macro economic indicators.
I regret that I failed to get into the programme, despite trying time and time again, the question of access to third level education, which is something on which we are all agreed. At present people can covenant a certain amount of money toward third level fees. However, because it is 5 per cent of salary it is a regressive tax in the sense that the higher one's income the more one can gain from it, which is not attractive to Government, trade unionists or people who are seeking equity in the taxation system.
If this country cannot afford to give free third level education access, what could at least be done — and I ask the Minister to raise this with his Cabinet colleagues and my colleagues on the opposite benches — is to move towards it by allowing for tax purposes vouched receipts for third level fees and costs. That takes us half way there in that those who can afford to pay third level costs could at least set it against tax. It is fairer in many ways than the raising of the threshold because it means that only those people who are paying taxes can gain from it and it is very attractive from that point of view. Access to third level is critically important.
Having got the macro economic indicators correct and having seen growth in exports, employment and so on, I will be looking forward to improvements in the future in the educational area. The primary sector has now brought forward proposals to reduce class size, increase the numbers of remedial teachers, give more access for people in disadvantaged areas, in particular investment in special education, and the possibility of eliminating substandard school buildings, which is very attractive. I do not have time to go into the details of that now but I will at another time.
The movement of taxation is in the right direction. However, the residential property tax is a disaster, not because of what it seeks to do but because it is directed at and focused on the same people who have been paying tax all the time. The reaction to it is not to the amount of money but that people feel they are being steamrolled once again.
Finally, I make no apologies for saying that during the course of these negotiations, as the only Member of the Oireachtas present, I insisted at all times that the awards of the Gleeson report should be implemented. It has been indicated to me that will be done. I feel that elected public representatives are entitled to this, like every other worker. If they are afraid to shout for themselves, I do not mind doing it for them.
As we know, Senator O'Toole.
We have a good shop steward.
It is hard to follow that. The document before us is so long and has so much meat in it that I had difficulty in trying to decide what to focus on. I will focus on one aspect of this broad subject, which is what I see as the missing link in the document between performance and reward. My hopes were raised when I read the title: Programme for Competitiveness and Work. It is clearly saying that competitiveness comes first and work second, which is the crucial point. Similarly, I was interested to see that last year's new Department of Enterprise and Employment put enterprise first and employment second. Work depends on competitiveness and employment depends on enterprise. That is the missing link which concerns me here. The central reality in the business world is that we must recognise that employment depends on competitiveness.
I agree with a great deal of what Senator O'Toole said, but I do not agree that that link has been established. He described all of those marvellous measurements which show how well Ireland is doing, except for one. I suggest that there is a link, that as long as we continue to pay ourselves above the odds and over the rate of inflation we damage and weaken the chance of creating work.
Today's business is about competition. Companies which do not compete successfully go out of business, and nowadays they go to the wall more and more quickly. The world owes no company a living and no company is able to offer or maintain jobs unless it stays in business. To be honest, the promise of the programme's title is not carried through fully in its content. It is almost as if the title was put in as an afterthought rather than being the natural outcome of the programme itself and the discussions to which Senator O'Toole referred. I do not find the programme to be infused with the philosophy which the title suggests.
The pay element of the programme is not driven by the reality of the connection between competitiveness and work but by that abstract across the board approach which characterised the two previous agreements and a whole generation of national pay agreements before that. The pay element is not related to the market place in which each individual company must fight for survival. The result is that all companies, whatever their circumstances, are expected to pay out at the same level of increase whether they are making that extra profit. In other words, their inability to fund it is not taken into account.
I have been arguing for some time that we should drop that across the board approach in favour of one which relates the amount of extra reward which people get to the performance of the company for which they work. Such an approach would be good for employees, companies and the economy as a whole. We did something similar in our company last year where we offered the employees the opportunity to participate in a profit sharing programme in return for foregoing part of the last phase of the Programme for Economic and Social Progress. It worked very well because everybody who put in the extra effort knew that they would show a reward for their hard work at the end. It worked successfully and enthusiastically and is the sort of approach which needs to be taken if we are going to succeed. It meant that our company paid far beyond the level which we otherwise would have had to pay, but we did so because we earned the extra profit. We are fairly certain that much of that extra profit would not have been made if we had not had that arrangement. People worked together much more effectively because they knew that they were going to share in the fruits of the efforts.
This approach is important because it recognises the fact that people who work in a company can have a direct effect on the amount of success which the company enjoys. A company's success always depends on its own people. However, beyond that general truth there is an extra measure of success which can be achieved, depending on how personally motivated each individual is.
An element of this approach should have been included in the Programme for Competitiveness and Work. The lack of it is the missing link in the programme. The principle involved is that instead of paying in advance for what we have not yet delivered, we should concentrate on paying out what we achieved — but only after we achieve it. That would harness a tremendous amount of motivation around the task of helping the company one works for to do better. It would produce bigger dividends for people working in companies which do well and encourage them to ensure that companies do well. Companies who did not make the extra profit needed to fund the increases would not be lumbered with the extra cost, and this is critical for employment. It is when costs run beyond profit that companies stop being competitive and are soon on the road to ceasing to exist altogether. The blanket approach to pay increases we have favoured in recent years does not increase companies' competitiveness but actually undermines it. Whenever competitiveness is undermined, jobs are threatened.
I met a businessman while in the United States last month. He said that Ireland was a wonderful country in which to holiday but as a board member of a number of companies he made a point of advising them not to invest in employment in Ireland. He said this was because, as a nation, we did not recognise that one needs success to create jobs. He said that we make it too difficult to employ people, which I can understand. I say that as someone who was partially responsible for some of this. Last year during the passage through the House of the Unfair Dismissals (Amendment) Bill, I encouraged and had accepted an amendment which made dismissal on grounds of age automatically unfair. Every step this nation takes to make ourselves less competitive is unfair on the 300,000 people who are out of work. We must rethink this approach. The time to do it is during programmes such as the Programme for Competitiveness and Work.
I welcome the opportunity to speak in this debate on the Programme for Competitiveness and Work. I am glad to see this agreement was reached. Many parties were involved, including the Government, the Irish Congress of Trade Unions, IBEC, CIF, IFA, ICMSA, ICOS and Macra na Feirme. Submissions were received from the Irish National Organisation of the Unemployed, the Conference of Major Religious Superiors, the National Youth Council, the National Parents Council and the Combat Poverty Agency. All these submissions were taken into account and an agreement was reached: the Programme for Competitiveness and Work.
This is about keeping people at work. We need stability in the workplace, because irreparable damage is done when industrial relations break down and there are industrial disputes, strikes and so on. There is a loss of wages to the workers concerned and a loss of profit — and often markets — to companies. It also results in an unfortunate development of hostility between the workers themselves and between workers and their supervisors which can last for generations. If the Programme for Competitiveness and Work continues on good lines and keeps people working, it will eliminate that hostility or prevent its development.
I want to mention the establishment of the new enterprise boards throughout the country. I compliment the county development teams which existed in some parts of the country before the establishment of the enterprise boards and the tremendous work done by their officials. They existed along the west coast of Ireland and in the half of County Cork in which I live. Their work over the years created tremendous opportunities for employment in small businesses.
If there are 20 small firms each employing two people, there are 40 people at work. That can often be much better than a company which will set up and employ 100 initially but later closes down, due to a lack of market or other factors. If one small company fails, only two jobs are lost and there may be another small company to replace it. If 20 small businesses are operating properly, there are 40 people at work, and in rural communities this is of great importance. If one person sets up a little business on their own and comes off the live register and later employs another person in a small project, tremendous work is done. This spirit is embodied in this document.
I also compliment the people who were involved in the Leader programme. I live in an area where the Leader programme operated and did tremendous work. The people involved carried out their work with diligence and efficiency. Many small projects were started and studies done which will be of great benefit and which will be continued by Leader II or the enterprise boards. The setting up of IDA (Ireland) and Forbairt is an important part of this programme. The native industry dealt with by Forbairt will be on a greater scale than that being handled by either the Leader programme or the enterprise boards.
Since the Programme for Competitiveness and Work deals with the National Development Plan, the setting up of new regional authorities will play a big part in seeing that the money is spent effectively to create employment throughout the country. The Programme for Competitiveness and Work takes many aspects into account. As somebody already mentioned, it is a long document. The provision of £100 million in the enterprise fund for small and medium sized businesses will go a long way towards the provision of employment and keeping people at work.
I want to mention the points made in the programme on the marine sector. Fishing, which is often regarded as a cinderella industry in this country, deserves full and proper promotion under this programme. I come from a constituency which stretches from east of Kinsale to the Kerry border and takes in places such as the Beara peninsula, Castletownbere, Union Hall, Schull, Courtmacsherry, Kinsale and other seaports. There is a huge resource off the coast which can provide a substantial amount of employment if it is developed properly. I am glad to see that a significant section of this programme deals with the marine sector.
Deputy Dempsey has replaced Deputy O'Shea, who was here a few minutes ago. I hoped he would be here when I mentioned agriculture and food, but he seems to have known I was going to raise it.
I will pass it on.
The food sector can be developed fully under this programme. The food industry is very wide ranging. When coupled with horticulture there is a great reserve in this country, only the surface of which is being scratched at the moment. A properly developed food industry can provide worthwhile employment. Vegetables and other food can be produced in this country and, if marketed properly, could provide worthwhile small employment units throughout the country.
The agricultural sector encompasses the development of forestry which was also considered a cinderella industry in the past. In areas where there are few other resources, forests can provide a good worthwhile employment and a resource for the development of industry.
Combined with the Programme for Competitiveness and Work is tax reform. We cannot talk only about wages when we are talking about any programme; we must talk about tax, etc. as well because if a person gets a percentage increase, PRSI, tax and pension contributions will be taken from that percentage. I was glad to see in the budget that tax reform as well as the programme was taken into account. The abolition of the 1 per cent levy, higher personal allowances, the widening of tax bands and other tax reforms are very important for job creation and wages restraint.
The areas we talked about most are those which deal with cash but this programme covers many other areas, some of which were hammered out in very fine detail. I am very glad agreement was reached between ICTU and the employers' organisation on a 2 per cent pay increase for the first 12 months of the agreement, with 2.5 per cent and 1 per cent increases in the second and third years.
A £3.50 per week increase in basic pay in phase 2 and a similar increase in phase 3 were also agreed. In the public sector the agreement is slightly different but, here too there are two phases of 2 per cent increases, two phases of 1.5 per cent, and one phase of 1 per cent with an increase in basic pay of £2.80 per week in the second phase, £2.10 in the third phase and £2.10 in the fourth phase. A similar deal was agreed for the construction industry. All these deals took a lot of bargaining and I compliment the people involved in reaching agreement because when it comes down to figures very often a percentage point can lead to a breakdown in the talks and many more long hours of renegotiation.
I welcome the Minister's wide ranging speech today. He wants to keep interest rates low and to enhance the confidence of domestic and foreign investors alike by the sensible manner in which we manage the economy. That is very important for work creation. The agreement covers a three year period and overall pay increases will amount to about 8 per cent of basic pay over that time. I already mentioned the increase of £3.50 per week in the second and third phases of the main agreement.
We must always take into account employment needs, fiscal discipline and competitiveness. If we are not seen to be competitive we will be swallowed up. We do not have a protected market, we have an open economy and we see the European Union expanding every day. We have to be on guard all the time against foreign competition.
Very often when we hear different groups interviewed they seem to say we are spending too much on the public sector. People in the public sector are doing vital work. People in the private sector sometimes say that people in the public sector are getting too much; they are not. I worked as a teacher before I came into the Seanad and the money earned by teachers when tax is deducted would not make anyone rich. Well heeled people in other organisations should not use this as an argument.
Following the success of the Programme for National Recovery and the Programme for Economic and Social Progress there was unfinished business in the public service and I am glad to see it has been taken care of in a flexible and efficient fashion.
We need industrial peace. We do not want strikes or disputes. Strikes lead to loss of wages for the worker and profit for the employer, but very often the hostility that can develop as a result of an industrial dispute, especially a prolonged dispute, can lead to ill will that takes many years to forget. If this programme does no more than avoid industrial disputes, it has done a tremendous job.
I welcome the Minister's speech. The National Development Plan deals with matters which will take us into the next century and will have a profound effect on this country. A programme like this, whether it is confined to wages or work or is a total programme to develop our country properly, is of the utmost importance. Coupled with tax reform and the provisions in the budget, our country will gain substantially from the National Development Plan and the Structural Funds.
I welcome the opportunity to speak on this programme and recognise that a number of groups have done much work together in producing it. However, I have to question the necessity of this programme compared to its predecessors. This programme deals with many issues, but I question the worthiness and necessity of it because it is centred around what is fundamentally a pay deal.
One has to question whether much of what is talked about in the programme would not go ahead anyway in the various areas it addresses. It is full of worthy aspirations, statements and desires which the Government hopes to implement over the next few years, but does the Government really believe all these proposals are worth doing? How many of them would have gone ahead in the absence of a pay agreement? If many of them would have gone ahead anyway, is the Government not a little dishonest in presenting them as being the trade-off for a pay agreement? The Government should now state which of the proposals or plans in this document would have proceeded on their own merits even if no pay agreement had been in question.
We ask why there is a need for a pay agreement. Under the Programme for Economic and Social Progress some workers received increases greater than those negotiated because they worked in companies that increased profitability and output and the workers benefited from that. In other instances, companies found themselves in difficulties and workers got increases lower than those recommended by the Programme for Economic and Social Progress. Only the public sector got the full benefit of the Programme for Economic and Social Progress. One has to wonder whether this is of any benefit to the workers in the private sector. The same applies to this programme. On page 10 of the document it is stated that:
Improved planning of such costs facilitates the freeing-up or better utilisation of resources needed for the improvement of the cost-effectiveness or efficiency of the operation of the economy as a whole.
If this improved planning increases costs, what is the benefit of the improved planning? The same situation arose in the Programme for Economic and Social Progress. Pages 9 and 10 of the document are particularly interesting in view of the developments last week in relation to Structural Funds and the National Development Plan. One wonders what effect this entire section of the programme has when we are talking about a substantial reduction in Structural Funding in the overall national plan. That area of the programme is up for consideration and discussion as is the European Union dimension, which is not as relevant as one might have thought two or three weeks ago. Its relevance must now be addressed by the Government in the light of new developments that have occurred over the past week.
On page 11, section 1.21 deals with the environment, yet there is no evidence that the Government recognises that Ireland on its own cannot and will not be able to pursue an environmental strategy outside a joint European dimension. Environment is a transnational problem and we can be seriously affected by what happens in England, as THORP and Sellafield have made clear. There is no evidence that that has been taken into account by the Government in this programme. We have a national responsibility to concern ourselves with environmental issues within the confines of Ireland, but our position on the international front is even more important as is the attitude being adopted towards the environment by other countries.
I would like to deal with the cost of fuel, particularly crude oil and petroleum, and their use as raw materials. Their cost in competitive terms can be high, yet the only way to deal with their environmental effect is by taxation. It is not possible to do that, however, unless it is done by other countries as well. Without international agreement to take similar action the competitive question will not be dealt with properly and we cannot afford to take that type of action in isolation. The Government does not address the issue in any shape or form in this programme, which is unfortunate because we can only succeed with some type of international agreement.
The same applies to industrial employment. We can only deal with the issue of international companies coming here if this programme deals with the international dimension, but it does not. For instance, it does not recognise the fact that the Maastrict Treaty's social chapter is not being dealt with uniformly across Europe because Britain, our nearest neighbour, has not accepted the social chapter. That issue is not addressed in the employment and industry section of the programme although it will greatly affect our competitiveness in securing foreign industry.
I am sure the Minister is aware that some companies have chosen to leave or not locate here in the first place — opting for Scotland or England — because of more attractive conditions and less restrictive labour laws. This matter has not been addressed in the programme. The fact that Britain has not accepted the Social Charter while we have is a fundamental issue. Unlike Britain, we are bound by that charter which puts us at a serious disadvantage in trying to attract international companies to this country. It is a question which the Government should address strongly yet I do not see any evidence of it being tackled in this report.
I would like to join previous speakers in complimenting the work being done by county enterprise boards and the Leader programmes. In County Clare we have a good Leader programme in place which has done unique work in retaining people in jobs that would otherwise have gone. It has also managed to generate employment in new small businesses and industries. While the county enterprise boards are getting off the ground and providing some basic assistance, hindrances remain at national level. Unless the Government seriously deals with these — particularly in the area of small and start-up businesses — we will not generate the type of employment numbers we need to halt the terrible tragedy of so many people being unemployed. I appeal to the Government to recognise the amount of red tape that gets in the way of those trying to start up a business. It trips them up and eventually — in most cases within two years — many are forced out of business because of the bureaucracy that is choking them.
Fine Gael has repeatedly said that it is vitally important for people to be left outside the system in the first two years of operation and not to be drafted into the bureaucratic tax net. They should be provided with an opportunity of getting their businesses off the ground, on the road and established. If they are still going after two years they will then be in a position to come into the net and become part of the system. In the long term, the Government and the Central Exchequer will benefit considerably more from that situation because such people, if they get a decent start, will remain in business and increase their output.
Announcements have been made by the Government about securing loans from the lending institutions, but I find very little evidence on the ground that people are finding it easy to get loans at a decent interest rate. A definite approach needs to be adopted to provide people with the type of interest-free loans required if jobs are to be created. I am sure many Members of this House would think twice before employing somebody because of the overall costs involved. Phenomenal costs other than wages are involved for small employers who are trying to survive. These costs are a total hindrance to employing additional people. We need to encourage people to employ workers and recognise the value of that.
Even if the Government was never to draw a penny from the employers there would at least be fewer people on the dole to whom the State must pay social welfare benefits. No co-ordinated strategy is being adopted across the board by various Government Departments, lending institutions and the industrial promotion agencies to address this serious problem. Until concrete action of that nature is taken we will never overcome the huge problem of unemployment. We have the ability and talent to generate jobs but there needs to be a clear commitment and direction from Government. The obstacles to generating work need to be removed and unless that is done we will face a very serious unemployment crisis.
Many issues could be addressed in this programme but the fundamental one is that of competitiveness. We can only compete successfully in the world economy if we are able to produce goods at a cost which is competitive or lower than our competitors, and that means great efforts on the part of the employees. Many companies should seriously consider involving their employees in a more fundamental way in their company operations. Some years ago a number of companies introduced employee share ownership. It was a very successful scheme and we should encourage more companies to operate it. Employees have responded positively where such a scheme has been introduced. They have involved themselves more effectively in running the companies. They have produced more and that has benefited not only the companies but also the employees. There is greater co-ordination between the personnel concerned and such co-ordination is very important. Greater employee participation in the company can work to the advantage of the company, its shareholders and the employees. Such participation, therefore, should be encouraged.
Other fundamental issues have not been addressed in the programme, but I hope the Government will address those matters outside the context of this programme.
I welcome the opportunity to debate the Programme for Competitiveness and Work. I approve the programme. Like its predecessors, the Programme for National Recovery and the Programme for Economic and Social Progress, it is different from earlier efforts to establish a centralised arrangement. The new feature in the three programmes since 1987 is that the national agreements have been based on detailed studies by the National Economic and Social Council. The NESC is an independent organisation which represents the widest span of opinion. NESC reports have given an authority and confidence to the three programmes which did not exist previously.
There is no doubt that the first two programmes, the Programme for National Recovery and the Programme for Economic and Social Progress, served us well during the last six years. Net employment grew by 56,000 in that period although we have a long way to go due to the huge annual increase in our labour force. Economic growth has averaged almost 5 per cent, which is substantially ahead of that in many European countries. Average take home pay since 1987 in, for example, manufacturing and construction has increased by between 8 per cent and 20 per cent net. The pay agreement, which is central to the Programme for Competitiveness and Work, will continue to put more money in peoples' pockets.
The overriding concern and objective of the programme is work. Work is mentioned in the title and that has a certain symbolic value. Moreover, the central objective of the programme is a concern for job retention and job creation. Despite the fact that we have had very respectable economic growth rates by European standards there has been a mismatch between economic growth and the number of jobs created. It is disappointing that growth has not translated into jobs to the extent that we would like. It requires a singlemindedness of purpose and an exceptional commitment to keep the focus on jobs. The Programme for Competitiveness and Work combined with the National Plan and this year's budget constitute a step in that direction.
Pay is an important component of this and previous programmes. The Programme for National Recovery, the Programme for Economic and Social Progress and this programme are deliberately designed to put more money in peoples' pockets. The previous two programmes achieved that. It was achieved through a flat increase for workers earning below a certain level of pay. There is every indication that this programme will continue to focus on the lower paid. The pay agreement in the programme is sensible and moderate. It will undoubtedly continue to enhance our competitiveness. Ours is a small open economy. We live by our exports and it is of vital importance that we be competitive in the international marketplace. The more competitive we are, the more jobs we can retain and the more jobs we can create.
The large number of long term unemployed people is an ongoing problem. They must be dealt with in a sensible and practical manner. I welcome the provision in this year's budget for 40,000 places on the community employment programme this year. They are not new placements but they represent a 50 per cent increase in the numbers on social employment and other schemes which it will replace. However, there is an ongoing need to look closely at expenditure on employment schemes. We must be focused and careful in how we spend public money. I had the honour to chair the Oireachtas Joint Committee on Employment — on which the Minister of State, Deputy Stagg, served effectively — which examined the employment schemes. Representatives from FÁS gave evidence to the committee on two occasions and they told us that there was a need to rationalise the number of FÁS schemes. They said there was a tendency to add schemes as additional funds became available. As FÁS indicated, there is a need for rationalisation in that sector.
There is an important link between the tax system and job retention and job creation. On the one hand one wants to give the incentive to work and on the other hand one wants to give the incentive to employ. The tax reform measures which have been implemented in the recent past favour the lower paid. In this year's budget people on salaries of under £9,000 per year will be exempt from the health and employment levies. It is worth remembering that almost 500,000 workers earn less than £10,000 per year, so there will be clear benefits for a sizeable portion of the labour force. In addition, taxpayers in general and the lower paid in particular have benefited under the budget from the abolition of the 1 per cent levy, the 7 per cent increase in the tax bands and the increase in personal allowances. The clear target of this programme, of which the budget is one element, is to continue to improve the lot of the lower paid.
The Oireachtas Joint Committee on Employment has been succeeded by the National Economic and Social Forum. Despite the short existence of the committee, we conveyed our views in advance of the negotiation of this programme. I am glad that our views were taken into account. We sought, in particular, income tax reform with a focus on the lower paid. There is concrete evidence in the programme and this year's budget that Government policy is taking that direction.
There is also the question of incentive to employ. Ours is a country of small businesses. We have 157,000 firms which employ under 50 people. Nearly half of private sector employment in this country is in enterprises employing fewer than 50 people. I welcome the publication this week of the report of the task force on small business. Among its important recommendations — some of which have already been implemented — is the question of access to finance for small business. That is a pressing issue which also arose during our work in the Oireachtas Joint Committee on Employment. It is an obstacle to the existence and development of small businesses. I am happy to note that £100 million in cheap loans is available for small business through the Industrial Credit Corporation at 3 per cent below the market interest rates. We often think of small business in the context of grants or equity injections. The interesting fact that emerged from the deliberations of the task force on small business is that small businesses are more interested in low cost finance, so that they can plan their financial arrangements for a particular period, rather than in grants or equity.
Another area that requires continuous monitoring and which must be tackled is bureaucracy. Excessive bureaucracy can clearly get in the way of administration affecting small business. The number of hurdles to be overcome is staggering. I am glad to see that, reinforced by the findings of the report of the task force on small business, that matter has gone to the top of the agenda.
State agencies are not good at paying their bills in time to small businesses. That is a real problem and has implications for the funding of these bodies by the State. The United States have a Prompt Payments Act to ensure that small businesses are not left with this unpaid debt for too long. Reasonable credit terms are afforded to agencies who pay them for services rendered.
Obviously, much of the focus of this discussion will be on pay and economic issues. The word "social" has been deliberately put into the title of the National Economic and Social Forum. There is a social concern. Indeed, the social policy committee is one of the key committees. That raises the question of social equity. However, some people are not doing as well as others under these programmes. The programme does make a positive commitment in regard to action being taken to achieve social balance. Before this agreement was concluded, the National Economic and Social Forum clearly stated that they would like to see the benefits of growth shared more equitably and that there should be a more equitable and caring society as a result. I am glad to see certain specific measures in the programme in relation to, for example, education and housing; and the Minister of State at the Department of the Environment, Deputy Stagg, has made an excellent contribution to the latter in his present portfolio.
There is a close relationship between employment and educational attainment. There is an ongoing need to target more resources for those who are disadvantaged educationally. I am especially glad to see that the allocation for second chance and continuing education in the budget has increased by 10 per cent for 1994 alone. The vocational training opportunities scheme, which is specifically focused and targeted at the long term unemployed, will immediately provide an additional 2,500 places. The vocational and training opportunities scheme offers mainstream education for the long term unemployed to improve their knowledge and skills. A number of them did not stay in school long enough and now want, for example, to sit the leaving certificate. There are other courses available, such as starting one's own business or entrepreneurial skills. This programme is working well. I am delighted to see those 2,500 places being made available for the long term unemployed, who are typically made up of those in their early twenties.
In the area of housing — and I have already paid tribute to the Minister of State in this matter — before the negotiations on the programme concluded, the National Economic and Social Forum called for a fairer distribution of resources for the least well off. Under the programme local authority housing has got a substantial increased capital provision. There is also increased funding for substandard public housing. Those local authority houses that do not have bathrooms, for example, have been targeted for this additional facility under the programme.
I also wish to refer to the heading of industrial relations. In this programme there is a subhead titled "Industrial Peace". It says: "This agreement commits employers, trade unions and employees to promoting industrial harmony." Another paragraph under the same heading says:
This Agreement precludes strikes or any other form of industrial action by trade unions, employees or employers in respect of any matter covered by this Agreement, where the employer or trade union concerned is acting in accordance with the provisions of this Agreement.
The pay agreement contained in the programme is to be ratified later this month. It is not, of course, legally binding under our voluntary system of industrial relations. However, there is a strong moral commitment to it and a serious disciplined approach by the trade unions, the employers, the Government and the other social partners to stick to the terms of the agreement. The proof of the pudding is in the eating. Our industrial conflict record and number of strikes has dropped dramatically when compared to the 1960s and the 1970s. This new, more peaceful regime has distinct advantages. It gives stability to managers, unions and employees in the course of their business. It certainly helps to promote the image of the country for international mobile investment. Productivity, obviously, is secure and hopefully will be enhanced; and the financial losses that employers will suffer through shut downs, as well as the losses to employees through strike action, are avoided.
In my professional capacity as a professor in industrial relations in UCD, I would have been holding countries such as France and, more especially, Germany, as models of stability in the industrial relations field in the past. Ireland is currently more peaceful in the industrial sense than either of these countries. There is no need to gloat over that. It is a welcome change and a reversal of the situation of previous years. The consensus approach and the co-operation, so suited to a small country like ours, between Government, unions and employers and the other social partners is of critical importance.
The National Economic and Social Forum is glad to have the opportunity to focus on ideas for employment measures on future policy. Indeed, we are currently actively exploring new ideas, consulting international opinion as to what is successful elsewhere and examining current schemes. Our next major report will be in May of this year, when we hope to make a substantial input into policy on the employment question.
It would be possible to welcome this agreement almost unreservedly if it was simply a national wage agreement, that is if one believes that such agreements are worth having at all. From that point of view the Government's negotiators did a good job in achieving these results, which are contained in the appendices.
Having said that, it is difficult to express a view on the rest of the document, partly because it does not contain the evidence which would allow one to assess the quality of thinking that went into it. That may be unavoidable if the size of the document is to be kept to a reasonable level, but partly because the quality of expression and presentation in it is unacceptably inferior, even by what has come to be the acceptable level of official documents. If there is high quality thinking in this document, the drafters have failed abysmally to do justice to it. I will give a few examples from the first pages in connection with this. It extends beyond expression; I fear it goes back to content. If confidence is an important factor in stimulating economic activity, it extends beyond confidence in the calibre of businessmen. It involves confidence in the calibre of Government and in the planners to plan reasonably and effectively in an uncertain world.
I will begin by taking a few presentations and sentences of the report and ask what on earth they are supposed to mean. The first sentence is clear enough. In paragraph 1.6, we are told that:
This action must harness the same national determination in dealing with work as was the case in 1987 in restoring financial stability. There is one essential difference in approach. Success in the area of work will come only through more specific, more focused, more local and more business-oriented approaches.
That may all be true, but the essential difference is that in dealing with the national finances the main requisite was the political will that directly lay within the compass of Government directly to control the national finances. That is simply not the case in terms of job creation or employment. Government could get everything right if we knew what was right and still the task might prove beyond the country. Political will alone does not suffice here, even though it is important.
A sentence in paragraph 1.8 raises serious questions. It says:
A small increase in a reasonable percentage of the 100,000 small businesses in Ireland, a bridging of the gap between Ireland and other countries at our stage of development in the area of start-up enterprises and a strong performance in new areas of the growing services sector, will give the improved employment performance necessary to reduce unemployment to more acceptable levels.
I do not want to be too pedantic but I repeat "A small increase". Dare I ask the Minister how small is "small" or how large is "large"? It continues "in a reasonable percentage of the 100,000 small business in Ireland", what would "a reasonable percentage" be? I was glad to hear Senator Hillery quoting the figure of 157,000, a figure that emerges from the report of the Task Force on Small Business. To be fair the task force admits that what is involved is a guestimate because we do not apparently have reliable figures. Nevertheless, the difference between 100,000 and 157,000 is substantial. Have 57,000 small businesses emerged from the woodwork over the past three or four months? On what concepts are the planners in these two documents working? If one insists on proclaiming that small businesses will be the salvation of the country, to be 60 per cent out in one's estimate of the number of small businesses suggests there are elastic criteria involved in the concept of planning among the planners.
The paragraph continues "a bridging of the gap between Ireland and other countries at our stage of development in the area of start-up enterprises". The Task Force on Small Business says that the number of start-ups on a pro rata basis is around the European average. The European average may not be identical with other countries at our stage of development, but what is the average in other countries at our stage of development? What is intended there? With whom are we being compared? How rigorous is the comparison?
I am glad to see in the report of the Task Force on Small Business that the argument that was copiously advanced last year by the Minister, by IBEC and by university presidents that we were grossly lacking in enterprise on the basis of start-up figures given for Germany, Italy, the United States and ourselves, and the badly researched and grossly inadequately supported figure, are no longer accepted. That assumption is exploded and it is now clear that the real problem confronting us is not start-ups or a lack of enterprise but the ability for small and medium firms to grow. This means it is more a lack of management skills than a lack of enterprise as such. That has considerable implications for the area in which I am most interested — the education system.
A chapter in the Green Paper on education referred to an enterprise culture which was based on the assumption that we were grossly deficient in enterprise and made any number of suggestions about turning the education system upside down in order to remedy this defect. It would now appear the diagnosis was, at the least, inadequate. It is disturbing to see on the second page of this document a number of assumptions which, to say the least, are highly questionable. I could phrase it more adversarially than that. It raises questions about the data being used or about the coherence of thinking among the planners when something like that is put down at the beginning.
In paragraph 1.12 we have the assertion that: "Ireland's experience shows that successful convergence [within the European Union] is fully compatible with, and indeed, a necessary foundation for healthy growth.""Successful convergence"? What is unsuccessful convergence in the context of the thinking here? Even having resolved that, what does the sentence mean? I do not know. I hope the drafter knows — assuming there was only one drafter. Maybe the second half of the sentence was written by the back end of a horse and the first by the front end of the horse. I would like to know what it means.
I do not wish to be derisive about this but——
The Senator cannot help it.
I am being restrained compared with how Senator Ross might be. It would be nice to be able to welcome a document which states clearly and coherently, based on reasonably accepted evidence, what is in the minds of the drafters.
More seriously and substantively, paragraph 1.15 refers to "policy guidelines...designed to deliver low interest rates as the basis for increased investment, output and employment". Low interest rates are to be welcomed, but they have never been, to the best of my knowledge, in the economic history of any country I have studied, the basis for increased investment, output and employment. They can make a significant contribution if other factors are in place, they can be a basis, but to say they are the cornerstone of our economic policy would make me sceptical about the likely outcome of that policy.
It continues: "the GATT negotiations will constitute a decisive step forward". We do not know that; we hope the results will prove to be as satisfactory as the projections suggest, but to say that it will constitute a decisive step forward is pure prophecy. It further states: "the growing trend towards decentralisation in today's world, reflecting the increasing importance of the local level". How many mandarins in Merrion Street believe in the growing trend toward decentralisation in today's world? How often have we been told that Ireland is too small for decentralisation? Has Ireland suddenly silently grown in size overnight that now it reflects a world trend of which we will become part? I do not believe any of these people have changed their minds on the undesirability of decentralisation however much they may have to quote or ape the rhetoric that makes it fashionable.
I welcomed Senator Taylor-Quinn's references to the environmental dimension, and her criticisms of the lack of an international perspective were correct. Having said that, I welcome paragraph 1.21. However general the rhetoric may be, it is at least going in the right direction. Whatever one's reservations about rhetoric, it is nice to have it going in the right direction. It may turn into something concrete in due course.
A weakness in the report is the relative lack of emphasis, except at the rhetorical level, on marketing. There is a reference at the beginning to market led growth but there is little on exporting as such. On page 16, paragraph 1.37 refers to what An Bord Tráchtála is doing to assist exporting particularly by indigenous industries. An Bord Tráchtála is a worthwhile organisation — I am not criticising it — but the performance of indigenous industry in the past year when it increased market share in difficult circumstances was impressive.
The conclusion in paragraph 1.37 is that "It is projected that this development support will yield an increase of an average of 9 per cent per annum in exports by indigenous industry.". The implication is that but for this development support there would be no increase; that the increase in exports will be solely due to the increase in development support. Much though I welcome State support for exports and much though I deplore ideological distinctions between public and private, because we need excellence in both in this country, it seems to me to expose a cast of mind that the total increase in exports will be due solely to State assistance. That cast of mind is unfortunate but is exposed by the phraseology used here, however welcome the general thrust may be.
I also note in paragraph 1.44 that where we are talking about importing industry and multinational industry, it states: "A range of sectors will be targeted but pharmaceutical, health care, electronics, precision engineering and software will continue to be the subject of a special focus." They are exactly the growth industries we have at present which suggests to me that there are no new ideas around about developments. Since much of the activity in plans and reports in the last number of years, including the Culliton report, was supposed to identify new sectors for development and develop clusters in new areas, it is disappointing to see nothing new on that subject.
I have some comments on education. There is a section on innovation through research and development which is admirable but vague. Most of the comments on education are similar. They are unexceptionable but difficult to put in concrete terms. Paragraph 6-41 reads: "Third level facilities will be expanded to provide additional student places". I am not sure how one translates that into something one can either praise or criticise.
I am glad the Minister, Deputy Fitzgerald, is here. The official mind is largely uncomprehending of the relationship between third level education and economic development. I welcome the concern of the official mind for the role of third level education in promoting such development because that sector has an important part to play. However time and again I am perplexed by what seems to be its incomprehension of realities at third level.
I echo the earlier call for a serious examination of possible tax reliefs for the parents of students at third level education. While there may be a danger of privileging a sector of an already privileged class, there is now scope to look at this in the interests of social justice.
I also make a strong plea for the vigorous implementation of the also rather general commitments to adult and continuing education. That is justified on educational grounds and for social equity. In addition to the class and gender inequalities we have increasing age or generational inequalities now emerging as one of the worst inequalities in our society. Many of those adults who have been deprived of the opportunity for higher education in an earlier generation deserve a second or third chance if that can be devised; undoubtedly it can be arranged if the political will is there. The commitment to adult, second chance and continuing education should be taken seriously and not left at the level of rhetoric. Concrete steps should be taken to implement it.
I congratulate the Government and the social partners for securing agreement on another national programme. The benefit of centralised pay bargaining is obvious. The consensus approach is always preferable to conflict in all areas, especially in relation to work, the provision of jobs and industrial matters.
This programme makes clear that the Government's overriding priority for economic and social policy is the creation of more jobs. We have seen two previous programmes, the Programme for National Recovery and the Programme for Economic and Social Progress. This one is called the Programme for Competitiveness and Work; even the titles of the programmes are appropriate.
The approach towards securing agreement with the social partners has served the economy well in the last six years. Undoubtedly the financial crisis we faced in 1987 could not have been reversed without the agreement to these programmes. At the time of the first programme there was undoubtedly a need for national recovery and to turn the financial position around. The Programme for Economic and Social Progress tackled the spiralling debt, inflation and our balance of payments deficit.
Reference has already been made to some of the concrete achievements during the period of the first two programmes. Net employment has increased by 56,000 over the six year period; economic growth has averaged close to 5 per cent; income as measured by GDP per capita has grown from 60 per cent of the EU average to 74 per cent; farm incomes have risen in all but two years of the programmes; and average take home pay in manufacturing and construction had increased by anything from 8 to 20 per cent in real terms.
Anyone who calls into question the need of or benefit from such programmes or plans should look at the position in 1987. We have tackled the national debt and our finances and made progress. It would be unfair to describe the previous two programmes as merely pay deals; the benefits which accrue from such centralised bargaining would be lost if it was left to each group to fight its corner. The plans provide a balanced policy framework based on consensus with continuous input by the social partners through the central review committee.
It is also pleasing to see "work" in the title of this programme. The first programme put us on the road to national recovery and provided jobs, but that was not reflected in a reduction in the numbers unemployed, certainly in the area I represent. The Programme for Economic and Social Progress did much to curb inflation and tackle our balance of payments deficit. As the Minister knows, areas in my constituency have unemployment rates of over 60 per cent. Those people think these programmes are fine for employers or employees but the unemployed feel excluded and think they have lost out.
This programme ensures that we look after the long term unemployed but its central purpose is to provide jobs. I am not an economist but I have had huge difficulties explaining that while our growth position has greatly improved this has not translated into jobs. We will suspend judgment on this programme until we see at the review stage or at its end whether growth has led to jobs.
The Minister of State at the Department of the Environment has left the House. I wished to tell him that previous settlement strategies from both central and local Government have meant the unemployment problem has been concentrated in the suburban new towns. As I said, some of these areas have unemployment rates of up to 60 per cent. It may be possible to tackle a national level of unemployment of 15 per cent but it will need a huge impetus for the programme to have an impact on the crisis in suburban Dublin. When the Minister replies I hope he concentrates on the provision of jobs under the programme as that is my priority.
The title also contains the word "competitiveness". An article appeared in The Irish Times today about an ESRI study. It states:
Irish women earn 20 per cent less than men, and half of this wage gap is due to sex discrimination, according to a study of men's and women's earnings by the Economic and Social Research Institute (ESRI).
I am always concerned when times are tough that the automatic suggestion is that married women should return to the home and leave jobs for young school leavers or when we see the results this type of survey produces regarding the need for competition. The Minister's speech and the contents of the programme hammer home the fact that we must be competitive and be in a position to produce goods that are at least as competitively priced as those of our partners. I agree with that to a point but I draw the line when a particular segment of society is exploited, whether it is young people employed at £1.50 per hour in fast food chains, etc., or women in certain industries. The study reflects the fact that women are being discriminated against and indicates that their earnings are 20 per cent lower than men's. This is where I have grave worries about the detail of the programme as agreed with the social partners. Perhaps the hidden agenda is that certain unscrupulous employers are paying women less, as this study clearly shows. It states:
On average, women earn £4.27 per hour for every £5.33 earned by a man, with the largest wage gap among service workers, where men are paid over £2 more per hour than women.
The other programmes got our finances right, inflation down and helped growth. The new buzz word for this programme is competitiveness and we need to be careful and ensure that this type of discrimination is discontinued and does not become its focus.
A benefit from the previous two programmes which could be a benefit from this programme provided my earlier point does not become a feature, is the position regarding industrial conflict. We have industrial peace when there is an agreed programme and a consensus approach with the social partners. Every Member would agree that it is in nobody's interest to have strikes; it is not in the interest of workers or the country and a bad reputation regarding strikes does not attract industry. The two previous programmes enhanced the position of Irish workers in the eyes of potential employers from abroad or people setting up businesses here.
This programme differs from the previous programmes in a number of areas. It states:
...the development of small business and start-up enterprises where a comprehensive range of measures involving lower interest loans, removal of "red tape", focused incentives for equity investment and support services at local, community level are being and will be put in place...
It also states that there will be the further development of jobs in the service sector where Departments and agencies working with private sector promoters will take new and positive steps to create new jobs. It was evident in the area I represent that the previous focus of industrial policy was to attract multinationals; it was the be all and end all. Although it has a part to play in industrial policy and in the programme, it cannot start and end there. Those two aspects of the programme are an attempt to ensure that the jobs we create are home grown.
The programme further states:
...the development of community-based work, with work experience and training, to a level where before the end of this Programme 100,000 people will through work experience, education and training, be working to improve their prospects of access to sustainable employment and enterprise and, in the process, participating in the development of the areas in which they live.
I have a particular interest in this matter because this is the area which will improve the position of the people I represent. The Minister is aware that schemes, such as the Tallaght Partnership, have been hugely successful. When communities have been empowered to take their future into their own hands, it has proven highly successful. I look forward to the development of community based work. If it is successful it will be evident in my constituency.
I do not know if the central review committee formed part of the previous programmes but it is welcome. Sometimes we set ourselves on a particular course and there is a reluctance to reexamine it or to admit that perhaps it is not the direction we should follow. There is nothing wrong with saying that we should change course if we have made a mistake. If we discover midway or during the course of this programme that the directions we are taking are wrong, the central review committee will ensure that we take whatever action is necessary to change course.
I welcome the programme but my interest is in increased employment and the generation of jobs, particularly for the people I represent and the 300,000 people who are unemployed. I am optimistic that this programme will work in the interest of those people. Ultimately, the unemployed will be the judges and will let us know if we progressed from the areas of the two previous programmes which dealt with getting the figures correct and increasing growth, in the third programme through the creation of jobs.
I, too, welcome the Minister of State to the House and the opportunity to discuss the programme. On the opening page of the Programme for Competitiveness and Work, it is acknowledged that a key component to increase the productive capacity of the country is the National Development Plan. In other words, the plan is rightly accorded an integral and essential role in underpinning the job targets and development strategy of this programme.
This begs the fundamental question: where do we stand in relation to the National Development Plan now that the double talk, double counting and the double dealing by this Fianna Fáil/Labour Coalition is finally unveiled in all its sorry and shabby detail? This included bitter rows in Cabinet and Commission officials in Brussels being unfairly pilloried. Saddest of all, communities throughout this country who were led to believe that vital social and economic projects were in the bag are now left wondering if their project will ever get the go ahead. Last week, the Taoiseach said on RTÉ that nothing had changed. The Minister for Finance went on to insist that the plan would be implemented in full and that there was no intention or necessity to revise it. When are the Taoiseach and his Government colleagues going to cop themselves on and stop treating the Irish people as if they were fools?
This Government is characterised by big publicity splashes. Glossy documents and reports are launched and the weaker the content, the greater the fuss that is made of them. An example is the launch of the Programme for Competitiveness and Work. The programme is nothing more than an ill advised pay deal for the public and private sectors, or rather for those private sector companies that can afford it, dressed up as a would be social and economic programme. It is simply a rehash of the now badly holed National Development Plan.
We all agree that unemployment is the most serious problem facing this nation. The Minister said that this Government's main priority is the creation of more jobs. That has been high on the agenda of every Government since the foundation of the State. With the exception of the 1960s, no decade has shown the promise that we might actually be able to solve this enormous problem. What was it about the 1960s that gave rise to a sense of hope? That was a time of low taxation and zero budget deficits. Today we see little of the pioneering spirit of the 1960s.
A good example of the prevalent negative thinking is the reluctance to open up our telecommunications industry, despite the fact that it results in Irish industry being put at a cost and service disadvantage to its European competitors. Let there be no doubt that this is what is happening. To prove it one has only to recall what happened within weeks of Telecom Éireann reducing the cost of international calls last year in what was misleadingly termed the rebalancing of telephone rates. The then IDA and various Ministers were running around announcing hundreds of jobs and new telesales businesses. Without the reduction in telephone charges none of these jobs would have been created. The lower charges are also helping other companies who are engaged in international trade, enabling them to become more competitive and therefore better able to maintain and create new jobs.
Despite these tangible benefits we continue to seek delays in the introduction of liberalising measures in Europe regarding trade and telecommunications, rather than seeking to be out in front, as we sought to be in the 1960s. It is interesting to note that even after last year's reduction in the cost of international telephone charges, large Irish companies who can gain direct access to British Telecom can still save approximately 50 per cent of the cost of their telephone charges to other countries. However, other Irish companies, and by this I mean small and medium sized locally owned firms, continue to be at a major cost disadvantage to their competitors in respect of telecommunications charges.
We appear to be about to witness at last another turn by the Labour Party regarding the privatisation of Telecom Éireann. In changing its view, the Labour Party is to be congratulated on at last facing up to reality. We are told, of course, that this is not privatisation but rather a strategic alliance. May I ask how the Tánaiste, and the Labour Party would describe this if they were the Opposition to the Government?
The Programme for Competitiveness and Work is a national plan with one new piece of information. This new information is not contained in the main section, but rather in an appendix which covers the draft terms of the pay deal. The programme will do nothing new about solving our unemployment problem and will not result in the creation of a single real job which has any chance of being sustained.
In the introduction to the Programme for Competitiveness and Work, the Taoiseach states:
The Government's clear objective... was to make work at all levels the cornerstone of development action, in the next three years in particular.
What new thinking emerges from this document? None; but should this be surprising? What is happening in this country at present is a clear case of paralysis through analysis. More glossy documents and new Government quangos are not what is required, rather what is required is action which will help businesses generate real jobs and not more jobs in the vast bureaucracies which we have created and which must be funded by an already overtaxed work force.
In the Introduction to the Programme for Competitiveness and Work, the Taoiseach also states: “The short-run outlook... of our main markets is slow and uncertain.” He goes on to refer to the degree of competition to which Irish producers are exposed to as increasing; yet we are able to offer ourselves wage increases of a minimum of 8.5 per cent, despite the real increases we have enjoyed over the last few years. The Taoiseach goes on to state:
We must ensure that this [growth] will have benefits for the whole community. In particular, I will be taking steps to ensure that the impact of the Programme on equality is monitored on a continuing basis.
However, what does this programme hold for the 300,000 who are unemployed? Nothing. Indeed, to the extent that we have increased the cost base of Irish industry through awarding those at work wage rises, despite the uncertain economic climate and the increasing levels of competition on both the home and foreign markets, it makes the position of the unemployed worse.
Far from having something for the whole community, this programme worsens the position of the unemployed. Yet the unemployed were the only section not present at the table when the programme was being negotiated. Let us not forget that in terms of numbers there are more than twice as many on the live register as the total number of farmers, and the latter had three organisations representing them in the talks. It is only fair to state that I do not agree with central wage agreements and that my party is against them in principle. We believe that wage negotiations should be at company level and not at national level.
It must be accepted that the Cold War is over. The Berlin Wall has come down and, whether we like it or not, businesses based in eastern Europe are gaining freer access to our markets. These countries are not populated by uneducated, unenterprising masses. If anything, some of them have a greater depth of technical knowledge than we have in Ireland.
This is the kind of competition that we, as a nation on the edge of Europe, must tackle head on if we are to get the jobs that are so desperately needed. However, nothing in the Programme for Competitiveness and Work could give any confidence that this harsh reality is fully understood by those who drafted it. If real jobs are to be created it will be by businesses providing services and products to Irish and foreign consumers in terms of quality and price which they find attractive.
In considering the present state of the Irish business community we find there are, unfortunately, precious few truly successful indigenous companies that have been built up over the last 30 years. This failure is all the greater when we compare ourselves to the other less developed countries who were similar to the stage of development we were 30 years ago, countries such as Hong Kong and Singapore. These countries have today many leading world companies among their corporate ranks.
One success that this country has produced is Patrick Campbell of Bewley's Cafes Limited. Mr. Campbell foresees many Irish businesses selling out to foreign companies because of the obstacles put in the way of small Irish companies. High on his list of these obstacles is excessive taxation, payable both by employers and employees. Mr. Campbell said in a recent article in The Sunday Tribune:
This Government is over-managing the economy through the introduction of restrictive regulations which have undermined competiveness.... Today the Revenue [Commissioners] have more power of entry and search than the gardaí have to fight criminals and drug dealers.... Today, the self employed taxpayer is a suspect.
What does the Programme for Competitiveness and Work do to address these issues which are sapping the enterprise out of the very people we should be holding up as the real heroes of today's Ireland? The answer is nothing; indeed it goes in the opposite direction to what business people are seeking.
In the article Mr. Campbell indicates that while IDA Ireland and other such grant giving agencies are held out as the providers of part of the badly needed funds small and medium sized companies require to build up their businesses, he would have to advise any young entrepreneurs not to waste their time looking for help from them, because, he remarks, in practice their help "all too often turns out to be as elusive as the Halloween snap apple".
To be an Irish entrepreneur today is to be a second class citizen in many ways. First, because he is Irish such an entrepreneur gets paid a smaller grant for each job he creates than his foreign counterpart; second, he will be asked for a higher percentage of the overall grant package to be repayable than his foreign counterpart; and, third, he will be asked to give up equity in his company so that Forbairt can make a profit if the business is successful. It is unacceptable and makes bad business sense that Irish companies are paid less than foreign companies simply because grant giving agencies believe that the Irish company has no choice but to locate here.
I am not critical of the efforts being made to get foreign companies to set up in Ireland, but I am calling for fair play for our native business people. An effort must be made to help Irish owned companies to develop, expand and create wealth, which for the most part will remain in Ireland rather than be repatriated abroad. We should be paying grant levels per job on a more equitable basis than is presently the case. To implement this proposal I call for more funds for Forbairt and An Bord Trachtála. I am convinced that these funds would be better spent than many of the training schemes planned for in the National Development Plan. In this respect, and bearing in mind the latest controversies regarding the spending plans of the National Development Plan, it is interesting to reflect on what Mr. Campbell said in the recent article in The Sunday Tribune:
It will be impossible to secure £8 billion from the EC without spending between £2 billion and £4 billion ourselves. We do not have that type of money and it would be suicidal to increase the national debt. The alternative is a hefty increase in income tax, which would also be unbearable, or some deft footwork by the Government to enable us to use a major portion of that £8 billion to support ourselves on a day to day basis.
It would appear that even the "mere civil servant" as the Minister, Deputy Quinn, called him, far from being too removed from the problems of Ireland to know what is required, is far closer to seeing what a shambles the National Development Plan and the Programme for Competitiveness and Work are.
Last November, Mr. Maurice Doyle, the Governor of the Central Bank, said that the problems besetting the economy are more structural than cyclical in nature. He went on to say that — this must be alarming for us to hear — 50 per cent of the rise in unemployment is due to domestic policy factors. These factors can be identified as the continued existence of the large tax wedge for those at work and the need for reform of the social welfare and taxation system to improve incentives to work and the promotion of a more flexible wage bargaining process. The Programme for Competitiveness and Work fails in respect of these two tests. Old restrictive work practices must be abolished and European Union competition law must be speedily introduced. Unfortunately, this programme does nothing to quicken the pace.
When reviewing the Programme for National Recovery and Programme for Economic and Social Progress, Dr. Kieran Kennedy, director of the ESRI, indicated that they did not have the flexibility needed to deal with events such as the currency crisis and did not adequately contain public sector pay. The current programme clearly fails in this regard. The programme also fails to achieve anything in respect of a key target set by the Government, that of getting agreement on how pay levels within the public sector should be reviewed in future and how disputes should be resolved. Dr. Kieran Kennedy also indicated that the Programme for National Recovery and Programme for Economic and Social Progress failed to fundamentally address Ireland's major structural problem, unemployment. To do so, he believes, a question must be asked — what pay cuts can we reasonably ask workers, a privileged class, to take in order to help get to grips with those currently excluded from work? On this test the current programme is a hopeless failure.
I welcome the Programme for Competitiveness and Work. It is aptly named, because we must be competitive. When manufacturing or producing goods it is important to sell them. We are operating in an open market and we must be able to compete. The programme reflects the full range of operating costs for the whole economy, private and public. It requires that inefficiency and rigidity should not be allowed to threaten the long-run viability of Irish employment.
I am glad the unions and others were involved in this because we had reached a stage where there were too many demarcation lines. If something went wrong nobody could repair it, except those in a specific category. That caused many problems, including strikes; it was costly and cost jobs. I am delighted we are adopting a more flexible approach.
I am pleased the programme highlighted the need to support indigenous industry and attract overseas investment because they go hand in hand. We hear a lot about indigenous industries, and rightly so, because they create a lot of jobs. Many are dependent on large industries which have come into this country. By and large, indigenous industries are service industry subcontracted to do work for larger industries.
The problem with small industries is they do not have sales people. Such industries can be innovative and manufacture products, but they do not have the wherewithal or the personnel to travel abroad to sell these goods. Selling is the name of the game. Overseas factories and businesses here have sales networks on the Continent, America and elsewhere. These large industries and the subcontractor I referred to — the indigenous industry supplying parts to the large industry — go hand in hand; one cannot survive without the other. I am delighted service industries are being recognised because for too long they were neglected.
The problem with small industries does not relate to start-ups or know-how, but to job losses. We are not doing enough research on why jobs are being lost. It is easy to say we cannot sell products because of overproduction. Given the fact that Ireland is a small country with only 1.5 million people to employ from a population of 3.5 million, there is no reason why, we should not have full employment. The EU provides us with a huge market, so does the US. If we increase sales by .0001 per cent, we could create a sufficient number of jobs to keep people here. We need a task force — it seems to be the operative thing at present — to research why we lose jobs. Although new jobs are great, it is important to try to keep existing jobs; otherwise we are only replacing them and that does not solve the problem.
I am glad money is being made available to small industries at 3 per cent less than the normal rate. There is, however, a snag and I ask the Minister to look at it. I believe one may only get this money in order to expand or extend one's business or to create new jobs. I appeal to the Minister to be more flexible, because many small industries are struggling to survive. If they could avail of this money at a cheap rate they would not have to let people go or cut back. We must consider industries which are going or have gone through a tough period. I am delighted to see so many small industries. Some 25 years ago when I began to promote small industries in my village it was a joke, because people were talking about amalgamations and conglomerations and they believed small industries could not survive. We have returned to the idea that small is beautiful and I am delighted. I have experience in this regard and I ask the Minister to help small industries struggling to keep above water. It would be great if this money was available to them.
We spent a lot of money on the tourism sector, which is progressing. The former EC Commissioner, Mr. MacSharry, told me at a chamber of commerce dinner that we need to increase the number of tourists from Britain by only 1 per cent to fill our tourism potential. Only 0.75 million tourists visit from America and elsewhere each year, yet two million tourists come from Britain. We should look at what is near to us. When I first became involved in the tourism industry, a lot of Scottish people visited my village. They came to Derry by boat. As a result there was a great deal of tourism business in the area. In our young days we looked forward to the Glasgow holiday week or fortnight when many Scottish visitors came. We should go after this market again. Tourism is very important.
The programme estimates that the introduction of a car-testing system will give rise to 300 jobs. This system should not be similar to the one introduced for trucks. It should be done by an independent body. Trucks have to be tested by certain garages and as a result smaller ones are being put out of business. When a truck goes into a garage with a Department of the Environment licence, small garages are short of work. The large garages say that small ones cannot do a good job. This is not right. We have created a monopoly for large garages. If we introduce compulsory car-testing it should not be done by private individuals or, if it is, they should not do any repairs but only examine cars and say what is wrong with them. For them to engage in repair services would militate against small garages. I say this as somebody who ran a small garage and was the only one-handed mechanic in Ireland. I was reported in an American magazine for my ability to repair at a late hour in the evening a tourist's car which had broken down. If motor testing is introduced, small businesses like the one I ran will be closed. Such businesses create jobs. Although car-testing may create 300 jobs, we may lose a thousand other jobs.
I doubt if such testing will make roads or cars safer. One sees few bangers involved in accidents and being towed by AA wagons. It is mainly good cars which are involved in accidents because they can put down the boot and go. I am sure there are many like me who drove bangers. We had to drive slowly because we could not drive fast. We are over-emphasising the need for testing. I am not against it but it will have far bigger repercussions on small garages than the truck business has. The Minister should look at this aspect. Such testing should be done through local authorities, or the task should be given to private individuals who would be paid a certain amount for testing cars. They would say what is wrong with cars and the owners would take them to be repaired wherever they like. This would provide work for both repair shops and garages. It would not create a monopoly or give a person with a licence to test cars the opportunity to take all work at the expense of smaller garages.
The support for enterprise and starting businesses provided for in the programme is wonderful. Many small industrialists have told me they would prefer cheap loans to grants and these should be provided. A certain amount of loans will never be repaid, but around 95 per cent of them will be paid. A loans fund would be revolving, whereas money paid in grants does not come back, and no jobs other than those resulting from the initial payment of the grant are created. It is important to provide loans and keep the money revolving. This would create jobs.
It is a great pity that we have not spent more time doing surveys of our unemployed and setting up co-operative movements consisting of unemployed people. Many of them are not able to start businesses on their own. If we could encourage groups of five or six craftsmen to start up on their own we would get to the heart of our unemployment problem and create many jobs. There are many people with expertise, but we are not harnessing their talents and helping them to form co-operatives. We should encourage cooperatives and there is no better way of doing this than through community based industries and employment.
Insurance is a big problem. I am glad the programme proposes to deal with the problem of high awards for pain and injury. Insurance costs are crippling businesses. I used to run a restaurant and garage in Grange, County Sligo, but now I only have a restaurant. The public liability for the garage and restaurant used to be £20 a year. My daughter paid £1,200 this year for public liability for the restaurant. It is very difficult for small industries to pay insurance. In my opinion, many people are deliberately tripping in order to seek compensation. It is happening all over the country. Awards for pain and injury represent one of the biggest rackets of all. I am delighted something will be done about this. Insurance costs will close down small businesses, regattas, shows and pony jumping facilities. Amenities in rural Ireland are being crippled by insurance costs. I appeal to the Minister to work hard to deal with this problem because insurance costs are becoming the biggest stumbling block to creating jobs.
This topic is very interesting. Competitiveness has different meanings for different people. If one lives in Dublin one has a certain understanding of what it is about, but if one lives in the provinces, particularly at this time of year one might have a different understanding of it. I am speaking of people who provide services in the country, particularly in a county like Monaghan, where there are many small industries and delivery and collection services in rural areas. The cost of servicing machinery used to maintain vehicles using rural roads is incredible. Senator Farrell talked about the overheads, particularly insurance costs, which businesses have to bear now compared to what they used to be. We are inclined to close our eyes to this. Every week somebody rings me to complain about having to carry out repairs on springs and shock absorbers on lorries and even bigger repairs, which cost a great deal. This winter industries in Monaghan have spent about £5 million trying to keep collection and delivery services going. They would not have had to spend this money if the roads were kept in good condition.
People are fed up listening to us talk about roads but when one speaks about competitiveness and trying to keep industry going, roads are important. I want to bring home to the Minister that roads must be looked at in the context of job creation and the development of rural Ireland. There is no doubt that the Government has some good ideas about rural regeneration but these ideas must be based on a good framework. If the roads are not good how can rural tourism be developed when people cannot travel comfortably to get to an area? This is one issue on which we must continue to focus or there will be a rural rebellion one of these days.
In the legislation this House passed yesterday, the Minister proposed that the Garda will have the power to seize vehicles if tax is not paid on them. It is amazing that that should happen at this particular time because the people in rural areas are talking about the relationship between vehicle tax and the condition of their roads. They are discussing the possibility of not paying their motor taxation. Many of them will be amused to find that that legislation was passed yesterday. However, that is another day's work.
Overheads account for a growing percentage of turnover in industry. When times are good an ESB, telephone or insurance bill is just another bill and a cheque is written. However, in tight times, which we have had for a long time, the overheads industry has to bear are disproportionate to turnover. The Government must do everything possible to reduce overheads for industry and allowing employers to make a profit which will enable them to keep people at work.
Employers regularly quote figures to me, for example, if they employ 100 people they must pay £150,000 insurance. For the ordinary person who knows nothing about business, that is a huge sum. Insurance is an incredible cost to industry. It is a disincentive to employment. It reduces the profit margin thereby reducing the ability of business to employ people.
Employers in every industry are talking about trying to replace people with machines. Everybody is of the opinion that it is too difficult, costly and awkward to employ people. They say that they would rather not employ anybody. With such an ethos it will be very difficult for the Government to increase employment. That trend must be turned around. I do not know how the Government will achieve it but confidence will have to be put back into the economy. Profit margins must be increased because profit is the deciding factor when it comes to creating employment.
I was talking to a person today who said that if a person makes the right effort, organises himself and uses all his skills he can get a business off the ground. However, that person was from Dublin. I said that was possible in Dublin where there are many people and a great deal of activity. In that context, if a person has the proper skills and the money to set up a business it may be successful.
However, so many people are leaving rural Ireland that it is almost impossible to set up a business there. Many people are using various schemes to set up businesses but in 12 months time they will probably be out of business because they cannot get into a market which does not exist. The rural market place is getting smaller because the economy of an area is created by the activities there and on the amount of money people have to spend. However, the fewer people there are, the less activity there is and the more difficult it is to establish an enterprise.
We are very concerned that existing industries will become outmoded over the next 25 or 30 years and we will be left with nothing but tourism. Those of us who live in counties which are not tourism oriented are worried that there will be nothing for people in the future. In Leitrim, for example, tourism is fairly good; it is far better than in Monaghan or Cavan. At least they have that as a base because the population there is decreasing at such a speed that the ordinary industrial activity in the area does not have a local market. It is a vicious circle. People in the retail trade and those who provide the kind of services one finds on the high street — such as banking, schools and so on — are disappearing from certain areas in County Leitrim because there are no customers.
The population of Monaghan has also decreased by 5 or 6 per cent since 1986. If that trend continues, we will be in the same sort of a trap with banks leaving the towns because it will be unprofitable for them to stay there; there will be amalgamation of schools and all the other indicators which point to dying communities.
This idea of competitiveness and work has a different meaning depending on where one lives. If the Minister wants to put forward programmes for the development of rural Ireland they should have a sound base. She should ensure that, if rural tourism is being described as the saviour of rural Ireland, people can at least get in and out of these areas. I look forward to hearing what the Minister has to say.
I thank the Senators for their contributions to this debate. This is an important agreement, which is one of the central parts of the Government's economic strategy over the next three and a half years. Unlike Senator Honan, who professes her party to be opposed to centralised pay deals, I believe in the value of a consensus approach to solving our economic problems. It is important that we would have stable industrial relations, work in a constructive ways with the social partners and together face our shared problems with realism. That is what has been done in the Programme for Competitiveness and Work.
In the preparation of that programme a very good report was prepared by the National Economic and Social Forum. When I set up the forum I ensured that there would be representatives of the unemployed, women's groups, people with disabilities, the elderly, youth organisations and environmental interests to ensure that this third strand of Irish life would be in a position to make an input into public policy and, specifically, the discussion of this Programme for Competitiveness and Work. That report was a very valuable and responsible one.
The approach taken in the programme is a responsible and modest pay settlement which will improve our competitiveness over the next number of years. It creates a climate of certainty in which people can do business and will improve and maintain Ireland's competitiveness vis-a-vis our trading partners and the markets we need to sell our goods. Ireland exports 70 per cent of its produce and at home many of our goods and services are competing with goods and services from other countries. It is only by maintaining competitiveness that we can ensure employment and the creation of new jobs.
Our economic future is very good. All the independent economists and economists working in private sector organisations say we are set for a year of strong output growth. Last year when European economies in general lost 2 per cent of national output, Ireland was one of the few countries which bucked the trend and showed economic growth. We now have low interest rates in real terms and an increase in confidence. Last year's labour force service figures show an increase of about 8,000 in the number of people at work. There has been a fall in the unemployment figures. The Irish economy is poised for growth.
Senator Honan criticised the National Development Plan. Over 95 per cent of the £20 billion plan is not in dispute. We were disappointed that, in the statement of 20 October, we did not get the full amount we sought. However, over 95 per cent of the money from the European Union, our own resources and from the public and private sectors, will be spent and we hope to get the rest over the period of the plan. There will be a significant injection of cash and spending into the Irish economy. More importantly, money will be spent wisely to ensure long term and lasting economic return for the country when the last ECU has been spent.
Senator Honan criticised the scale of the pay deal that was on offer. When her party was in Government it negotiated a pay deal with its then partners which left us, when we came into Government in year one, with a £350 million——
Was there not a common thread between those two Governments?
——public service pay bill. In the second year we had——
That is a nice rewriting of history.
——a £250 million pay bill. That pay deal was agreed, in Government by the Progressive Democrats, the so-called party of low spending. I believe in centralised pay bargaining and when a deal is made, one should finish it, which is what we have done. The Programme for Competitiveness and Work has not only created a stable climate and a moderate pay deal for the private and trade sectors of the economy but it also has dealt in a very good way with the public sector. The increase in public sector pay is the same as in the private sector, a basic 8 per cent increase which will be spread over three and a half years. There are arrangements in place which create a ceiling on the cost of outstanding special pay increases.
A major achievement in terms of the certainty of planning future public expenditure and public programmes has been a commitment by the partners to this agreement — the unions, the employers, the farmers and the Government — that there will be no new special pay increases for the three and a half years of the agreement. This gives us an environment in which we can plan the public finances and the future of the economy with certainty. It also puts us in a good position in terms of delivering jobs.
The Department of Finance's economic model estimates that every 1 per cent improvement in competitiveness vis-a-vis our trading partners leads to an extra 4,000 jobs for this country. There is a clear link between the elements of economic policy under our domestic control, such as the rates of pay and inflation, and the number of jobs we can create. In a responsible manner, the social partners have acknowledged that reality and have devised a responsible level of pay increase in this deal.
The Government has matched that responsibility by offering, in this year's budget, £330 million in tax reductions. From next April people will see substantial tax reductions in their take home pay. Looking at take home pay has enabled us to secure a moderate and responsible pay agreement. If we had a free for all, we would not have been able to plan the next three years with the same degree of certainty. We have a pay agreement which respects the economic position of the country and puts tackling unemployment at the top of the political agenda.
I welcome the provisions in the Programme for Competitiveness and Work which follow from the provisions I made in the National Development Plan for focusing on unemployment black spots. Senator McGennis referred to the work of the Programme for Economic and Social Progress area based partnerships. I visited a number of these partnerships and I am familiar with their work. They have done enormous work in giving heart to areas that have been blighted by chronic unemployment. We need to focus on the needs of the long term unemployed. People who lose their jobs and do not get work within a year are unlikely to work again. Unless we have specific measures that focus on rebuilding the economic potential of the long term unemployed, our unemployment problem will remain with us and these people will be effectively outside the economic system.
Senator Farrell talked about job maintenance in small businesses. I respect the concerns expressed about preserving existing jobs. However, we must ensure that we do not spend public funds, whether it be through subsidised loans or grants, allowing people to do what they would do anyway. We must avoid making 95 per cent of economic activity eligible for subsidies under the heading of job maintenance. That is why we have traditionally ensured that subsidies go to new projects which would not happen without them. The focus of grants and soft loans has always been on new activities and new businesses. We should be slow to go down the road, in the name of job maintenance, of subsidising projects in which people would have invested their own resources anyway. There is a real danger of dead weight and a wasteful use of public money.
Senator McGennis referred to women at work and the difficulties for women highlighted by the ESRI report which was published yesterday. One of the more heartening things in the recent labour force statistics has been the extent to which women's participation in the workforce has increased and the extent to which new jobs have been taken up by women. Women's economic independence is central to equality for women.
Senator Farrell raised the question of insurance overheads and cited the horrific figure of public liability insurance increasing from £20 to £1,200 in his own business. The Government is preparing proposals in the insurance area. I agree that the amount of fraudulent claims being made is costing jobs. People with the compensation mentality are depriving their fellow citizens of jobs by making the cost of employment and the cost of doing business prohibitive.
Senator Farrell also raised the question of car testing. I share his scepticism about this being a job creation measure. If, instead of spending money in the local chip shop on Irish potatoes, we have to spend the same money getting cars tested, jobs may be lost in the chip shop and the potato growing industries and created in the car maintenance industry. However, no net jobs would be created. We are simply shifting expenditure from one area to another. I share his scepticism about the job creation element.
The future for the Irish economy is very good. We have the highest growth rate in the EU at the moment; we have growing confidence in the economy and interest rates which are conducive to investment; we have had a very good budget which lowers the cost of employment to employers, a national plan coming on stream which will be very important with investments of the order of £7 billion in the Irish economy geared to giving a lasting return in terms of improving the quality of our education, training, productive infrastructure and targeting the unemployment black spots.
The Programme for Competitiveness and Work is an important element in the Government's economic strategy; it sets a moderate tone that will put jobs at the top of the agenda and help us win those vital export markets. Through selling our high quality goods at a price that people want, we create jobs for the Irish economy. The framework for that has been set by the Programme for Competitiveness and Work and it is up to us to ensure that we maximise our opportunities.