I welcome the opportunity to talk about the Programme for Prosperity and Fairness and to hear the views of the Seanad on the new partnership agreement.
This social partnership agreement is the fifth since 1987. These agreements have contributed significantly to economic and social development. They have been central to the economic stability which enabled the economy to grow more than twice as fast as the EU since 1987, to deliver six times the EU rate of employment growth and to raise living standards, as measured by per capita personal consumption, twice as fast as the EU average.
It is no wonder that the Government with the social partners sought to preserve and strengthen this key element in our broad national strategy for economic and social progress. The objectives of the programme relate both to economic and social progress. As well as the pay terms which have been agreed, the programme sets out a comprehensive series of integrated economic and social objectives and the operational framework to achieve them.
The new programme is set in the context of the Government's Action Programme for the Millennium, as recently reviewed, and of the national development plan. It has been crucially informed by the social and economic vision for the modern Ireland set out in the recent NESC report. It is the culmination of three months of hard work by all the pillars of the social partnership. It involved considerable and detailed discussions and tough negotiations and I thank all who contributed to its development.
Implemented in the same positive spirit as it was conceived, the programme contains the basis for continuing the prosperity and progress we have enjoyed over the past decade. It has the capacity to ensure that past problems, such as high unemployment and pervasive social exclusion, involuntary emigration, stultifying levels of taxation and national indebtedness, do not return to crucify our people. However, it remains as true today as it ever was that no one owes us a living.
I view this programme as a vital ingredient in building the Ireland of the 21st century which delivers further prosperity for all our people, achieves equity and fairness throughout our society and which helps us to realise our full economic potential and our full potential for social inclusion. We will not be thanked by future generations if we let this opportunity slip. We must not assume as a nation that our past success guarantees the future. It does not. All of us within each of the pillars of the social partnership must be prepared to play our part in ensuring the success of the programme. I stress this point because any failure by us to meet emerging challenges will imperil the future. While there are no guarantees of plain sailing, I remain optimistic about Ireland's economic prospects.
The programme is predicated on and dependent upon achieving an average annual GNP growth rate of approximately 5.6% over the period to 2002 – inter alia on the basis of sustained improvements in productivity, that emerging supply side constraints will be overcome and that significant budgetary surpluses will be maintained through the programme. If economic growth exceeds this level, it may be possible to apply additional resources in a balanced way to accelerate progress towards the priority objectives of the programme, including social inclusion. Equally, if growth falls below this level it may be necessary to make more gradual progress. The entire package is carefully constructed to achieve a balanced outcome, offering a win win situation for all. If we each play our role in carrying its spirit forward, we can aspire also to the promise it holds out for each of us.
I emphasise some aspects of the programme's content. The basic pay terms of the new agreement are the same in the public service and the private sector. The new agreement, if ratified, will commence in the public service on 1 October 2000 and will last for two years and nine months, expiring on 30 June 2003. It provides for the following increases in basic pay: 5.5% from 1 October 2000 plus a further 5.5% from 1 October 2001, plus a final increase of 4% from 1 October 2002. As in the private sector, there is provision for minimum increases of £12 a week in the first phase, £11 in the second phase and £9 in the third phase.
In addition to the basic pay terms of the programme, a separate agreement has been concluded with the Public Services Committee of congress relating to certain groups colloquially known as "early settlers". These groups have been arguing for some time that the local bargaining increases they received under the PCW were later exceeded by other groups. This agreement, which is conditional on acceptance of the Programme for Prosperity and Fairness, provides for an increase of 3% from 1 October 2000 for the "early settlers".
A resolution of the early settlers issue which would not give rise to new instability by sparking off further claims by other groups had to be found if a new programme was to be agreed. The 3% payment has been agreed with all the unions involved – both early and late settlers – and will close the final chapter on the PCW.
The agreement provides for a public service monitoring group to oversee the implementation of this and any future public service pay agreements. This group will provide a means of ensuring that the terms agreed between the parties at national level are implemented in practice within the various parts of the public service. It will be open to either side to raise any alleged breaches of the agreement in this forum.
The industrial peace terms of the overall pay agreement also apply, of course, to the public service. In addition, the public service terms include a commitment to put in place voluntary codes of practice on dispute procedures to address, in particular, the maintenance of essential services. These codes of practice are to be agreed in each sector by 30 June 2000. If any difficulties arise in this regard, there is provision for the matter to be referred to the Labour Court or Arbitration Board as appropriate.
The draft programme also outlines the key objectives to be achieved under the next phase of the public service modernisation programme. These will involve ongoing implementation of statements of strategy or service delivery plans within each sector based on the relevant policy documents and the SMI modernisation programme; design and implementation of performance management systems to support implementation; and implementation of challenging service standards set in consultation with the recipients of the service. It will also require greater organisational adaptability and flexibility in responding to service needs and that issues such as changes in grading, broadbanding and teamworking be addressed.
The programme outlines the actions to be pursued in the Civil Service, the health services, the education sector and the local authority services. Corresponding actions are to be pursued in other parts of the public service. Overall, this represents a far more developed and sector-specific framework than was the case under Partnership 2000.
To ensure that this ambitious programme is developed and implemented, the public service pay annex makes it clear that payment of the final phase increase of 4% is conditional on specific performance indicators being established in each sector by 1 April 2001, and achieving these sectoral targets by 1 April 2002 – with progress assessed at organisational level by 1 October 2002.
The strong attachment to historical cross-sectoral pay relativities has bedevilled public service pay in the past. Apart from any other considerations, the rigidities inherent in the old system made it virtually impossible to deal with groups who might have had a justifiable case for a pay adjustment because of the knock-on effects which any such adjustment would have on other groups.
A more recent problem is the perception of some public servants that their pay has fallen behind private sector pay, while private sector employees believe that public service pay has increased at a faster rate than theirs. Public service pay cannot evolve in isolation. It has to be set in the context of pay in the wider economy, to ensure equity between public service and private sector employees.
The new agreement provides for a public service benchmarking body to undertake a fundamental examination of the pay of public service employees vis-à-vis the private sector, and make recommendations. This will not be an old-fashioned pay review. The benchmarking exercise will cover both pay and jobs in the public service and across the economy. It will examine and compare job content, duties and responsibilities in both sectors. The examination will also be based on in-depth and comprehensive research, examination and analysis of private sector pay across a range of employment types and sectors and will take account of the way reward systems are structured in the private sector.
The benchmarking body will be asked to produce its report and recommendations by the end of 2002, to allow the parties to discuss the implementation of its recommendations in the context of any successor to the Programme for Prosperity and Fairness. Any increase which might emerge from the exercise will not take effect during the period of this agreement. It has been accepted that any outstanding claims or commitments relating to the pay of any group will be subsumed within the benchmarking exercise and will be dealt with solely in that context.
The agreement makes it clear that cross-sectoral relativities are incompatible with the operation of benchmarking. In addition, the terms of reference make it clear that, even within a given sector, traditional or historical relativities between groups will not prevent the benchmarking body from recommending what it considers are appropriate pay rates on the basis of existing circumstances. There will be only one report covering all the groups involved, in order to achieve a coherent and integrated approach and to avoid the problems of the past, where an award based on the alleged exceptional circumstances of a particular group quickly led to a spiral of special pay increases right across the public service.
The Government entered the talks on a new national programme determined that we needed, like any employer, to have certainty about the development of the pay bill over the period the agreement, to have stability and industrial peace within the public service, to advance the process of public service modernisation, and to tackle the issue of cross-sectoral relativities. I believe the draft agreement addresses all these issues, which have been the source of significant difficulties in recent years, in a constructive and balanced way and provides a logical and coherent approach going forward.
The national minimum wage Bill will come before the Houses of the Oireachtas in the near future. The Government has decided, in line with the commitment in the programme for Government, that the national minimum wage agreement will be introduced with effect from 1 April this year, and that the minimum hourly rate will be £4.40. The pay agreement supports increases to £4.70 from 1 July 2001, and to £5 from 1 October 2002. I particularly welcome the agreement that no repercussive claims will be made by trade unions or employees as a result of the introduction of the minimum wage.
Tax reform has been a key element of our approach to partnership since 1987. The combination of agreed pay increases with significant reductions in personal taxation has delivered substantial increases in net take home pay for all workers over the period of partnership. This approach will continue under the Programme for Prosperity and Fairness. Over the period of the new agreement, up to and including budget 2003, take home pay of workers will increase by up to 25% or more when the taxation and pay elements are taken into account.
The Government has already begun a process of tax reform and tax reduction. We have introduced tax credits and have acted to remove substantial numbers from the top tax rate. We have pursued a policy of balanced tax measures, increasing allowances, widening bands and cutting tax rates. These policies have been welcomed by taxpayers and have contributed to increasing prosperity and fairness.
The structure is in place for continued tax reform under the new agreement. Tax benefits can be delivered through increased personal tax credits, widening the standard rate band and reductions in the rates at which tax is levied. It is an agreed policy objective of the Government and the social partners that, over time, all those earning below the minimum wage will be removed from the tax net.
The social partners support the policy of establishing a single standard rate band for all individual taxpayers, and agree that the level of the standard rate band should be kept under review with the objective of ensuring that, over time, at least 80% of taxpayers are not subject to the higher rate of income tax. There is also agreement that a special working group will be set up to examine the role which refundable tax credits can play in the tax and welfare systems, and that employee share ownership, gain sharing and profit sharing and other financial employee incentives have a role in the development and deepening of partnership.
I agree with the social partners that confidence in the fairness of the tax system is a prerequisite for successful partnership and that this must be maintained by determined action to combat tax evasion and fraud and to reduce opportunities for tax avoidance. The Government is fully aware of the need to maintain confidence in the efficacy of the tax system and I am confident that the major and extensive new powers given to the Revenue Commissioners in the 1999 Finance Act provide a sound basis for tackling those who seek to evade their tax responsibilities.
As the Taoiseach said at Monday's launch, social justice, together with stabilisation and growth, are the key goals upon which the new programme is founded. It contains key objectives in the social inclusion and equality areas and outlines the various actions which will be undertaken to achieve these objectives. Together, the actions involved, backed by a £1.5 billion commitment to enable them to be implemented, represent a considerable demonstration of the priority which the Government accords to ensuring that the fruits of our new-found prosperity will be shared among all our people.
In the central area of income adequacy, the real value of social welfare payments will be maintained and, where possible, enhanced in the context of making substantial progress over the period of the agreement towards a target of £100 per week for the lowest rates of social welfare. For pensioners, the agreement confirms that the level of old age pensions will be improved in line with the commitments given in the Government's review of An Action Programme for the Millennium.
Senators will be only too well aware of the widened public interest and concern about the issue of child care. In the budget, I allocated £46 million a year for the child care area. This will be spent principally on increasing the supply of child care places throughout the country. There is unanimity that increasing the supply of places is the most urgent task in the whole child care area. This £46 million is the first instalment of the £250 million committed in the national development plan to assist the private and voluntary sector increase the number of child care places and to improve the quality of care provided. The issue of support for parents will be examined thoroughly this year, in consultation with the social partners, and the next budget will contain the Government's response.
The agreement commits us all to creating a fair and inclusive society for everybody. To help achieve this, a wide-ranging programme of action has been agreed in areas such as disability, gender, refugees and equality proofing. In addition, several relevant institutions have been established, including the Equality Authority, the Office of the Director of Equality Investigations and the National Disability Authority.
The partnership process which we have evolved in Ireland is unique and has served us well. The new agreement outlines a basis for enhancing both our economic prosperity and the inclusiveness of our society through the first three years of the new millennium. As I said earlier, it offers a win-win situation for all.