I wish to share my time with Senator O'Dowd, or in his absence, Senator Costello.
Programme for Prosperity and Fairness: Statements (Resumed).
Agreed.
I welcome the Minister to the House and I listened to some of his contributions on the new national agreement, which I welcome. I do not have any criticism of this agreement because I welcome it. It is of vital national importance. We owe a debt of gratitude to all who assisted in its negotiation, all of the various so-called pillars, not least our distinguished colleague and Member of this House, Senator Joe O'Toole, whose contribution I also enjoyed. We must now hope the fruits of their combined labours pay off. They worked long and hard over three months of tough negotiations in framing this Partnership for Prosperity and Fairness. Hopefully, over the 33 months, once it is accepted and voted through by all the members of the unions involved, it will find overwhelming acceptance and will bear fruit.
This agreement is the fifth since 1987 and, as said by the other speakers, it has contributed significantly to our economic and social development. The Irish economy has managed to grow at twice the EU rate since the introduction of agreements in 1987. It has delivered six times the EU rate of employment growth. There is no doubt about the vast improvement in our living standards over that period. That is borne out by the measurement of personal consumption per capita which grew twice as fast during that period as the EU average. That is impressive and acknowledged by us all.
I salute the objectives of this programme, which relate both to economic and social progress and are wide and all-encompassing. It sets out a comprehensive series of integrated economic and social objectives and the necessary operational frameworks to achieve them. We are deeply indebted to the social partners for the three months of hard work they put into this agreement. Detailed and lengthy discussions were required to produce such a document.
For too long we suffered from high unemployment rates and the social exclusion of the weak, old and infirm. For the first time this programme sets out measures to tackle these social scourges of the recent past. The Minister told us this morning that no one owes us a living. That is true. For that reason we must continue along a careful path. Failure to meet the challenges which lie ahead will damage our future.
The work which has been put into this plan is in the national interest. Partnership has been of tremendous assistance to economic growth and we must nurture it to ensure it continues. I welcome the commitments on taxation, child care and social welfare and the improvements for the low paid. We did not do enough in the past to tackle the plight of the unemployed. I welcome the measures which will assist in removing the young and those starting work from the tax net.
I look forward to the publication of the Finance Bill to see what detailed measures are provided in it. Perhaps we will be more critical, although in a constructive way, of the Finance Bill than we are of the new national wage agreement. Maintaining the positive aspects of our growth and distributing the fruits of that growth in a fair manner are important national goals. Ireland has a unique approach to forging consensus through the social partnership approach. The management of social partnership by successive Governments since 1987 has been a real success story. I agree with Fr. Seán Healy of CORI when he says that the development of social partnership supports the democratic process. This agreement endorses the rights based approach outlined in the NESC strategy document, Opportunies, Challenges and Capacities for Choice. It recognises social, economic and cultural rights. It is broadly based, hugely comprehensive and points the way to a fairer society. A fair distribution of the available resources is addressed in this agreement.
The agreement deals with sustainable development, development which meets the needs of the present without compromising the ability of future generations to meet their own needs. The programme states that there is a need to ensure that the achievement of improvements in living standards in the shorter term is consistent with the long-term sustainability of economic and social progress, including protection of the environment.
I am glad to note that the agreement offers cumulative pay rises of up to 20.5% for the low paid and 15.75% for others, and tax cuts of at least 10% by 2002. It is the best attempt yet at ensuring everyone shares in the prosperity we have gained. All of us have heard complaints from those who feel they have not been touched by our economic success. Hopefully this agreement will change that. Tax cuts worth £1.5 billion over three years are provided while the same sum is provided for measures to tackle social exclusion. People earning less than £200 a week will be exempt from PRSI. The introduction of a benchmarking review body is another important innovation.
It is laudable that 80% of taxpayers will not be subject to the higher rate of income tax. I welcome the idea of enhanced consultation when examining major tax policy initiatives. Perhaps we have reached a time when we could move to a system similar to that in the United States, where a committee of Congress assists with the formulation of the budget. We should strive for a uniquely Irish version of such a system, as we did with social partnership.
The commitment that budget tax packages will be poverty proofed is also welcome, as is the aim to remove over a period of time all those earning below the minimum wage from the tax net. Many commentators have already described the agreement as the best deal for workers and people on low incomes. Senator O'Toole and Mr. Peter Cassells have both said as much. That is true.
We are faced with a difficulty in that we are debating a document which has not been distributed yet. When the social partners reached agreement in the past it was fruitful for the economy and most people clearly benefited by it. I welcome much contained in the speech of the Minister for Finance, Deputy McCreevy. It augurs well for the future that the main players in the economy are consenting to this and that more people will be better off at the end of the agreement.
The Minister spoke about equality, child care and family friendly policies. I see a trend developing about which I am concerned. One of the problems with the economy is there is a shortage of unskilled and lower skilled labour at certain entry levels. If one goes around Dublin one will see notices seeking workers in every second window, and such workers are not available. The agreement will obviously encourage more people to go out to work. One of the categories of people who are returning to the workforce or entering it for the first time are young people between the ages of 18 and 26. Many of these people would have been unemployed for a long time, did not get a good start in life, and a significant number of them are single parents or mothers.
In my area, County Louth, on returning to work such people who had a medical card are under active review. There is nothing wrong with the health board reviewing medical card guidelines, but why is that sector being targeted specifically? I am endeavouring to find the answer to that question. I am to receive a telephone call in about five minutes to explain the reason but, as I understand it, medical card reviews do not take into account the child care costs a young mother incurs if she goes out to work with the result that hundreds of people are losing their medical cards on re-entering the workforce. That is significant because while the economy needs them, people who want to get out to work are finding it increasingly difficult to do so if they lose their medical card rights. This is happening in County Louth and I am trying to determine if it is a policy all over the country; I do not know the answer to that yet. It is a significant problem for a group in the community who could clearly be identified with the Minister's headline, equality, child care and family friendly policies. This is not a family friendly policy and it does not encourage people to re-enter the workforce. I do not have the details of the national wage agreement and I do not know to what degree there has been an input into that area, but we as a community must insist that this would change and that there must be sympathetic and positive recognition of mothers' entitlement to medical cards and other benefits on re-entering the workforce. This will have an important impact.
A mother complained to me about her daughter. She is a chronic asthmatic who suffers from eczema and cannot bring her two hands together due to the pus and discharges. She has a part-time job – she works five days a week for less than five hours – and she has lost her medical card. That is disgraceful and that is replicated all over my county. I want something done about it. I do not want this just to be an empty comment; it is something which I intend to pursue and on which I intend to campaign. I would hope that the people who were involved in this plan would look clearly at this issue because this will apply everywhere. The medical card guidelines apply to each and every health board area. The Government must encourage these people. The economy needs them. The people want to work but if by going out to work they are faced with bills which they cannot pay, that is putting them at a serious disadvantage. I want that addressed.
This is a significant group in society and they deserve to be mentioned also in the context of housing. Never was there such a need for local authority housing. Never were so few local authority houses being built. If the Government wants people to work in the economy, it must provide them with decent health care and housing. Society is becoming far too selfish. It is being driven by forces outside of family interests in some respects. The Government is failing miserably to provide adequate health care and housing for people at whom this welcome document is aimed who are so badly needed in the workforce. I would urge a rethink of Government policy at the top. To have a happy workforce, it must be healthy and well housed. That is patently and obviously not happening. There needs to be a serious redirection of Government policy in this area. There is a need to redress the clear imbalance in society now.
I welcome the Minister of State at the Department of Public Enterprise, Deputy Jacob, to the House on this positive occasion. I compliment all the social partners to the national agreement, Programme for Prosperity and Fairness, and hope it will be accepted by the trade unions.
As previous speakers stated, earlier national agreements have served the economy well. It is important to mention people like Mr. Des Geraghty, Senator O'Toole, members of IBEC, officials, the Government, other social partners and the farmers who have participated in the negotiations on this agreement and came up with a worthwhile document. It is generous in the sense of treating all its people in a fair way and it deals with the problems and the needs of a growing economy. The agreement contains a tremendous challenge for all the partners to ensure that every aspect of it works. It is an integrated plan and it covers all areas. If any aspect of it comes undone, it will have an effect on the overall outcome in all the sectors.
In the past there were substantial national strikes in different sectors. The great challenge now is that the trades unions, the workers, employers, the people and the Government can focus on the working of the agreement. They can drive their energies in specific ways which will attain the targets set in the agreement. That, in itself, is a great focus and it is important to the success of the plan and to the future success of the people.
I listened to Fr. Seán Healy of CORI speak about this plan on the radio. I welcome the social inclusion provisions in the plan and the interest which is being taken in the changes in the economy. New needs arise in a changing economy and they are addressed in the agreement. It is important that the people see they are part of the planning process of economic growth, they will be treated fairly in this plan and their interests and aspirations can be dealt with in a fair way.
The last three months of work by the social partners have been worthwhile. The plan sets out the social and economic vision for the future of Ireland for the next two years and nine months. The Government has set out a system of economic and social objectives. Prior to this, there was a feeling that because of the country's economic progress, it would not be possible to conclude a new agreement. While those feelings were widely publicised, they have proved to be unjustified. I compliment the negotiators of the agreement on their commitment to the long-term wellbeing of our people.
In entering into these talks the Government recognised the need for certainty about the development of the national pay bill over the period of any such agreement. One objective of the agreement was to have stability and peace within the industrial sector, while another objective was to advance the process of public service modernisation. I compliment the public service unions on taking on this aspect which examined the purpose and type of public service that is provided within the parameters of the strategic management initiative. It is very far seeing of the unions concerned to incorporate such elements in the agreement and it can only improve the way in which we serve our citizens.
This programme has targeted key areas. It offers substantial tax reductions to low-income earners and it was obvious that we needed to deal with this aspect of the economy. It has now been dealt with both within the terms of the budget and within this plan. The programme introduced a new national minimum wage of £4.40 per hour, which will be increased to £5 by 2002. While this is a very positive and to some extent adventurous move, it establishes the benchmark for a minimum hourly wage rate and is part of the overall plan we are focusing on.
The new national agreement sets out a 5.5% pay increase for 2000, 5.5% for October 2001, and 4% for October 2002. Those figures are achievable and demonstrate a good understanding of the growth of the economy and of our ability to deliver the targets we have set. Given the industrial peace that reigns in the economy and the overall focus and structure of the agreement, Irish industry will be well served.
The new agreement includes measures to support on-farm investment, including a financial commitment to farm waste management, dairy hygiene, animal welfare, installation aid, the farm retirement scheme and REPS. Within this context there is also a commitment to support young farmers. The Government has made a cohesive commitment through the national development plan to support the agricultural industry. Farm leaders, who have been part of the negotiations on the new agreement, have secured a good future within the plan, along with the benefits already stemming from Agenda 2000. The agricultural sector has an important significance for the economy and the new plan demonstrates the Government's commitment to maintaining as many people as possible on the land.
Substantial progress has been made under the heading of social welfare. The target of £100 per week for the lowest social welfare payment is very positive and, thanks to this plan, the target will be achieved within a short period.
The plan is also welcome in the context of sustainable development. It takes balanced regional development into account, which is an important factor, and I am delighted it has been addressed within the ambit of the plan. The Government will implement an infrastructural investment programme to deliver regionally balanced and economically and environmentally sustainable development. This will be based on a broad definition of infrastructure, encompassing both the economic and social dimensions, as well as prioritising the potential for enhanced infrastructural links with Northern Ireland. The plan sets out in a proper manner the idea of balanced sustainable development – something that we have all aspired to in the past. When one looks at the development of the country it can appear to be imbalanced, but the new plan will rectify that.
The plan sets out firm commitments that at least 50% of jobs created on greenfield sites by the Industrial Development Authority will be in the Border, midlands and west. The Government is firmly committed to this principle and I am glad the social partners have also agreed to it. It means that the development of the State can be cohesively achieved through proper planning.
I welcome the measures within the plan dealing with equality, child care and the family. As has been mentioned by a previous speaker, we have new problems arising from our status as a developing economy. Pressures arise in different areas and, for example, more child care facilities are needed for working mothers. In addition, personal assistants are required to care for the elderly and the handicapped. Rather than building institutional centres, we should be encouraging the provision of hands-on family support, and this sort of thinking needs to be developed within the health boards. The concept contained in the new plan is the correct approach to the matter. We need to provide more services of that kind, particularly for single working mothers in order to enable them to care properly both for themselves and for their children. Investment in that area would not only benefit the economy as a whole but also the well-being of young people and families in general.
The agreement contains a commitment to the elderly. For many years there has been insufficient investment to provide for this growing section of our population, but the programme plans specific capital investment for the development of suitable residential places for the elderly. This commitment is to be welcomed. While we have made progress in this area in the last few years, we need to continue investment there in future.
There is a new approach to educational needs. The idea of setting out and planning our future, setting achievement levels and looking at our weakness and setting realistic objectives within our educational structure is very necessary. It is attainable and we can measure progress by it. The VEC sector can now set out its own management structures and human resource levels. I welcome the changed thinking of unions regarding the concept of adaptability within such services, as envisaged by the plan. The utilisation of human resources in a proper manner will enable us to move forward and grow in a fast changing economy.
I welcome the genuine commitment of the Government and the partners in the plan to ensuring our new found prosperity will be shared with all the people on this island. That is the great challenge of this plan. I am very proud this document has been put together in such a careful, concise and fair way for all the people of the State. There is a great challenge in it for the Government and the workers of the State.
I believe we can achieve the targets set out in the programme and that it will lead to greater growth and economic satisfaction throughout the State. We can, through the investment under this plan, alleviate some of our current problems, such as the imbalance in development in our cities and the lack of infrastructural investment. This investment programme will go a long way towards substantially improving the economic life of this State in a fair and balanced way. When we look back on this plan in two years' time, we will see the positive changes it will have brought to our economy.
This may not be an ideal time to speak on this programme, in that many of us have not seen the full document. Senator Coghlan had an opportunity to see it but Senator O'Dowd expressed his difficulties in doing so. However, we have had a good opportunity to debate it today because the Minister, Deputy McCreevy, took the House through it this morning.
I welcome the Minister of State, Deputy Treacy. I was delighted to hear the Minister, Deputy McCreevy, this morning and I listened very carefully to what he said. He said that no one owes us a living, which is an important element of this partnership. I looked for certain pointers in the agreement. I looked first for the pointers in regard to social exclusion and the have-nots, those who have been left behind by the Celtic tiger. I was glad to see steps were being taken but I have some questions.
It is worthwhile to remember one particular aspect of the minimum wage. It is very hard to criticise an increase in the minimum wage. However, we must remember the economics of the statement that no one owes us a living. Some jobs do not exist once they become too expensive.
An article in today's Financial Times paid huge compliments to the success story of the Irish economy. It said that more jobs were created in the past three years in Ireland than in the three decades before, which is a great success story. However, it went on to describe the owners of a factory opening in west Dublin deciding to put in equipment rather than people to do the job. I mention that because many businesses cannot survive once wages reach a certain level.
Last year I pulled into a filling station where I regularly get petrol, but on that occasion there was no one to serve me as it had gone self-service. I am a great believer in self-service but in this case I was a bit lazy and I would have preferred to have someone serve me. I talked to the owner who said – it had nothing to do with the national pay agreement – he could not get people to work at the rate he needed to pay them if he was to succeed, and if he paid them the higher rate he would go out of business. Therefore, he had switched to self-service, which meant those jobs no longer existed.
The reason I have gone to some pains to talk about this is that I think those are the economic facts of life. The Minister spoke about social inclusion. We must remember that if we do not take those facts into account, some of the jobs for the socially excluded will not exist. We must find a way to encourage people to take jobs and to ensure those jobs will continue to exist. The important aspect is take home pay.
I was disappointed by the Minister's statement that, "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". We are talking here about a minimum wage probably in the region of £5 per hour within two years. The phrase, "It is an agreed policy objective. . . . that over time. . . . " is very wishy washy. I would have preferred to see the efforts put into ensuring we got there much earlier, by bringing those who are socially excluded into the net through creating jobs.
I am impressed by the change from the last agreement, which talked about profit sharing, to the references in this one to "gain sharing". I like that term. This agreement also refers to profit sharing, of course. However, I fear that concentrating solely on profit sharing can sometimes encourage businesses to take a short-term outlook. Those involved in those businesses sometimes benefit from the short-term outlook of making a profit this year, although it might not be the right thing to do in the long term. I much prefer the term "gain sharing", which I had not heard before and I congratulate those who came up with it. The other pointer I looked for was inflation, which I will discuss later.
I am enthusiastic about the success of the agreements we have had over the past 13 years. I have just returned from the United States and it was interesting to see the envy of the world focused on Ireland, with people asking how we managed to get this success. That has all sorts of other benefits. An interesting benefit is that, as the Minister of State may have noticed, until a couple of years ago, if someone on British television wanted to tell a joke about somebody stupid it was about Paddy the Irishman. I have not heard a story about Paddy the Irishman being a thick for the past couple of years. Suddenly the world has changed. We have also succeeded in many other areas, such as culture, art, dance, music and literature, although we are not quite so successful in sport, certainly not in rugby if last week's performance is taken into account.
The big change, which was touched on by Senator Coghlan, is from a national pay agreement to social partnership. The difference between the two is that the new social partnership involves a whole range of players. It is not just a deal between employers – who include Government – and unions but brings in far more of the stakeholders in society, such as the farmers, to whom Senator Chambers referred; it brings in Government, not just as an employer but because it raises our taxes and directs the overall economy. That is good. However, it also brings in the excluded – and here we think of the words of Fr. Seán Healy of CORI – such as the have-nots, the old, the young and the poor.
The first efforts at social partnership were not very successful because they left those people out. The haves, who were generally the employers and the unions, divided up the cake between them and the have-nots were left outside, looking in to see if they could get a share. We have moved on somewhat from those days, particularly this time.
It was interesting last Monday to hear the Taoiseach speak about social justice, when he referred to the £1.5 billion we are putting aside and the aim of ensuring anyone on social welfare will receive a minimum of £100 per week. These are steps in the right direction towards trying to help those who have been left behind, but I have some questions about them.
Most of the have-nots are now inside the tent and their voices can be heard. However, I am not sure if their voices have been listened to enough. It is, at least, arguable that this new agreement should have directed much more of the cake towards remedying that area of social disadvantage. That would have made sense socially and economically because it would not have added to the fear I have of overheating and stoking inflation, which is occurring. Instead, it would work at reducing problems which, if we are not very careful, could totally destroy our prosperity further in the future. That is why I would prefer to see it move in that direction. I welcome what the agreement will do to address disadvantage but I wish that pillar had taken more resources from the other measures which I believe are undesirable for the future of our economy.
Let us move on to the second key element which makes social partnership different from the traditional national wage agreement. It throws more into the pot than wages. Social partnership is about coming to a deal on everything which affects the total outcome, including wages, taxes, investment, social spending and profits. Even more important is that at the heart of it is trading off one against the other those elements of the bargaining process. The clearest example is the trading off of wages and tax. A wage agreement focuses only on the gross amount of pay and matters of tax are left to another day. However, social partnership quite rightly says that it is not gross pay but take home pay that matters. There is no point increasing gross pay if take home pay does not go up also. By realising that we have in recent years learned to trade off wage increases and tax cuts by focusing on what people had in their pockets to spend.
We went further and realised that there was no point putting more in people's pockets if the real value of that money was eroded by inflation. We learned to trade off wage moderation against inflation so that the pound in a person's pocket continued to be worth a pound. That is what we have been doing over the past few agreements and it is working well.
My point is simple – at the heart of the success of social partnership is trading off wages, taxes and inflation. By juggling them at the same time, we can increase purchasing power much more than if we simply push at the single goal of raising wages as much as we can. That is the problem and where my criticism, concern and worry about this lies.
The problem with the agreement before us is that this central concept of trade-offs appears to have been abandoned. We have forgotten the lessons we learned about social partnership over the years. Instead of setting wage increases against tax reductions, we have massive handouts in both directions. There is no trade-off – we have done both at the same time. There has been no trade-off particularly with the third element, inflation. One brings inflation into the picture by behaving in a manner whereby inflation is discouraged and not encouraged. We have not done that. By going, as we have done, hell for leather on wages and tax cuts at the same time, we will give inflation the best chance it has had for the past 15 years to take off and get out of hand. Not even social partnership will enable us to have our cake and eat it. That is what we are in danger of doing here.
In comparison with previous programmes, we have much less room for manoeuvre now. We are now in "euroland" and do not have control over our interest rates, and there is nothing we can do about that. Here we are, of our own free will, throwing away the only club left in our bag, that is, the ability to rein in the economy through fiscal controls. We have lost the ability to rein it in through interest rates but could do so with fiscal controls. However, we have thrown the two of them away and we now have a problem. Meanwhile, the spectre of inflation – we talked about this a couple of weeks ago – is already thundering at our door and is clearly in danger of knocking it down. Overall, it is not a recipe for continued success. We need to keep a close watch on it as we have thrown away some of the weapons we had.
I have two final points – one possibly good, while the other is possibly bad. Previous agreements suffered from two vices in particular which undermined their very effectiveness. One is the public sector, private sector divide where the public sector has effectively done its own thing in the face of whatever agreement was there. This time we have the new idea of benchmarking and the idea is that it will prevent this. If it works, fine but the track record is not very good.
We are weak on benchmarking
Various Governments have been inept in fighting their own corner. The smart money now must surely be on the public sector unions finding a way to drive a coach and four through it. I hope not, but it is a concern.
The other vice from which this process suffers is that at the stage we are at now we lock the employers into the agreement but the agreement of the unions and their members is still open. Inevitably, that will produce more demands in the near future because dissenters have nothing to lose. Their dissent is not even likely to collapse the agreement as a whole. Picture what will happen. Some unions will hold out for more and we will have more weeks of this sham tension which annoys people so much.
We are not looking at the Programme for Prosperity and Fairness because we only have a draft. I do not mean a draft in as much as we have not seen the final programme, but the final programme will not have the numbers written on it for a couple of weeks. I hope it will only be a couple of weeks because it has to be agreed by both sides and only one side has agreed. Let us not do any sums yet because the final figures are not in. For those of us who believe the existing figures do not add up to a sensible programme, the prospect of even worse figures is hardly something to which we will look forward. I am a fan of the programmes and believe it is the right way to go but there are words of caution, concern and warning. Let us make sure we get it right this time.
I welcome the Minister of State to the House. I compliment the Ministers, Ministers of State and the Taoiseach for the part they have played in ensuring we have a new agreement. We are all agreed that it is most important. When negotiations began in November last, many cast doubt on the ability to conclude a new agreement to succeed Partnership 2000. Negotiating an agreement, particularly against the background of our rapid economic growth, posed different challenges to the process. This viewpoint, however, failed to take account of the strength of the commitment to social partnership.
Over the past 12 years, since the first national agreement was put in place in 1987, the people have seen the substantial benefits of social partnership. There can be little doubt that a crucial ingredient of today's economic success has been the social consensus which began with the first of the new comprehensive national programmes. The social partnership approach has produced the much needed recovery from the disastrous early and mid-1980s and has underpinned a sustained period of growth since then. The record of social partnership is impressive. It is a record of achievement and it has brought about positive change and, most importantly, it has the potential to provide a renewed framework for further prosperity, fairness and full employment.
There were many key challenges facing the social partnership process. The first was to ensure everybody can feel the benefit of social partnership recognising that for many people poverty and social exclusion are still a stark reality. That is a point we have tended to forget in recent years. The second was to bring about real and tangible improvements in living standards, not only in terms of income, but across the issues affecting the quality of people's lives such as housing and transport. We are all very aware of the problems with housing and transport. The third was to master the challenges posed by the information revolution, globalisation and EU enlargement, which dominate our changing world. I am confident this agreement, the Programme for Prosperity and Fairness, will address these challenges and provide a basis for solid progress, moving forward economically and socially.
The programme is most comprehensive and it is ambitious. It addresses a number of simple but powerful truths. First, we must constantly reposition ourselves if we are to move steadily forward into the winds of economic and technological change. Standing still is not an option – if we try to stand still, we will be blown back to the bad old days of the 1980s when our country was as near to bankruptcy as made no difference. Second, the agreement recognises that people have an entitlement to share in the fruits of our new found prosperity for which we have all worked so hard since the partnership process was launched in 1987. Third, it recognises that our economy and society can continue to prosper only if everybody has the opportunity to play their part and realise their full potential.
The programme is founded on key macroeconomic goals of stabilisation, growth and social justice. These are important goals to underpin economic growth and maintain domestic and external confidence. They provide for increased living standards and reduce social exclusion in a manner that will be sustainable over the long term.
Along with this programme we have the national plan, which was unveiled recently by the Government. It provides for the investment of £40 billion over the next six years. That is of major importance and it stands favourably beside this agreement. Recently there was also a review of An Action Programme for the Millennium, which provides the political basis for Government action over the rest of its term.
Taken together, all these measures would support the achievement of the objectives which the National Economic and Social Council put forward recently as a vision for a new Ireland. The Programme for Prosperity and Fairness is fundamental to ensuring that we reach our goal of channeling the benefits of prosperity to people while furthering economic growth. It sets out key responses to the challenges of competitiveness and change. It sets out a clear blueprint for adapting to the information society. It addresses the problems that accompany our rapid economic growth, with which we are all familiar, traffic congestion, difficulty in purchasing land for housing and in buying houses due to price increases and the shortage of supply, the shortage of quality child care places and the shortage of certain skilled personnel.
Those of us who are members of local authorities are very aware of the shortage of skilled people, such as engineers. Engineers are in the fortunate position that, for the first time in many years, they can leave what at one time was a sound and secure job in a county council to take up jobs in the private sector that offer better pay and conditions. Who can blame them? It is a worrying trend in terms of whether we will be able to sustain the level of skilled labour required at a time when we have so much money to invest.
The Programme for Prosperity and Fairness does not shy away from these issues. It sets out a process and measures to tackle them effectively. It will enhance our economic prospects, improve living standards for all and tackle social exclusion urgently and effectively. Many political commentators and political parties have spoken about social inclusion during the past 12 to 18 months. It became a buzz word. It was very important but I compliment all concerned, particularly the Taoiseach and the Government, for addressing the issue head on and extending to those who were marginalised the benefits of our Celtic tiger economy.
I wish to comment on a few of the more important measures in the programme. Competitiveness is a core theme. The programme identifies some key competitiveness challenges for Ireland. To meet these challenges we must secure a leading position in the emerging information society, promote lifelong learning as a national priority, move up the value chain of economic activity by investing in research and development, innovation and upskilling, continue to reform our regulatory and competition systems and modernise the public service to ensure the provision of quality services lies at the heart of all public service organisations.
The programme also contains a package of measures to develop key sectors of the economy, including indigenous and foreign owned industry, small business and services, tourism, construction, energy, the food industry, forestry and the marine sector. The policies in place are designed to maximise the potential in these sectors over the period of the programme. As regards agriculture and rural development, it is great that the agricultural sector will also be rewarded and took part in the negotiations. The negotiations involved many more sectors than the trade unions, employers and Government, and that is very positive.
The new programme also reflects the shared commitment by the Government and the farming pillar to the continued development of a competitive high quality, high value agricultural sector, which will ensure an increase in living standards for farm families in line with increasing standards in other sectors of the economy. We would all agree that the living standards of farm families have not been in line with those of other sectors for a number of years and it is welcome that they will be brought into line. We welcome the measures in the agreement for farm families. The package for this sector involves continued investment in agriculture, policies for individual product areas, a deepening of the standards of services provided to farmers, a renewed effort to eradicate animal diseases and a taxation system that underpins the long-term viability of the sector. The provisions in the programme on rural development, the food sector, the marine sector and forestry together with measures to combat rural poverty will help ensure that a thriving rural economy underpins a vibrant rural society.
The programme contains a major package of measures to address the needs of people on low incomes, including a national minimum wage, increases in basic pay, reduced taxation, social welfare increases, training and pensions. These measures are important and much more than pay is involved.
The agreement associated with the programme provides for progressive increases in the national minimum wage and significant minimum increases in the basic pay in each phase. The personal tax package will produce substantial increases in real take home pay at all income levels. Making a difference in what people bring home in their weekly wage is what it is all about and what people want.
The rates of social welfare will be increased in real terms and substantial progress will be made towards targets for the low rates and for child benefit. I welcome the increases and the inclusion of social welfare recipients. They are becoming fewer and fewer as we are quickly reaching full employment but a certain number of people are totally dependent on social welfare. It is incumbent on us to ensure those people can enjoy a decent standard of living and that they are well treated.
The pay terms associated with the programme are reasonably balanced between necessarily divergent objectives. Over a period of two years and nine months increases totalling 15% have been agreed. The terms are particularly appropriate in the context of a multi-annual agreement. I welcome, in particular, the clear commitment to developing partnership in the workplace and to the continued partnership approach to the modernisaton of the public service.
Housing is an important issue. The infrastructure bottleneck affects the housing market. The Programme for Prosperity and Fairness addresses the growing need for social and affordable housing and the need to improve the physical condition of existing social housing stock. The measures include the establishment of a housing forum comprising representatives of social partners and relevant Departments, the expansion of local authority schemes to build 22,000 local authority homes in the next four years, enacting the Planning and Development Bill, 1999, to remove obstacles and delays to housing developments, increasing voluntary housing output to 5,400 units over the period 2000-3, continued investment in improvements to local authority houses and inner city flat complexes, a targeted initiative for homeless people, estate management programmes involving increased tenant participation in partnership with local authorities and their staff and an initiative to address issues of security of tenure.
With regard to child care, the programme recognises that policies to support child care and family friendly life are a cornerstone of future social and economic progress. It includes, among other measures, a commitment to a substantial increase in child benefit over the period of the agreement with a priority focus on progress towards £100 per month for the third and subsequent children. Before the end of the year the Government will take decisions on an equitable framework to support parents with child care needs. Its commitment to do that is welcome.
The Programme for Prosperity and Fairness will involve a concerted effort to overcome one of the major quality of life issues confronting us, the transport and infrastructure bottleneck. This includes the largest ever investment programme in our national public transport system, a new and faster approach to building national roads and motorways and the establishment of a new public transport partnership forum.
Quality health care is of national importance. The programme sets out an ambitious package of measures to improve the nation's health status. It is aimed at keeping people healthy and providing adequately for their needs if they are sick or disabled. The programmes includes a series of measures for targeted health promotion and preventive strategies. Major capital investment is also planned under the national development plan through the upgrading of facilities in the community health sector. Initiatives are set out to address specific needs in the areas of the disabled, women's health, children and travellers. Measures are being put in place to address skill needs within the health sector and the welfare of health service workers. Taken together, the implementation of the programme's health package will make a significant impact on the quality of life of all of our citizens, particularly disadvantaged groups.
This programme is about people. It is about ensuring that everyone gets a fair share of the prosperity that we have gained to date. The phrase "Celtic tiger" has become very common but I have met a lot of people in the past couple of years who have not benefited. That is sad because while some people benefited from its spin-offs, other people did not. This agreement is a huge effort to ensure that all our people can benefit, make a contribution and be helped to realise their potential. It is about making sure that we can prosper and grow in the future. It is about giving people the confidence based on education and training to embrace the opportunities offered by technological change. It is also about ensuring that everyone has a chance to play a full part in the economy and society and to live their lives to the full. It is about people living and working here, whatever their circumstances, religion, colour or sexual orientation.
Industrial peace was mentioned by some of my colleagues. It is marvellous to know we can look forward to the next couple of years with a guarantee that there will be industrial peace. We all have seen strikes in our time. Recently we had the nurses' dispute which dragged on for a while. There are no winners after a strike when workers take account of what they lose in their wages and compare it to what they have gained by way of an increase in pay or other terms. Much acrimony is created. Disputes are bad for the worker, their job, the economy and the country. Farmers also had a dispute recently. Disputes take from the day-to-day working of the country. We should be doing positive things rather than using up our time to settle industrial disputes. With this agreement I can say we will have relative industrial peace.
With regard to the promotion of North-South partnership, the social partners will seek to work with all relevant interests to realise the vision of the Good Friday Agreement and the structures arising from it. They will do that by supporting full implementation of the Agreement and by promoting dialogue between the North-South Ministerial Council, the implementation bodies and the social partners in the pursuit of common action where mutual benefit is perceived. We have seen many cases of mutual benefit in the past few months. The interested parties, Northern Ireland Ministers and our Ministers have worked closely together and that has resulted in benefits. Long may it continue.
We are actively examining the ways by which the views and expertise of social partners may best be utilised in building co-operation between the North and South and between Ireland and Britain. The Comment Chapter of the NDP refers to developing opportunities for co-operation, making maximum use of EU funding under INTERREG initiatives and the peace pro gramme and promoting human rights. It is important that we can refer to the North in this context and that what will happen will be good for it.
I congratulate all the social partners, officials, the Cabinet and the Taoiseach on the fantastic job they have done in a short timespan in bringing forward this agreement. Many people doubted that this could happen. It has happened, it is good for everyone and I welcome it. I trust it will be ratified by all the various organisations. It has been accepted already by some of them. Other groups have not ratified it yet but I am sure they will.
It is great for Members to have the opportunity to debate this agreement. On the Order of Business we were reminded that the agreement was finalised early on Monday morning. That caused its own difficulties with regard to distributing copies to Members but that problem has been overcome. I am glad to have had the opportunity to debate this today and not in 12 months' time. It is good to have the Minister present to listen to our views. I am sure Members will listen to his views with interest. I hope everyone concerned will reap the benefits of a worthwhile agreement.
Cuirim fáilte roimh an tAire go dtí an Teach seo agus cuirim fáilte roimh an comhaontú pá freisin.
I compliment the various participants in the national agreement. A number of Members, including Senator Quinn, said it was anticipated that it would be more difficult in the current climate to conclude an agreement that would satisfy all the social partners in comparison with the background when national pay agreements were first initiated. At that time we had excessive Government spending, significant national debt, high unemployment and high inflation. The climate has now been reversed and that is in no small measure due to the contribution made by successive agreements to our current economic boom.
The negotiations were difficult for many of the participants. Members alluded to the fact that businesses were anxious, even though they are doing well, to ensure that nothing would be included in the agreement which would undermine the foundations upon which economic growth and the success of the business community had been predicated. Unions were also anxious to ensure that their members, who had made a significant contribution through their hard work to Ireland's present status, would enjoy the benefits that accrue from that.
Senator John Cregan mentioned the agricultural community. In the past few years they have had extreme difficulty in getting value for their products. As a consequence their incomes have fallen. That trend is expected to be reversed this year and they should see a return to better days.
When one puts all those issues together the commencement of the talks did not give rise to undue optimism regarding a successful outcome. The agreement is an indication of the maturity that has been reached in all sectors of society as to the best way to secure the interests of all sectors. Over the past 13 years people have worked together in a co-operative fashion and they now realise that that is the recipe for the success we enjoy today.
It is appropriate in this debate to remind ourselves of the architects who had the vision to embark on a unique arrangement when it was introduced in 1987. I compliment the former Taoiseach, C. J. Haughey, even though it may not be fashionable or politically correct to do so. He made a major contribution. His leadership skills were evident when he led the Government that engineered the first national agreement, in which he was ably assisted by Ray MacSharry, then Minister for Finance. He made a pivotal contribution.
And the Tallaght strategy.
Yes. I acknowledge that because it is true. The then Minister for Finance did a lot to correct the profligacy of the Administration that preceded him but Charles Haughey saw where the best interests of this country lay. He played his part. The current Taoiseach, as Minister for Labour, was also highly instrumental in bringing together the various strands of the first national agreement.
As the Acting Chairman stated, great credit is due to Deputy Dukes who must have been uncomfortable with what took place under the leadership of Garrett Fitzgerald from 1982 to 1987 when the national debt doubled. Deputy Dukes played his part in reversing the damage that was done during that era by supporting the minority Fianna Fáil Government in taking the necessary decisions which have undoubtedly laid the foundations for our current economic success. It is a pity his party, in its subsequent dealings with him, did not show a higher appreciation of the contribution he made.
The headline aspect of any agreement of this nature is the terms of the wage element attached to it. Senator Quinn and others alluded to the level of wage increases which are undoubtedly high at 5.5% for the first 12 months, 5.5% for the second 12 months and 4% for the final nine months of a 33-month agreement. It must be stated that wage increases since 1987 have been quite modest and this has contributed enormously to the competitiveness of Irish industry. It was, therefore, reasonable to expect that, given current level of economic growth and business performance, workers would expect higher incomes.
All sectors of society must enjoy our current success and we must ensure that the wealth is dis tributed fairly. Some people say it must be distributed equally but that is not correct. The distribution of wealth should be in accordance with and in relation to people's contribution to the development of the economy. Obviously, the level of such contributions is unequal. Having said that, as a fair republican society we must ensure that all elements and strands of the community are catered for under any national agreement. That is certainly the case with this programme.
While the level of wage increases may fuel inflation, there are methods other than wage controls which could be used to reduce the level of inflation. Of all the economic indicators at our disposal, the one which seems to be flashing amber is our inflation level. We are top of the European league in that regard and it is imperative that we endeavour to reduce inflation so that it comes into line with the European average as soon as possible. Interest rates and other such fiscal mechanisms are no longer available to aid us in this and it is important that we work assiduously to achieve our goal by some other means.
It is interesting that a number of economists, rather than criticising the level of wage increases as being inflationary, have commented that they may have the effect of slowing the economy. There are those who argue that this needs to be done in a gradual way, rather than allowing the economy to overheat. The most serious difficulty with which we might then be confronted could be a complete shortage of labour.
The direction in which we are proceeding is correct. We have also applied the practice which has been part of each agreement, but which has been a significant part of this agreement and its predecessor, namely, coupling the reform of the taxation system to reduce the burden with reasonable wage increases in order to improve people's living standards. It is significant that, over the 33 months of this agreement, take home pay may increase by up to 25% – the figure may be higher for certain workers – when the benefits of actual wage increases are coupled with changes in taxation.
The Minister for Finance has indicated that he intends to remove 80% of people from the top rate of tax. As a result, 20% or less will pay tax at the top rate. That is an important and desirable objective which brings into focus the fact that the process of individualisation – the social partners have agreed to this – should continue in the future. Individualisation is a necessary step with definite benefits. It was obviously inequitable and unacceptable that single people on the average industrial wage were obliged to pay tax at the higher rate. The only way to tackle that problem was to increase the bands on an individualised basis. However, while it can be argued that a married couple, both of whom are working, incur costs greater than those incurred by a single income household, it can equally be stated that the costs incurred by the latter exceed those of a single person. When individualisation is being considered, we must ensure that single income families pay tax at a rate somewhere between those of double income families and single people. If single income earners and single income households are linked under our tax regime, we will do an injustice to the family. I hope that does not happen.
I note the emphasis on competitiveness in the programme. Over a number of agreements, wage increases have been used as a floor from which other special increases were obtained in the public sector. This has given rise to significant and rampant increases throughout the public service. The issue of cross-sector pay relativities and the attachment thereto will be tackled by modernising the approach taken in the public sector. That is a welcome development. There are many skilled people working in the public service who make a tremendous contribution while, as with any workforce, there are others who do not do so. We must ensure that a meritocracy, similar to that which obtains in the private sector, is established in the public sector.
In the private sector during the past two years, because of the shortage of skilled labour, companies are making special deals in order to retain key categories of employees. If we do not remedy that shortage, it could undermine the competitiveness of Irish industry. This agreement, to some extent, will help avoid the special increases to which I refer.
I welcome the provisions in the agreement which deal with low income earners. I applaud the inclusion of minimum payments of £12, £11 and £9, respectively, over the three phases of the agreement for those on low incomes. The introduction of the national minimum wage is overdue and I compliment the Government on the courage it has shown in putting this initiative in place. The fact that the minimum wage will rise to £5 by the year 2002 is a welcome development. Low income earners will also benefit from reduced taxation. Reform of the social welfare system – child benefit payments, old age pensions, etc. – will be tackled as part of the overall programme. That is a step in the right direction.
Senator John Cregan alluded to the country's transport and infrastructural needs. The House debated that matter on previous occasions, particularly in relation to the national development plan which contains a significant commitment to address Ireland's infrastructural deficit. That deficit must be tackled on an all-island basis.
Escalating house prices are of concern to the Government and the social partners and I note with interest that there is a section in the agreement which specifically deals with this issue and calls for 22,000 local authority houses to be built in each of the next four years. This represents a significant increase on the present position. The Planning and Development Bill, 1999, was welcomed by all sides of the House and contains the courageous provision to allow builders and local authorities to come to an arrangement to provide affordable housing for those in need. Such a comprehensive and energised approach will allow us to deal with the housing problems. It is interesting that the issue of estate management is also included in the agreement. Estate management has been an important component of social housing with voluntary groups and we are now ensuring that local authorities will be to the fore in this area.
The issue of child care has been topical over the past 12 months and in the run up to the budget, and has been identified in the agreement. An effort will be made to reconcile work and family life and to ensure that adequate child care facilities are put in place in the private and community sectors. We are moving in the direction of what has been happening in the rest of the western world. I referred to our skills and labour shortages and it is important that we have the facilities which enable both partners in a marriage to pursue a career, to make their contribution to the economy and to benefit accordingly. Child care is a very important element in this objective. This country has historically placed great emphasis on the family but the social fabric and the ways in which the family will function will change in the future. As this occurs it is important that the value system instilled in us is not lost in any rearranged system and resources are essential to guard against such an outcome.
Any self-respecting republic must have regard for the quality of the health services it provides to ensure it caters for the well being of society and that those on low incomes have services available to them on an equal basis. I would hate to think that we would move towards the American system where those who do not have financial resources are disadvantaged in terms of access to health services. Our ethos would not welcome or allow such a transition.
The PPF also includes a health promotion strategy and it is important that we inculcate a commitment to healthy living in all sectors of society. It is well known that many health promotion strategies are not put into practice to the same extent in low income brackets as in higher income brackets. There is a need for a programme of education to address this problem. The adage that prevention is better than cure is as valid today as when first enunciated 100 years ago.
The agreement also includes welcome provisions on equality to eliminate discrimination in employment and services. There is the additional challenge of continuing change and the promotion of lifelong learning. Life is not a dress rehearsal; it is the real thing. In order to achieve fulfilment people should have access to these services.
The IFA recently successfully campaigned for an equitable price for its members' produce. Incomes are falling in the farming sector and it is essential to ensure that this sector, which was the cornerstone of the economy over the past 100 years and has been our most important industry since independence, does not continue to lag behind the rest of society.
I compliment the various parties to the agreement. I have no doubt that it was more difficult to reach agreement on this occasion than before. I hope that the agreement will be endorsed by trade unions and employers so that we can move forward and build on our recent success, particularly that achieved in the past four or five years, so that the next generation enjoys a lifestyle our forefathers could only dream of.
I welcome the Programme for Prosperity and Fairness. It is desirable that we have continued the initiative taken in 1987 to try to bring as many areas of social, economic, business, farming and community life together with Government to agree a deal for the benefit of all.
I have always been disappointed that it has not been possible to include Members of the Oireachtas, as distinct from members of the Government, in the partnership. The partnership has expanded since 1987 when it only comprised Government, farmers, trade unions and IBEC. A range of other groups are now involved including the community pillar with 23 participant organisations such as CORI, the National Women's Council of Ireland, the National Youth Council of Ireland, the Society of St. Vincent de Paul, Protestant Aid, the Small Firms Association, Irish exporters, the tourism industry, the Chambers of Commerce of Ireland and so on.
The partnership has expanded considerably from the initial four pillars and I do not know why we cannot find a formula to allow Opposition parties to be involved. These parties are elected representatives of the people. The Government is elected and is represented, but it is not representative of all strands of opinion on economic, social, cultural and other issues. I appeal to the Minister to look at this matter for the future. It should be possible to have a representative of Fine Gael, the Labour Party, and, perhaps, the smaller groups and Independents present at the talks as they have an input to make. All parties are committed to the national programme as a way forward and their presence at the talks would be beneficial and not counter-productive, as the Government seems to think.
The agreement is a massive document and the programmes seem to be getting larger. This programme contains 150 pages, which we received courtesy of Senator O'Toole. Unfortunately, it was not published in time to see it prior to this debate. It should have been available to us at the same time as it was available to the media, but it was not. This document has become larger, and it has been my experience that the larger a document becomes the longer it is on generalities and rhetoric and the shorter it is on specifics. This is the case here. It is long on pay but short on specifics in all the other areas. Between the new partnership and the extended number of organisations and bodies represented, the range of matters covered is enormous. Nothing is forgotten, but the result is that we have ended up with aims, objectives, targets and aspirations, and no specifics relating to very critical areas such as child care, health, housing, transport and infrastructure. What we have is a document that looks factual, but it is little more than thinly disguised fiction.
The background to this document is a budget which was very much skewed against families in terms of individualising the tax system. It was skewed also against the people on low incomes. Those on high incomes benefited disproportionately, given that 2% was lopped off the higher level of tax and that taxation starts on incomes of £107, which is nearly £70 below the minimum wage of £4.40 an hour for a 40-hour week. It was an incredible budget.
We are currently experiencing galloping inflation. On 15 December, the Minister estimated it at 1.6% for 1999. Now we find that it is 3.9%, more than double the European average, and rising rapidly. We do not know how that will play into the system, particularly as so much more money has been skewed in the direction of higher income earners who will spend it on luxury goods. That 50% of our trade is with non-European countries, including the United States and Asian countries such as Japan, or with the United Kingdom, means that we will be importing inflation. It would be okay if most of our trade was with other European countries, but it is not. We are on the edge of Europe. Britain has not joined in economic and monetary union. Therefore, importing luxury goods from Britain will be highly inflationary.
Against the whole plan we have to look at an expanding economy. The figure in the plan is 5.6% per annum. I have no doubt that we will exceed that very comprehensively. The indications are there. Exchequer returns exceeded expenditure by £698 million in January compared with this time last year when the figure was £72 million. That is an almost tenfold increase. Clearly the economy is on a roll, and the momentum is even greater than anybody had anticipated.
Against that background nobody can argue against the wage increases that have been given in this agreement. The agreement is about wage increases and there is really nothing further to it. Looking at its language, everything else is aspiration, what we may, could or should do, what our targets and aims should be, and so on. The wage increase of 15% over 33 months, approximately three years, is modest enough. It certainly will not break the bank. It is quite a significant increase compared with those given under previous agreements when PAYE workers were very moderate in their demands. This is in no sense pay-back time for the workers who produced our prosperity. This will be seen as quite a modest increase. Nevertheless, I am pleased that flat minimum increases of £12, £11 and £9 have been built into the agreement as distinct from the simple percentage increase which was prevalent in previous agreements.
I am not happy that the national minimum wage will still be at £4.40 on 1 April. We could have done better. It is a bit much to have to wait until the end of the agreement in 2002 before a minimum of £5 is reached, and to have a gradual increase from £4.40 to £4.70 only in year two. It would have been better to give a real boost to those at the lower end of the scale. That should have been done in the budget anyway. What we are seeing is what is termed rebalancing, which is a euphemism for rewriting the budget in relation to the low paid. That has been done to the extent of ensuring that 80% of PAYE workers will be outside the higher rate of tax by the end of the term of the national agreement, which is very worthwhile. It has also been done in terms of shifting certain reductions in tax for the low paid to the Department of Social, Community and Family Affairs and imposing it on that Minister, Deputy Dermot Ahern, who did not expect to be the fall guy because the Minister for Finance did not deal with the issue of low pay in the budget and the unions insisted it be dealt with. That is where this wonderful word "rebalancing" comes in. PRSI for workers earning below £226 per week is to be abolished. Those workers will be exempt from having to pay 4.5%, and that will mean a significant increase in their take-home pay. That should have been included in the budget.
In respect of the 2% health levy, the threshold is to be increased to £280, which is £54 more than was intended. That also is being shifted into the social welfare area to be imposed on the Minister for Social, Community and Family Affairs.
The social inclusion measures are part of the rebalancing that the trade unions imposed on the Minister for Finance.
When is it proposed to sit again?
Next Wednesday at 2.30 p.m.