Vol. 392 No. 5
asked the Minister for Labour the proposals, if any, he has made to the Government on the basis of discussion with the Irish Congress of Trade Unions for the next pay round; his views on whether a central pay deal is the best option for the purposes of job creation; and the job creation which has arisen from the present Programme for National Recovery.
25.
asked the Minister for Labour if he has been approached by the Irish Congress of Trade Unions with a view to renegotiating the Programme for National Recovery especially in light of its failure to meet job creation targets; whether he has agreed to such a meeting; if it is his intention to enter into renegotiation of the Programme for National Recovery; and if he will make a statement on the matter.
I propose to take Questions Nos. 22 and 25 together. The Programme for National Recovery was agreed in November 1987 and is now two years into its three year life span. With another year still to run it is too early at this stage to begin the process of negotiating a further agreement. The Irish Congress of Trade Unions have asked for a meeting with the Government to discuss the operation of the programme and have also arranged a special delegate conference for early next year to consider the programme.
In order to build on the progress made to date the Government consider the negotiation of a further programme to be essential. A major strength of the current programme is that it has involved all the main social partners in a consensus approach to tackling the problems facing the economy.
It should be recalled that the Programme for National Recovery was negotiated at a time of economic crisis when confidence was at a very low level. The programme has been directly responsible for the transformation which has taken place over the past two years and has led to the creation of stability and confidence in the economy. In turn, this has created an economic climate conducive to growth and investment.
The pay agreements concluded in conjunction with the Programme for National Recovery have provided for stability in pay bargaining over the past two years and have made a major contribution to the present situation where the incidence of industrial disputes is at an all time low. The pay agreements provided for pay increases of roughly 2.5 per cent in each of the years 1988, 1989 and 1990. In addition, there was a Government commitment to introduce income tax reductions to the cumulative value over the three years of the programme, of £225 million, including an increase in the PAYE allowance costing £70 million. Within that context, the Government undertook to make significant progress towards having two-thirds of taxpayers on the standard rate by adjustment of the 35 per cent band.
Income tax reductions costing £91 million in 1988 and £152 million in a full year were introduced in the 1988 budget. The personal and PAYE allowances were increased, while the standard rate 35 per cent tax band and the 48 per cent rate tax band were both widened, and the general tax exemption limits were increased. As a result of these measures, nearly 63 per cent of taxpayers paid tax at the standard rate during the 1988-89 income tax year.
The 1989 budget introduced further income tax reductions, costing £121.67 million in 1989 and £202.8 million in a full year. The standard rate of tax was reduced to 32 per cent, while the top rate of tax was also reduced; both the standard rate and 48 per cent rate bands were widened. In addition, the general and age exemption limits were increased and a child addition of £200 per child was introduced in conjunction with them.
On a cumulative basis, the total value of income tax reliefs announced in the 1988 and 1989 budgets is over £700 million, more than three times the £225 million overall commitment contained in the programme. Specifically, the increase of £100 in the PAYE allowance introduced in 1988 will cost significantly more than the £70 million undertaking in the programme.
There was a significant moderation in the rate of inflation during 1988; the annual average figure of 2.1 per cent was the lowest increase in consumer prices recorded since 1960. The annual average rate of inflation in 1989 is now expected to be around 4 per cent. Thus, taking the two years, 1988 and 1989 together, inflation will have been broadly in line with expectations in the programme.
Given the combined effects of the standard pay increases and the substantial reductions in income tax there have been marked improvements in real take home pay over the last two years. This improvement in real take home pay cumulatively ranges from 1 per cent to over 5 per cent taking the two years together. On the basis of average earnings in manufacturing industry, increases in real take home pay range from 3½ per cent to 7 per cent. This clearly demonstrates that the living standards of workers have been more than protected to date.
A central aim of the programme was to put the country back on a path to sustained long-term growth, especially in order to expand the numbers at work. The scale of job creation achieved so far has been considerable. At a minimum, 29,000 new jobs were created in 1988 and a similar number are expected to be created this year.
The preliminary results of the latest sample survey of the labour force, released last week by the Central Statistics Office, indicate that the total number at work in the economy in April last was 1,090,000. This estimate, while somewhat below expectations and not significantly different from that for April 1988, confirms the considerable underlying improvement in employment trends over the past two years.
Total employment in April last was 10,000 higher than in April 1987 when present economic policies began to be implemented; this upturn compares with a 76,000 drop over the preceding seven years. The strength of non-farm private employment is very encouraging: it appears to have grown by well over 30,000 in the period April 1987 to April 1989 when one takes into account the 20,000 jobs shed in the public sector as a whole during that period and the fact that the numbers on FÁS employment schemes fell by almost 5,000 in the year to April, 1989.
In interpreting the overall employment figures a number of factors must, therefore, be considered, notably the necessary reduction in numbers in the public sector, fluctuations in participation in special employment schemes and the falling trend in agriculture. When these are taken into account, it is clear that the number of self-sustaining jobs has increased dramatically over the past two years by between 30,000 and 40,000. This reflects growing economic confidence and demonstrates that the ongoing process of budgetary adjustment has been beneficial for long term growth in employment.
A particularly striking feature is the upturn in growth in industrial employment. In the year to last April, there was an increase of 6,000 in the number at work in manufacturing, and figures published by the CSO for the June quarter this year show that the positive trend has continued since April.
It is against this background of increased levels of job creation, improvements in living standards and a stable environment for investment and business expansion that the Programme for National Recovery must be evaluated. It is most unlikely that the progress which has been achieved in all these areas would have been possible in the absence of a programme which enjoyed the involvement and support of all sectors of the economy. To return to a point I made at the outset, I feel that if we are to reap the maximum benefit of the ground work which has been done to date and build on this sound foundation then the conclusion of a further programme based on the consensus approach is essential.
It is a well known ploy of Ministers when they are in trouble to have a lengthy reply.
The Deputy asked for a detailed statement.
May I ask the Minister why, in his reply, he did not refer to the fact that inflation has been rising again since the agreement was concluded, that since the agreement was reached we have had the highest yearly emigration figures in 30 years, and that he did not, except in passing, refer to the fact that there are fewer people in employment today than there was a year ago, notwithstanding all the smog the Minister is trying to create? Would the Minister now accept that the existing agreement with all its benefits — and there have been benefits — has signally failed to create jobs? Would he now commit himself and the Government to seeing that any agreement that replaces it has the first and foremost objective of setting right our tragic emigration and unemployment statistics?
I did at length deal with the question of inflation. Firstly, the figures taken over the period of the Programme for National Recovery show that there have been very substantial increases in take home pay when the tax and pay elements are taken together as against what the consumer price index shows. Secondly, it is a well known fact — and it has happened in every economy that has tried to get out of major difficulties — that there is a time lag between correcting the finances, and trying to stimulate growth into the economy and when the job creation improves. That has happened here. There have been a number of reports from different sectors of industry recently, mainly the manufacturing and the construction industries, which show an increase in the number of jobs up to a certain level. Because we were trying to slim down our public service, and that involved a voluntary redundancy package, the figures between April 1988 and April 1989 were reflected in the labour force survey. I have said publicly on a number of occasions that I am still disappointed that the private sector, in particular, have not generated more employment. The answer the private sector have given — and in fairness I must state what they say because I have discussed employment with them on numerous occasions as have other members of the Government, particularly those Ministers involved in Industry and Finance — is that there was slack, that they were carrying part of the workforce during the recession years. They have now absorbed that capacity and from now on they should be taking on additional workers. I accept the figures of the CSO but I want to remind the House that initially there was a figure of 6,000 which later rose to 11,000. I will be disappointed if there is not a substantial improvement in the figures——
I hesitate to interrupt the Minister but I still have two priority questions to dispose of in less than five minutes. Deputies Toddy O'Sullivan and Rabbitte are involved.
Deputy J. Mitchell rose.
I was hoping for brevity.
Will the Minister agree, notwithstanding all he said, that in the two years since the agreement 78,000 people have left the country and that there are 232,000 people on the unemployment register? That means the real unemployment figure is in excess of 300,000. Will he, therefore, agree that the central purpose of the agreement to get growth in employment has failed and that any substitute for this in the agreement or its renegotiation should be directed at producing the jobs it forecast but which have not materialised?
I hope to deal with the two remaining questions.
I will be very brief. The Taoiseach and the Government have generally stated that in the programme for Government employment is the central objective. The reduction of the live register and trying to provide jobs for young people is our first objective.
