Ceisteanna — Questions. Oral Answers. - Programme for Competitiveness and Work Review Group.

Proinsias De Rossa

Ceist:

13 Proinsias De Rossa asked the Taoiseach the number of occasions on which the Central Review Committee of the Programme for Competitiveness and Work has met so far; the matters discussed by the Committee; if it has considered the current position in regard to unemployment and the target levels for job creation set in the Programme; and if he will make a statement on the matter. [531/94]

There have been four plenary meetings of the Central Review Committee under the Programme for Competitiveness and Work. The committee is assisted in its work of reviewing and monitoring progress in implementing the programme by a secretariat group representative of relevant Government Departments and the social partners. The secretariat group has also met on four occasions.

The committee has discussed many issues arising out of the programme and also matters of concern to the social partners. The issues of the economy, employment and unemployment, particularly long term unemployment, have been of central concern to the committee, which discussed them at their last meeting of the committee on 29 September in the context of the improved economic outlook. The committee agreed to explore the potential for making updated recommendations to Government as envisaged in the Programme for Competitiveness and Work, for consideration in the context of the 1995 budget. The Government looks forward to the receipt of these recommendations which we will consider very carefully.

The procedure now being adopted by the committee marks a further deepening of the partnership process in support of the shared objectives for growth and employment. I would like to compliment all of the social partners for their contributions to this process.

In relation to employment prospects, the indicators both direct and indirect for 1994 support the view that employment will grow strongly in 1994. The estimates for employment creation over the year continue to improve and the Government, along with independent forecasters, is now expecting about 28,000 new jobs to be created this year compared to predictions of 21,000 at the time of publication of the Programme for Competitiveness and Work. This is reflected in the fact that the numbers on the register now stand at some 20,000 lower than at the beginning of 1994. The Government expects that as employment continues to grow so unemployment will continue to decline. We are, however, in no way complacent and look forward to the updated recommendations from the Central Review Committee, to which I have referred, as an important contribution to action to intensify the improvement in employment and unemployment we have seen this year.

Will the Taoiseach indicate if the review committee has studied the report of the National Economic and Social Forum specifically on the question of long term unemployment and what input, if any, the sub-group, which the Tánaiste announced was established, had made to the Central Review Committee?

The report of the National Economic and Social Forum was studied carefully by the Government and it decided that a group should be set up to co-ordinate all the efforts and consider how the resources being spent in this area could be improved to ensure better results. That group is reporting to the Office of the Tánaiste on that matter. It will be working in tandem with the Central Review Committee and the partnership companies. They cover many areas but not all. There is plenty of scope for pilot schemes to be considered based on the ideas put forward by the National Economic and Social Forum on long term unemployment.

Long-term unemployment is the hardest nut of all to crack and we are not sparing in our efforts to tackle it in a variety of ways. We have done that since the Government came into office. We set up partnership companies and new innovations in relation to the holding of allowances to see what effect that would have on long term unemployment, and it has had the desired effect. We have broadened that since its introduction. I recently met the partnership companies of the south and north inner cities. With experience behind them they have come forward with new suggestions about where the Government could play a greater role on the macro level — they can manage things at the micro level. It is interesting to hear what actions they are now looking for on the part of Government.

On the countrywide application, apart from the partnership areas, the county enterprise boards are proving successful in most counties and are doing extremely well in some with the result that we have to provide more resources between now and the end of the year because the allocations already given have been taken up. That is a good sign of movement in that regard. The approach is one of a combination of initiatives and effort not alone by State agencies but by Government.

The Taoiseach referred to the number of jobs created as being 28,000 and said he expected that as jobs were created the unemployment figures would fall. My understanding is that unless three times that number of jobs are created the figures cannot fall unless there is also an increase in emigration. Will the Taoiseach comment on that? Also, to what extent are the 28,000 jobs that he refers to part time or full time?

I do not accept that employment figures cannot fall unless there is emigration. The requirement for jobs in the economy is between 20,000 and 25,000 and the projection for this year is over 28,000. That is improving as we go along and is much better than anybody expected last January. It will take time to get unemployment figures down to acceptable levels. This problem is getting full attention at Government.

The European Union has its own policies at macro level to generate the European economies. They will all have an effect on what happens here because 70 per cent of what we produce has to be sold abroad. The better the performance of the European economies — and they are performing successfully now, including the British, German and French economies — the better the performance of the Irish economy which, at 5.5 per cent expected growth this year, is far above the performance of the others. The more foreign markets grow the more will Irish exporters be in a position to take advantage of them and consequently create more jobs.

Is it not the case that the structure of the tax system, and in particular PRSI, is the biggest remaining obstacle to maximisation of job potential in this economy and that this is confirmed in the EU white paper on competitiveness? Will the Taoiseach agree to ask the Central Review Committee to conduct a study on the long term effect of high levels of PRSI on the employment?

The biggest obstacle to the growth in employment relates to demand for goods and services where real sustainable jobs are created, as Deputy Bruton knows too well. How often has he told us that in this House and elsewhere? We have to stimulate demand, and demand is stimulated when world trade grows. That is beginning to happen. As to the cost of employment here, I do not accept that we are not competitive vis-á-vis our European partners. I hear this argument made continuously in this House. If people examined the figures and looked at the social cost of employment in Ireland and elsewhere they would find that it is not as Deputy Bruton and others pretend.

On the Taoiseach's remark that additional resources will have to be supplied to the county enterprise boards before the end of the year, has it been decided to make additional resources available? A county enterprise board of which I am a member has 48 projects of which only four can be financed because the limit of £500,000 will be reached later this month. Will the Taoiseach comment on allocating a budget of £500,000 to each county enterprise board irrespective of the needs of that area, population size etc? Would he agree that the question of allocating £0.5 million to a county with over 0.25 million people as compared with a county with 30,000 people needs to be looked at?

Deputy Rabbitte should direct that question to the Minister for Enterprise and Employment. I will certainly speak to the Minister and convey the Deputy's views to him. I confirm that about three or four weeks ago additional resources were approved at Government level for the financing of projects outstanding in county enterprise boards.

I have a number of questions. Will the Taoiseach confirm that the funding for the county enterprise boards was halved this year to £9 million compared with £21 million last year and that is why they are running out of funds? Will he confirm that 48 per cent of the cost of employment in this economy goes to the Government in taxes, levies and PRSI and that this is the single biggest disincentive to employment? Does he agree with the comment by Dr. Donal de Buitléar, former Secretary of the Commission on Taxation, that we need to create 70,000 jobs each year until the end of the century and not the 25,000 jobs that the Taoiseach seems happy with? Lastly, did the Taoiseach learn anything about successful tax reform on his recent visit to New Zealand?

I did not have to go to New Zealand to know what they are doing there. Mr. Douglas visited me a couple of years ago on a visit to Ireland.

He has lost his job since.

I do not have to send anybody else to New Zealand either. I know everything that happens there.

The Taoiseach sent a delegation from the Department of Finance out there.

Was it a bad idea? As to the point raised by Deputy Harney, the 25,000 jobs I referred to is to look after the numbers coming on to the labour market every year. We need more than that to make a serious dent in unemployment. I do not accept that the social costs of employment are the big deterrent to job creation. As Minister for Finance, I tested this argument when I made it possible for people to take on employees without incurring additional social costs. We had pilot schemes and we know what the results were. Certainly there is a contribution to be made in that area and I have never denied that, but I do not accept that it is a panacea for the problem of unemployment.

In regard to the county enterprise boards, it will take a couple of years for them to level out at their annual requirement. Deputy Harney would agree that to try to project what they might require is difficult. Projects in county enterprise boards will not be left without finance. The Department of Enterprise and Employment puts out its best judgement on what budgets might be required. It may be too much for some and too little for others, but after a year or so it will be quite clear how they will level out. I can assure the House that no project held up at county enterprise board level will be left without funding.

Will the Taoiseach reconsider the survey on social costs where he says an experiment was undertaken? Is he aware that what he is talking about was a temporary reduction in PRSI for people who took on extra employees? Would he not agree that the problem is that when an employer talks about taking somebody on he is taking him on for, perhaps, a lifetime of up to 40 years and that a short term 18-month reduction in PRSI does not significantly improve the economies of that proposition?

We tested the market. Sustainable jobs are put in place when there is a demand for a product or service. It does not matter that there is no social cost if one does not have a buyer for the product or the end product is not competitive enough. Those are the things that matter. It is incorrect to suggest this is not a competitive economy considering that during a deep recession we increased our exports and share of decreasing markets, the greatest test of competitiveness in any economy. I look forward to a very sizeable increase in exports now that world trade is beginning to increase.

Is the Taoiseach aware that an employer who experiences an increase in demand for a product has two ways to fulfil that demand: by employing more people or by intensifying capital investment in the firm. Since people receive subsidies for capital investment and pay taxes on employing workers, they are more likely to increase production by capital investment than by increased labour input. An equalisation in the tax treatment of capital investment, which is subsidised, as against employing people, who are taxed, needs to be considered if we are to maximise the employment input as a result of an increase in output.

I am well aware of those arguments. There is a shift in direction in that regard of which I am sure Deputy Bruton is well aware.

That is gobbledegook. What does it mean?

The time for questions to the Taoiseach is exhausted. I will take questions — I hope they will be brief — from those Deputies who have been offering.

This is not high infants. The Taoiseach should at least attempt to answer a question coherently. Those words mean nothing.

They mean nothing to the Deputy.

The Taoiseach indicated he is on the point of solving the unemployment problem this year but perhaps he will forgive me if I am sceptical, given the level of unemployment in my area. To what extent are the 28,000 jobs to which he referred part-time? Are many permanent full-time jobs which are lost to the economy being replaced by part-time, in many cases low paid, jobs? Will the Taoiseach indicate the extent of emigration this year? He gave a figure of 25,000 new jobs required each year and said that 28,000 jobs were created this year, but he did not give a figure for the number of jobs lost. He claimed there is a reduction of 20,000 on the unemployment register but those figures do not add up. Where are the lost jobs?

I have given extensive replies in this regard and I have nothing further to add. I will send any further information available on classification of jobs to the Deputy.

Will the Taoiseach not accept, from his business experience in a labour intensive industry where margins are very tight, that the cost of labour is the biggest single factor in the success or otherwise of a company, that a reduction in the cost of labour renders a company successful? Is the Taoiseach aware that an ESRI study of employers showed the largest proportion found that high levels of tax in the Irish economy is the greatest disincentive to employment and 35 per cent said they would sacrifice grant aid in lieu of tax changes?

I am sure Deputy Harney is aware that the level of grants is being reduced. Deputy Bruton did not understand what I meant by a shift in policy in that regard but that is what I meant. There is a reduction in the level of grants paid and a totally different policy approach is being taken by Forbairt and the IDA in this regard. It is desirable that taxes are as low as possible but social costs are imposed for a purpose: they are used to remunerate workers who pay into this fund and have to get money out of it. There is a continuous barrage by employers seeking cheaper social costs, but somebody has to fund the benefits to employees. Let us put this in perspective and look at the overall picture.

I knew there was a socialist wing to this Government.

I am a realist. Everybody would like to pay less income tax and PRSI, but if the money does not come from that source it will have to come from elsewhere. The Government is holding a very firm line on expenditure. That is the way to reduce taxation and provide a better reward for those who are working. That is our approach. It is not a question of shouting, as people do in this House from time to time, to cut expenditure without saying where it should be cut.

It should be kept to the level of inflation.

If the Deputy wants a reduction in social welfare, health or education expenditure she should tell us. She should not be hypocritical.

A 17 per cent pay rise would be one matter on which to start.

My salary was analysed yesterday at £3 an hour. Deputy Harney is suggesting that is too much but I believe it should be much more.

Is the Taoiseach worth more?