John Bruton
Ceist:4 Mr. J. Bruton asked the Taoiseach the new reports, if any, commissioned from the NESC; and if he will make a statement on the matter. [16353/00]
Ceisteanna–Questions. - Publication of Reports.
John Bruton
Ceist:5 Mr. J. Bruton asked the Taoiseach if he will make a statement on the recently published NESC report on profit sharing, employee share ownership and gainsharing. [16728/00]
I propose to take Questions Nos. 4 and 5 together.
At its meeting on 28 April, the National Economic and Social Council discussed its draft work programme for the period to autumn 2001. The council hopes to finalise this programme at its meeting on Friday, 16 June. While the particular issues to be addressed will be a matter for the council to decide, the Government agreed with the social partners in the Programme for Prosperity and Fairness that the council should be asked to prepare reports on a number of issues. These are reflected in the draft work programme. I understand there will be two broad research categories. The first will address the provision of "Information for policy". This will encompass the identification and development of national progress indicators, benchmarking specific progress with respect to elements of the Programme for Prosperity and Fairness and evaluation of the pilot poverty proofing project.
Secondly, the council is proposing to examine medium-term strategic policy options in key policy areas, including the tax and social welfare systems and the management of public expenditure. I have no plans at this time to commission any further specific report from the council.
Deputies will be aware that the council recently published a research paper titled "Profit Sharing, Employee Ownership and Gainsharing: What can they Achieve?". This provides a review of these mechanisms based on the experience OECD countries. It was prepared as a background paper to the NESC strategy report published last December. Copies of the paper have been placed in the Dáil Library.
Does the Taoiseach believe adequate progress has been made in extending gainsharing throughout the economy given that it provides a means of rewarding additional productivity in a non-inflationary way? Has he any views on how gainsharing can be applied in the public sector?
The paper finds some evidence that financial participation may contribute to an increase in productivity. I have supported such measures over the years because I believe that if employees have share ownership and are part of the profit sharing and gainsharing of a company, they show more interest and feel more part of the company. However, while the report shows that this may contribute to an increase in productivity, there is no great evidence that this is the case. The report also finds that financial participation is more effective when combined with employee participation in workplace decisions. It states that while the evidence is inconclusive, some studies have found that profit sharing is associated with more stable employment. The research paper states that while the level of these forms of compensation is low, more and more companies are considering financial participation in schemes.
I said previously in this House that the Government is considering how to proceed with this issue. During discussions on the Programme for Prosperity and Fairness, we agreed to consider profit sharing and gainsharing as part of rating performance and competitiveness during the progress of the current programme.
Does the Taoiseach agree the extent of gainsharing in the economy is minuscule and does he intend taking measures to cause a wider take-up? Does he acknowledge the Government and the Minister for Finance flew in the face of the NESC strategy in terms of the budget which is now proven to be wildly inflationary? Having regard to today's figures on inflation, which are a serious cause for alarm, will the Government ask the NESC to look specifically at this question? Will the Government take steps in this regard?
It is true that there is not a great element of profit sharing, gainsharing or financial employee incentives in the economy. There is a case for looking at increasing performance and competitiveness. However, the Deputy will be aware that this must be agreed with the social partners because those who cannot readily gain and benefit believe that if there is not a mechanism for them it is not a fair system. It has been argued for a long time by trades unions that if this applies only to the sectors where gainsharing and profit sharing is easily permissible, others may fall apart.
Of course the Government is concerned about the current inflation figures which are higher than anticipated and reflect increases in a variety of areas. We had a meeting last week at official level with ICTU and IBEC and there will be a meeting at political level in the near future. We are considering a range of measures in different areas, including housing. While we must allow for competition on the one hand, we must look at specific areas where it is clear there is excessive profit taking. This issue will have to be dealt with in the coming months.
The NESC made specific recommendations on housing which the Government has not tackled. In relation to excessive profit taking, to which the Taoiseach referred, is the entirely disproportionate contribution of drink prices to the consumer index rise a matter for serious concern and action by the Government? The Government is pussyfooting with the publicans and vintners and refusing to take action other than talk vaguely about competition and introducing additional licences at some time in the future. The price increases on drink are a disgrace and of serious concern in terms of maintaining a competitive tourism industry.
I referred to this matter on several occasions. The current increase is 1.2% due to trade increases in the price of beer and spirits. I hope the measures in relation to licences outside the city areas being purchased, in addition to the relaxation of the regulations attaching to clubs, will mean more competition in populated areas and cities. The Government will also examine other measures to see what can be done. In this and other areas, the Competition Authority has given its views on anti-competitive behaviour and we must examine all these issues. Unfortunately, the result of profiteering is extraordinarily excessive prices. I do not know the real figures nor can I provide proof, but those in the profession say profit is in excess of 50% on the bottom line, which is excessive.
Last week I made the point at the ICTU conference that I wished people went to places where the prices were most competitive when there is competition in a locality. However, that unfortunately does not happen. Time and again in Dublin City, which is where I know best, we see commercial pubs still getting crowds while prices might be far lower in clubs. That is why I support the relaxation of the regulations governing clubs provided for in the Minister's legislation.
I do not rule out moves being made by the Government to address these issues. We must examine a range of measures to see how best the matter can be tackled. Price orders were referred to, but in the past they have not had the desired effect, are amazingly complex and are usually withdrawn, as Deputy Rabbitte is aware. Therefore, price orders will not solve the problem.
I agree that competitive forces are necessary and we will do all we can in that regard.
The Taoiseach's reply rivals Bulfin's Rambles in Éirinn for length.
Does he agree that the Government's opposition to the increase in inflation lacks all credibility because of the gross under staffing of the Competition Authority, the body responsible for ensuring competition? The Government talks the talk but will not walk the walk in terms of issuing additional pub licences. The Government's approach is meaningless because the Minister for Finance, Deputy McCreevy is parading on the front of the Irish Examiner saying he will issue more licences while he will not table additional amendments to the legislation being put through the House to give effect to that threat. If the Minister was serious he could amend the Bill before the Dáil today to give effect to his threat. However, publicans see the threat has no meaning because amendments are not being tabled by the Government to bring about further liberalisation of licensing in light of inflation.
Does the Taoiseach agree that the areas of profiteering are the areas of restricted supply? There is a restricted supply of licensed outlets for drink, of petrol retail outlets because of planning legislation resulting in profiteering and there is not any price competition, and in the area of taxis there is not any effective price competition. The Government, and in particular the Taoiseach, is unwilling in the case of taxis to take the necessary action to increase supply and thereby reduce prices.
The Competition Authority has been resourced to monitor, investigate and deal with evidence of anti-competitive behaviour leading to higher than appropriate price levels.
If that is so, it has only taken place in the past week or two.
The authority has received additional staff in the past while. Deputy Bruton is correct in some of what he says. The legislation provides for an increase in the number of licences.
Minimal.
The traditional system whereby licences could not be obtained in populated areas is being changed. One can already see the effect of this, with the number of licences in rural areas increasing dramatically, which has the potential for other problems. Clearly, people are buying licences so they can move to such areas. Regarding taxis, the Government announced proposals effectively doubling the number of taxis.
When?
It has been caught up in the courts, but the Government announced the measure last January or February.
Very reluctantly.
Not very reluctantly. The Minister of State at the Department of the Environment and Local Government put forward comprehensive proposals to double—
That was the last time the Progressive Democrats took a stand and got its way.
—the number of licences, not just to make a few hundred available here and there, as was called for by Fine Gael. It would be a great help if we could get on with this.
Does the Taoiseach agree we are now facing an emergency in terms of inflation, that our inflationary problems are beginning to be of concern to our colleagues in Europe and that inward investment will be adversely affected unless the supply side of the economy is made more efficient? Does he agree that in addition to asking NESC to recommend immediate action on increased retail outlets for drink, petrol and in other areas where profiteering exists, that he should ask them to examine the housing market where there are artificial restrictions on supply because of the planning system and its operation, which is creating a crisis for young couples who want to get a house and who cannot do so in a country with plenty of land? This is not the Netherlands where there is no land upon which to build houses – there is a plentiful supply of land, and the fact we cannot build enough houses for those who need them is a political failure. We have the land and can bring in the builders if necessary. We have the technology for providing water and sewerage systems. Houses are not being built because of supply, which is a political problem.
As Deputy Bruton is aware, the third Bacon report is currently before the Government. I appreciate the help of the House in concluding the Planning and Development Bill, upon which we had a long debate and which will be very helpful if we are to do something effective, as I accept Deputies of all parties want to do. We can help by completing the debate on the Bill brought forward by the Minister for the Environment and Local Government, Deputy Dempsey. There are also other local government changes.
Regarding houses, we must continue to make changes to facilitate and try to improve supply. Two years ago we were told that if we built about 37,000 new houses we would be well ahead of what the market requires. We now have 44,000 houses being built and we are told we need a substantially increased number. There is a capacity issue in terms of what the industry can do. Already, there is an input from a large number of construction workers as can readily be seen throughout the country, but it is not easy to reach a figure of 50,000 houses. Of the £11 billion spent last year in the housing and residential sector, about £5 billion was not linked to loans, so it was speculative involvement by people buying property, increasing rents and putting more pressure on young people in terms of rents and in terms of squeezing them out of the market.
That is an economic fallacy.
It is the reality of what is happening in the marketplace.
The Taoiseach's theory is wrong.
Supply must be addressed, but there is an issue of capacity. It is not a question of land, but of the ability to increase the figure from 31,000 to in excess of 50,000 new houses in a very short period, or when one adds local authority houses, in excess of 60,000 houses. The industry is driving towards that, and the measures we are introducing are aimed at that increased number.
Servicing the land is a problem.
We have the serviced land initiative and the sewerage programme. The figure has increased from 31,000 to 45,000 new houses so the number being built has clearly increased. If one looks at the figures it is happening everywhere but the number is still not in excess of 50,000. The objective of the measures the Government is implementing is to drive investors out of the market and give first-time buyers the advantage. The Government is also looking at the private rented sector. That is what we need to do to increase supply to in excess of 50,000.
Does the Taoiseach agree that it is standing economic logic on its head to say that one will increase the supply of something by driving investment out of the area in which an increase in supply is sought? Yet, that is what the Government is seeking to do. Does the Taoiseach agree that the obstacle to building houses is not that there are too many people willing to invest in them but that there is too great a delay in the planning system and the provision of water and sewerage to sites for houses and too great an extent of profiteering on the part of builders sitting on sites in anticipation of further inflation in the value of those sites? Does the Taoiseach agree that if there was to be a major increase in supply many builders would sell the sites on which they are sitting quickly before the price fell, that the best way of releasing those sites is to put money into the provision of water and sewerage to additional sites and that the provision of additional serviced land will drive down the price of building land and increase supply? That is the way to go, rather than the mistaken mercantilist approach being adopted by the Taoiseach which goes back to the economics of Colbert and does not take account of more modern economic thinking since the 18th century.
Is the Taoiseach aware that one is a nobody in my constituency unless one owns half a dozen houses and that the policies of the Government only fuel this phenomenon? Is it not the case that the Government has been predicting since last December that inflation would level off? It has risen gradually to today's high of 5.2%. Is it not the case that the Minister for Finance was forced to revise his figures only last week and that the revision is out of date already? Is it not the case that a disproportionate contribution is being made by the increase in drink prices of 1.2%?
There is.
On what basis does the Taoiseach say that a price fixing order would not work? It worked when I imposed it outside the Dublin region. Never mind the whinging about enforcing it—
A question, please.
—ask any of the publicans who had to implement it—
I am afraid the Taoiseach will not have time to answer all of the Deputy's questions. I should call the Taoiseach now. I am obliged to call the Tánaiste who will not have much time.
The first action of the Minister of State, Deputy Tom Kitt, on taking office was to lift the price fixing order. The price of drink has gone through the roof since.
Will the Deputy, please, give way to the Taoiseach?
How is competition supposed to deal with this when it has manifestly failed to do so?
I would like to give the Taoiseach an opportunity to respond to the Deputies.
Since the Taoiseach is the ultimate political pragmatist in the House why will he not say to the publicans' lobby that, if necessary, he will implement a price fixing order?
The Deputy is being disorderly. He knows the rules at Question Time. I ask him to resume his seat and allow the Taoiseach to answer the questions put.
There is no evidence that the price fixing order worked.
Of course there is. The Taoiseach should ask any of his subscribers throughout the country.
Does the Deputy want a reply?
There are some pubs that I still cannot go into down the country.
Was the Deputy bringing in additional customers?
The reality is that it did not work. No issue is being ruled out by the Government. The figure in relation to drink is 1.2%.
On housing, the Planning and Development Bill and all the initiatives taken by the Minister for the Environment and Local Government, Deputy Dempsey, and the Minister of State, Deputy Molloy, including the serviced land initiative into which a few billion pounds are being put, are geared towards increasing supply but the fact is that the industry is finding it difficult to increase the number from 30,000 to 60,000. If one takes local authority housing into account, the number currently stands at over 50,000. It cannot be increased to 60,000 overnight. Hanson's theory of supply and demand has not changed.
Is the Taoiseach saying that there are not enough builders in Europe?
According to the CIF and all the other groups the industry has to capacity to increase the number to 60,000 gradually. No one is saying that it can be done overnight.
It has to be done.
I have been subjected to much criticism from all the Irish lobby groups for saying that contractors will have to be brought in to provide the necessary infrastructure and services but I know I have the Deputy's support. The econ omy is growing strongly at a rate of between 8% and 10%. Almost half of those who invested in the residential market last year were able to buy property without having to take out a bank loan. In this small country £5 billion is a hell of a lot of money. This is a major factor. They would have accounted for only a small percentage a few years ago. They have moved in at the expense of first-time buyers. It is a fact of life and must be dealt with. The policies of the Government are aimed at increasing supply. Two years ago we were told that 45,000 would be enough. We are now being told that, between local authority and private sector housing, over 60,000 are required. This represents an enormous increase which we must try to facilitate but it cannot be done overnight.