I move:
That Seanad Éireann, in welcoming the budget,
acknowledges in particular, the fact that the Minister for Finance has, following intensive discussions and negotiations with the Social Partners including the ICTU, delivered, as promised, a pay and taxation deal which compensates for the erosion of value caused by inflation and which has also delivered the first moiety of the PPF taxation commitments;
notes that the agreement of the Minister to the fast-forwarding of the implementation of the Benchmarking outcomes has been of particular importance to public sector employees including teachers; and
recognises that the flexibility of the PPF Review process in proposing these adjustments will imbue increased confidence among trade unions and the general public in the partnership approach so crucial to economic development and stability.
I welcome the Minister of State to the House to respond to the budget which is being debated currently in the other House. I framed this motion last week in anticipation of a budget on the basis of what would be required. I was quite serious about this matter and made public that I was prepared to table the motion and let it stand or fall on its merits. I also said that if the budget did not deliver on the measures required, I would have no option but to speak and not move the motion.
A large number of issues were riding on this budget, one of which related to the Programme for Prosperity and Fairness. There was a huge commitment in relation to this at the beginning of the year when workers throughout the country were voting and worried about many aspects. A crucial issue was inflation. At many meetings throughout the country this issue was discussed and voted on. Workers in different unions received ballot papers and we told them that, in the event of inflation going out of control, we would trigger a review clause in the PPF. We did precisely that.
I welcome a number of issues in today's budget on the pay and taxation deal. In terms of the taxation deal itself, I sought that the budget would give at least one-third of the commitment under the PPF. The commitment under the PPF was for a 10% tax improvement in the net position of workers, therefore, one-third of that would be just over 3%. I also sought an improvement in taxation to compensate for the erosion of value created by inflation and a pay element in relation to the erosion.
It is important to recognise what was done in the budget. At the time of the PPF agreement, it was expected that inflation would be in the region of between 2.5% and 3% per annum. It is currently 5.5% per annum. Therefore, there was a difference of 3% in the erosion of value. We have now got a deal which includes a pay element of 3%. Effectively, the pay element will compensate for the erosion created this year. There is also a taxation element which is slightly more than 3%, depending on how much is allocated to the PPF. The full PPF requirement, plus in excess of 3%, has been delivered.
The Minister has been as good as his word. The Government has honoured its commitment to us in August and again last month. In a statement on 10 September, in particular, the Taoiseach announced that it was the Government's intention to meet part of the erosion of value created by inflation through tax measures in the budget. This has been delivered. The pay and tax deal which we as trade unionists were negotiating with the Government for the last three or four months has been delivered.
Last June I asked the Government to take action on inflation in three phases, first, to acknowledge there was an erosion of value created by inflation; second, to agree that it would develop a compensation package and, third, that it would enter into negotiations in that regard. It fulfilled its promises and it also indicated its support for changes in respect of pay.
The second part of the motion relates to the fast forwarding of the implementation of the benchmarking outcomes, which is of particular relevance to public sector employees. I refer here to teachers and others. I wish to outline the impetus behind this part of the motion. Under the terms of the PPF, the first payment recommended by the benchmarking review body would not be paid until mid-2003. We made the case that, because of the growth in the economy from an expected 5.6% to approximately 10%, there should also be movement in terms of bringing forward pay rises. We recommended that the way to do so would be through the fast forwarding of benchmarking.
As the budget confirms, the benchmarking outcomes will not be paid until the middle of 2002 but they will have retrospective effect from 1 December 2001. A quarter of the final figure will be paid at that time and, more than likely, at least another quarter will be paid later in 2002. It is important that people, particularly public servants, teachers, etc., are made aware of what this means in terms of the total pay package under the PPF. Until last Monday, the cash terms of the PPF were worth 19.2%. The additional 3% agreed last evening brings the figure up to 22.77%. In addition, two quarters of the benchmarking outcomes must be included in that.
In order to estimate the final percentage pay increase under the PPF one must be both optimistic and pessimistic. To consider matters in a pessimistic light, the worst deal that teachers will obtain under the benchmarking review would be an increase of 10%. If one is optimistic, they could get as much as the 17% or 18% obtained by Members of the Oireachtas. Let us consider what will happen if teachers obtain an average of between 12% and 16%. If they obtain 12%, 3% will be payable from 1 December next year and a further 3% payable the following year. They will, therefore, obtain 6% under benchmarking and 22.77% under the PPF, giving them a total increase of almost 30%. We must make it known that the cash value to teachers of the PPF will be in excess of 30% when its various elements are implemented. I recognise that the demands I made on behalf of teachers and members of other public sector unions for the fast forwarding of benchmarking have been met.
The third part of the motion refers to the adjustments referred to in the first two parts which will "imbue increased confidence". It was crucially important that the social partners – the Government, employers, the trade unions and the voluntary sector – would be able to show that flexibility exists in the programme to allow adjustments to be made. This shows that the part nership process works and that people can have an input.
A great deal of discussion took place earlier in the week about what people knew about the contents of the budget. The Minister for Finance can take credit for the fact that there was full engagement by him and his Department with negotiators representing the employers, the trade unions and the voluntary bodies. He met everybody, we put our cases to him and many of the things we were seeking have been delivered in the budget. Such a process must be followed in the future. Until the other economies in western Europe adopt such a process, they will not achieve proper stability. We have moved matters forward in an extremely effective way. I ask the Government to ensure that the partnership process is protected and that it is allowed filter down to Departments and have an effect on the way they conduct their business.
I do not intend to discuss the exact details of the income tax provisions in the budget. However, I wish to refer to a number of other issues. Some of the non-pay elements of the PPF have been delivered in recent months. One of these is the issue of maternity leave. There was a huge demand from many people for the extension of maternity leave. The Minister announced today that paid maternity leave will be increased from 14 to 18 weeks, which is a major and welcome improvement for pregnant women in the workforce.
I wish to make particular reference to the approach the Minister has taken to child care. I am in favour of many aspects of the Minister's approach but I do not agree with using child benefit to improve people's lot. The Government chose the most expensive yet easiest option and, in view of the difficulties that arose last year in respect of individualisation, I do not blame it for doing so. However, I would have preferred if the Minister had introduced tax rebates or chosen another approach. The elimination of benefit-in-kind for the provision of child care and crèche places for the children of employees as outlined in the budget – I accept that a specific explanation was not provided – is a major step forward and will be welcomed by many people.
I welcome the decision to remove the extraordinary anomaly in the school transport system – this has kept Deputies and Senators busy for many years – whereby a nine year old living two miles from school could not avail of school transport whereas a nine year old living three miles away could do so. When I worked as a school principal I had an argument with a CIE inspector who calculated that a child who was badly in need of transport to school was five yards short of living three miles from the school. To resolve the problem I knocked down the car park wall with a sledgehammer, drove my car inside and told the inspector to measure the distance from there in order to obtain the extra five yards.
Housing policy is an issue of major concern to the trade union movement and many workers. Some months ago I brought to the attention of the Minister an anomaly in the Bacon report which conferred a certain tax benefit on people buying a house but which would be lost if they derived income from letting a room. The only way young people in the UK and other European countries can afford to buy a house is by allowing work colleagues or friends move in and pay some money towards the mortgage. I am delighted with the section of the budget entitled "Rent a Room" which allows this to be done properly and correctly. I assure Members that this will allow more young people to consider buying a house because they will be able to invite a work colleague or friend to share the house, legitimately charge them rent and obtain a tax rebate of up to £6,000.
The extension of the schools psychological service will be widely welcomed and is a crucially important development. For many years I have said that membership of unions such as my union, the INTO, was almost as much a requirement as being a member of a professional body or an accountancy body and that union members should be entitled to tax relief on their subscriptions. I welcome the Minister's commitment to provide a flat rate allowance of £100 at the standard rate of tax in respect of trade union subscriptions.
The anti-inflation measures included in the budget are crucially important. The reduction of 1% in the rate of VAT and the reduction of excise on petrol by 2p will not have a major impact, but it signals that an important step has been taken. Next month's figures will show that the increase in the price of tobacco products from last year's budget will be subsumed which will give a plus of 0.8% while the reductions to which I refer will provide almost another 1%. This means there will be some improvement in the economy at a time when the euro has strengthened and when world fuel prices have stabilised.
The budget is well timed for workers. Our stated expectations have been fulfilled and on that basis I commend this motion to the House.