Wednesday, 28 June 2006
Dáil Eireann Debate
4. Caoimhghín Ó Caoláin asked the Taoiseach the reports published by the National Economic and Social Forum since June 2002; the procedures in his Department for responding to such reports; and if he will make a statement on the matter. [22767/06]
7. Mr. Quinn asked the Taoiseach if he will report on the negotiations that have taken place in regard to the new partnership deal; when the next meeting of the social partners will take place; and if he will make a statement on the matter. [23500/06]
8. Mr. Quinn asked the Taoiseach if he will report on progress made by the Government in regard to its commitments under the Sustaining Progress deal with the social partners; and if he will make a statement on the matter. [23501/06]
Together with my colleagues, the Tánaiste and the Minister for Finance, I met the social partners on Wednesday, 14 June, following the conclusion of the negotiations on a new social partnership agreement. I welcome the draft agreement, which builds on the significant progress already made under Sustaining Progress and provides an important framework for meeting the economic and social challenges that lie ahead.
A great deal of time and effort has gone into the making of the agreement. This underlines both the importance of the issues under discussion and the importance attached by all sides to maintaining our system of social partnership. I commend the negotiators on all sides for the commitment and leadership they have brought to the task. I previously stated that no deal was better than a bad deal but the end result shows it has been worth the effort.
The Government participated in the negotiations on the basis of its programme and my colleagues and I were happy to approve the terms of the new agreement in that context. If ratified, the Government will pursue the implementation of the agreement in line with available resources and subject to the approval of the Oireachtas in respect of necessary legislation and the voting of the necessary funds in the Estimates process.
In regard to pay, the workplace and employment rights and compliance, the proposals represent a sensible and well considered outcome, striking a fair balance between the need to secure the living standards of those at work and the pressures on the enterprise sector of the economy. A new social partnership agreement is not only about pay, important though that is. It is also about maintaining a supportive macro-economic environment, based on a shared understanding across all sectors of the community of the challenges that we face and of the consistent behaviours that will enhance productivity and competitiveness and build a stronger society. Put simply, it is about mobilising our collective resources to improve people’s lives.
I particularly welcome the new approach to social policy that identifies the key issues that might affect the individual at key stages in the life cycle. It is my firm belief that the life cycle approach, as it is called, offers the type of mindset or stepped change required, if we are to deliver effective policies and programmes that support people to realise their full potential. These, however, are not goals that can be achieved during the usual three-year agreement. In this context, the Government and the social partners recognise that a ten-year framework agreement is more appropriate for the type of social dialogue that can be effective.
The final agreement is now subject to ratification in the weeks ahead, in line with the internal procedures within each social partner pillar and organisation. I hope that all concerned will recognise the benefits of the new agreement both for themselves and for the country in its entirety and support it during the ratification process. Talks in regard to the farming sector have not yet concluded and are expected to continue in the days ahead. The farming pillar has, however, participated in the negotiations on the non-pay agreement, which have concluded.
The Government has prepared and published a total of ten progress reports on the implementation of the Sustaining Progress agreement. The considerable progress that has been made in implementing the wide-ranging set of commitments contained in Sustaining Progress is reflected in these progress reports, the special mid-term review reports and the final report on the special initiatives, all of which were laid before the Houses of the Oireachtas.
The National Economic and Social Forum, NESF, has published nine reports since June 2002. These are: Equity of Access to Hospital Care; Labour Market Issues for Older Workers; Equality Policies for Lesbian, Gay and Bisexual People: Implementation Issues; The Policy Implications of Social Capital; Equality Policies for Older People: Implementation Issues; Fourth Periodic Report on the Work of the NESF; Early Childhood Care and Education; Care for Older People; and Creating a More Inclusive Labour Market. This material is readily available in the Oireachtas Library because each NESF report is laid before both Houses of the Oireachtas. Details are also available on the NESF website, www.nesf.ie.
My function in respect of the NESF reports is to present them to Government, not to monitor the implementation of their recommendations. Consequently, there are no procedures in my Department for responding to such reports. I have made this clear on a number of occasions. Any questions in regard to the implementation of recommendations in specific NESF reports should be put to the relevant Minister.
Mr. Sargent: Will the agreement, which provides pay increases of 4.05% per annum over 27 months, take account of the need for a reduction in house prices? Inflation in this sector has been running at 15% per annum, with prices rising by 270% in the past ten years. Is there anything in the agreement that will satisfy the many people who are wondering how it will be possible to afford to buy a house in the future?
When will the 90 labour inspectors be in place under the aegis of the new office of the director for employment rights compliance? Will the Taoiseach explain why it has taken nine years for the Government to agree a national carers strategy and why it will not be implemented until after the next election? Why has there been such a delay in this important area?
Senator Morrissey made a speech in the Seanad on 22 June in which he indicated that Progressive Democrats policy would not be restricted by the social partnership process. Does this view have the imprimatur of the Taoiseach’s colleagues in Government? It seems a clear indication that the partnership agreement does not have the support of all Government Members.
The Taoiseach: The carers strategy is an important issue in the context of the social pillar. Carers’ representative associations are pleased with what has been done in recent budgets, particularly the last. They have achieved a significant portion of their list of objectives. Likewise, they are pleased to have received concessions on a number of important points in the course of the social partnership process. As resources permit, it is important that we continue to improve the lot of carers, who take on a vital role in society. The Minister for Social and Family Affairs has a full list of the new initiatives worked out between his Department and the negotiators on behalf of carers.
On housing, the Central Bank’s most recent financial stability report, published last autumn, shows that mortgage repayments for first-time buyers trended over the past 15 years within a range of approximately 23% to 33% of household disposable income on a national basis. Irish house buyers benefit from a range of supporting factors, including the healthy income growth of the last decade——
The Taoiseach: ——low income tax rates and relatively low interest rates by historic standards, up to nine points below what we had for almost 30 years. Affordability is also supported by the strength of the economy, record employment levels and relatively high saving ratios. The expected shift in the interest rate environment will impact on affordability. This, together with the large increase in new housing supply, will support equilibrium in the market. I have answered questions on many aspects of the housing issue in recent weeks.
In regard to the establishment of the office of the director for employment rights compliance, several legislative changes remain to be implemented. There is an amount of legislative work arising from the agreement and preliminary work has started on that in recent months. If the agreement is ratified, legislative measures to establish the inspectorate will be a priority.
Mr. Kenny: I ask the Taoiseach for his view on the democratic deficit that applies in the area of social partnership. The Sustaining Progress agreement was never put before this House for comment. People from all parties and none have pointed out that they heard personalities who were attending the social partnership talks speaking on the radio, outlining the issues that were discussed but the agreement was never discussed in here. After ten years, while recognising that the social partnership process is important for stability and so forth, the time has come for the Oireachtas and the Members elected by the people to have a real opportunity to discuss Towards 2016, Sustaining Progress and other agreements. The democratic deficit is not good for the health of our democracy or for politics.
Arising from the conclusion of Towards 2016, what serious efforts will be made concerning public service reform? We hear much talk from the users of public services about the gulf that exists between the standards and delivery of private services for which they pay and those provided by the public service, for which they also pay but which are not of the same standard. Is that something in which the Taoiseach has an interest? Is he interested in seeing serious public service reform whereby users can expect, demand and receive the best level of service, for which they pay?
The Taoiseach: The issue of a democratic deficit comes up continually and I have answered the question several times. The social partnership process is not anti-democratic because it is based on a recognition of the proper and distinct roles of Government, and the legitimate contribution to public life of the social partners who, in their own right, exercise significant influence over the broad economic and social life of this country. As employers, trade unions, farm bodies and voluntary organisations, they play an enormous role in civil society. In all of the six agreements to date, they have made an enormous contribution in terms of trying to resolve problems, examining new issues and amending the way we do things. Each agreement has evolved from the previous one and all have been based on the assessment by NESC every few years and on reports by the NESF, where there is a strong representation of this House and the Seanad.
Employers, trade unions, farm bodies and voluntary organisations play a huge role in issues every day. Their independent decision making and behaviour has a profound effect on employment, living standards, productivity and quality of life issues. It is entirely democratic to recognise and respect their independent roles and contribution. At the same time, the social partners recognise that the Government in this process is not simply the first among equals. They appreciate fully that the Government must insist on, and exercise fully, its prerogatives within the framework of political accountability. That is not an issue with the social partners and never has been over the last 19 years.
As in the past, the Government has entered the negotiations on the basis of its programme for Government. We have maintained close ministerial contact and oversight of the negotiations throughout. The terms of the draft agreement were approved in every respect by the relevant Minister who is answerable in this House on those issues.
On every agreement, the reports are put before the House. I have answered approximately 400 questions on social partnership and Sustaining Progress and have participated in debates in the Seanad. Even though this agreement is in draft form, there has already been a debate on it in the Seanad. Any money that is spent on the programmes must go through the Estimates process and Ministers are answerable to committees of the House for it.
Admittedly, the negotiations do not take place in this House and Members are not involved in the negotiations but the issues that arise are contained in reports that have been raised here. I do not believe there is a democratic deficit. Having been involved in this process for the best part of 20 years, I would like Members of the House to read about and take more interest in the process. However, that is a different issue. Members are busy, involved in committees and so forth and I understand the pressures on them. Nonetheless, it would be useful for Members to go through the reports laid before the House——
The Taoiseach: Public sector reform is a hugely important issue which has been referred to in every agreement this Government has been involved with, certainly since 1992. We have been seeking further progress, further productivity and more streamlined, efficient and effective ways of doing things. Public servants, under every agreement, have given something as part of the change process. There has been enormous and radical change in this regard. Recently, I presented awards to the public sector based on dozens of new projects and one can see the change that is happening.
Public sector reform remains an ongoing issue. Every Member of this House wants to see quicker turn-around times in getting replies, obtaining information and obtaining briefings. Every parliamentarian wants to see more effective use of resources and speedier replies from officials, Departments and agencies in their dealings with Members of this House. That is important because we are here as elected representatives of the public. We want the public service to be dealing with issues effectively.
Across all Departments and agencies, whether it is the Revenue Commissioners, the Departments of Health and Children or Education and Science, we are seeing fundamental reforms. Perhaps they are not happening quickly enough and I accept that. We would all like to see change happening more quickly but we have seen major changes under benchmarking and under Sustaining Progress and we must continue to see it. We must continue to identify more effective and efficient ways of public servants providing services to the public and Members of this House. They are the kinds of changes we seek and we pay substantial amounts of taxpayers’ money so we see reforms happening on an ongoing basis.
Mr. Kenny: I was not suggesting the system was anti-democratic, but that if the agreement was put before the House, it might provide a more complete and comprehensive rounding-off of the process. Who knows what news worthy or profitable comment might come from Members of the House?
The Taoiseach: I have no problem with the current agreement, which has already been debated in the Seanad. In fairness to the Seanad, which perhaps does not have the same pressure of business as——
The Seanad, in recent years, has given much attention to the social partnership process. It has had very good debates on the issue because Members of that House come from the employers, trade unions and social pillars. For that reason, the debates tend to be very good. I have no problem with laying the report before this House in the new term, provided it is ratified.
Caoimhghín Ó Caoláin: Is the Taoiseach making a commitment to accommodate a full debate in this House in the autumn, but with no prospect of it being accommodated in the coming week, prior to the summer recess? I would welcome such an opportunity. Is the Taoiseach aware that a recent NESC report found that the richest 20% of the working population in the State earned 12 times as much as the poorest workers? That is among the highest levels of inequality of any OECD country. In that context, how can the Taoiseach say that the new partnership agreement commitment of 10% over two years and three months is generous? That is the phraseology that he and his colleague beside him have used. Do they not realise that 14% of households now classified as being in poverty are headed by someone in employment and that the figure has doubled over the past decade? While one can point to more people in employment, low-pay poverty is a growing problem, replacing unemployment as a key cause of hardship.
Caoimhghín Ó Caoláin: That was a question. Can the Taoiseach identify what measures are in the agreement to protect workers’ rights over and above the enforcement of existing labour laws? Does he accept that these laws should already be in force and should not now be used as a concession or a carrot on the part of employers or the Government? Sadly, that is the case. Regarding the NESF, does the Taoiseach recall my asking him over a year ago if he had studied the fourth periodic report on the work of the NESF? Does he recall that it updated the position on a number of previous NESF reports, including that covering equality of access to hospital care? I was quite particular in my focus on that. Does the Taoiseach agree with the NESF statement that it is required that a fundamental examination take place of the public private mix in the hospital network and that it is that public private mix in our hospitals that is the key contributory factor to perpetuation of the two-tier system? Will the Taoiseach wrestle with that matter?
The Taoiseach: The Deputy raised a number of points. As I said to him in my reply, the Department of the Taoiseach does not monitor NESF reports, whose proposals go to the line Ministers. The Deputy’s overall question had two aspects, international comparisons and our model, which he contrasted against those of other EU countries. We have half the rate of unemployment in those countries. Our levels of consistent poverty are now tumbling according to all indices.
The Taoiseach: It is the case. The latest reports show that 250,000 people have moved out of consistent poverty. There are still people in poverty, but we have moved a large proportion out. Our flexible workforce has led to strong job creation and we are able to expend resources to assist the less well-off through tackling educational disadvantage. Those reports also show the strong literacy levels in our population when compared with others. A host of indices show that our model is working. There are wealthy people, but I am glad to say that they also pay their taxes.
Following the 2006 budget, the tax rate for a single person on the average industrial wage will be 15%, compared with an average 12% higher eight years ago, when it was 27%. A single PAYE worker on the average industrial wage has seen his or her after-tax income increase by approximately 44% in real terms since 1997 and approximately half of that increase is owing to tax reductions. They receive more money and pay less tax. For those on welfare, contributions have significantly increased. Every report shows that the incomes of those at the lower end of society have increased owing to welfare increases and that 300,000 people who would always have paid tax now pay none whatsoever. All those things show the success of our model.
The Taoiseach: That is the case. The Deputy’s job is that of an Opposition Deputy, and he quotes Europe at every Question Time, but when we go outside to discuss its benefits, he is against the EU. Does he never wake up in the morning and think that there is a great contradiction in that?
The Taoiseach: I wanted to answer the Deputy’s question on the workplace agenda. The Government said that it would deal with several such issues concerning the displacement factor and protection of workers and their rights. In the agreement, we have listed a host of areas where we require legislative changes. We must enforce the existing legislation, but it is also a matter of new legislation. There are several measures, and we must strengthen the labour inspectorate. The Government is anxious to do so and has made clear commitments on which it wishes to act. They cannot all be fulfilled overnight and we have started work on those based on legislation.
Mr. Rabbitte: As the Taoiseach well knows, successive agreements traded moderate pay increases against tax reductions, some of them not insignificant, over the years. On a number of occasions the Taoiseach said that the tax-cutting agenda in question has run its course, with that era over. Is that still his view?
The Taoiseach: The Deputy knows my view, namely, that what we have done since 1987 in Governments in which I have been involved has been to cut taxes from their former high rates. We continued to do that until we reached the current position. The only years in which we missed out on that were those of the rainbow coalition, which stopped cutting taxes in 1995 and 1996.
The Taoiseach: The answer to the question is that I do not think that we should ever stop trying to improve the tax position of the less well-off. That is why there was a considerable reduction in taxes for the less well-off in the last budget, keeping the minimum wage out of the tax net.
The Taoiseach: It is good that VAT went up, since we were able to redistribute that money. As the Deputy knows, in this country we do not impose VAT on food, clothing or other goods important to low-paid people.
To answer Deputy Rabbitte’s question, I believe that reductions from now on should be at the lower end. There is no case for reductions at the top end. Obviously, the bands and allowances must be kept in line, as the Minister achieved in the last budget. The reductions should help people who are working hard and are on incomes that are no longer low but which are relatively low compared with those of others. All the programmes introduced over the last few years have successfully targeted tax reductions at those receiving low pay. This has worked very successfully.
The proportion of taxes of those on the average industrial wage, which is approximately €32,000, has fallen dramatically from approximately 14% eight years ago to approximately 6%. This represents a considerable achievement in bringing about equity in the tax system, which means that the burden is now being shifted from those on the average industrial wage and the amount reduced considerably. This is a considerable rebalancing of the tax system. We should continue to put resources into this area rather than that relating to high earners.
Mr. Rabbitte: I make common cause with the Taoiseach on this issue. If he has any difficulty in the autumn putting through a budget that gives some relief to people on very low incomes, we will be happy to support him. However, his partners in Government have indicated that they wish to cut the top rate of tax for high earners. I am glad to hear the Taoiseach make a commitment that any improvements in the tax code will benefit people on low incomes.
Mr. Rabbitte: My question concerns remarks the Taoiseach made on the radio about benchmarking. Following the recommendation by a number of public sector unions that the new social contract not be agreed, the Taoiseach appeared to make plain that if the contract fell through, the entire benchmarking process would fall through. Is my understanding correct?
The Taoiseach: I thank Deputy Rabbitte for his support. In reducing taxes and, in particular, helping those on lower incomes, we have followed our programme for Government very faithfully. It is incorrect to say that the benchmarking process will fall through if the new social contract falls through. I said that the benchmarking process for next year has already commenced. A preliminary report on it has already been produced. If the agreement falls through, obviously, the terms of the agreement would be subject to entirely new negotiations between the Government as employers and the Civil Service and public sector unions. Work on benchmarking would continue but the ability of the Government to secure an agreement on it and suggest satisfactory conditions would depend on the type of agreement we would end up with on the public sector side.
We are satisfied with the agreement in the draft programme and are satisfied to continue with the benchmarking process, to negotiate to discover what we can and cannot do following receipt of the final report and based on its contents, and to negotiate with the public service unions on how benchmarking pay awards can be paid, whether all of them can be paid and the way in which they can be phased or scaled. This is the agreement as of now, but if we entered an entirely new set of negotiations with the Civil Service unions, it would depend on the resources available to pay awards. We cannot answer this question at the moment because we have had no discussions on this issue with the public service unions on their own. I hope this will not arise but if it does, what I said on Sunday will apply.
Mr. J. Higgins: Does the Taoiseach agree with the argument in the Economic Outlook 2006, published by the Irish Congress of Trade Unions, that profits have risen very rapidly and that the wage-profit share in the economy has been skewed away from labour to employers in a remarkable fashion? Does he accept that the statistics show that national agreements between Government, bosses and trade unions since 1987 have seen the proportion of national income that goes to working people reduced considerably, while the proportion going to speculators, big business and financial institutions has increased considerably? Wages have been held back while no ceiling has been placed on profiteering or speculation.
Does the Taoiseach agree that over a 27-month period, the wage increases envisioned in the deal will barely be ahead of inflation and could easily fall behind it? Does he agree that when it comes to critical areas of expenditure for workers, such as mortgage repayments and child care, inflation at its official rate does not reflect reality? Does he agree that what has been agreed is not an effective check on the race to the bottom and that no effective barrier has been placed in the way of employers——
Mr. J. Higgins: It is a question. I am asking the Taoiseach whether he agrees that no effective barriers have been placed in the way of employers getting rid of workers in favour of cheaper labour, especially cheaper migrant labour? This question merits an answer.
Does the Taoiseach agree that the entire partnership process, even while it was being negotiated this time around, has been shown again to be a fraud and a con when we witness one of the most profitable institutions, namely, the Bank of Ireland, which made a profit of €1.3 billion, dismantling its defined benefit pension scheme for workers during the course of the negotiations? What kind of partner for workers would dismantle its pension scheme while it is supposed to be part of a partnership agreement?
Is the Taoiseach very pleased that he has got away with it yet again? After months of seemingly tortuous negotiations, from the perspective of workers, the mountain has laboured and brought forth a mouse. The Taoiseach must be very happy that trade union leaders are prepared to put such a useless deal to workers.
The Taoiseach: Pay levels for organised labour across the crafts, construction, manufacturing, financial sector and other grades are well balanced in comparison with their European counterparts or are higher than them. Those who had no jobs in the past are now working so we have moved to a position that does not tally with Deputy Joe Higgins’s argument.
As the Deputy knows, the old figures relating to national income revealed that only a proportion of people were working. In addition, the unemployment rate was 18%, labour market growth was only 3% per year and emigration growth was 4%. The statistics from those days bear no relevance to today’s figures. Today, labour market growth shows we have full employment and immigration is even higher than labour market growth. People are now employed in relatively good jobs with good protections, including that provided by the statutory minimum wage, which is untaxed up to a high level.
That has been achieved by the negotiating skills of the trade union leaders with whom the Deputy continually disagrees. He denigrates them at every turn, but they have achieved a position in the past 20 years that was not achieved in earlier generations. Not only have they successfully negotiated with the Government of the day, but they have achieved a position of full employment in the country where the working class and every other class is working in well-remunerated jobs with a quality of life that they did not previously have.
I am not satisfied, as I have pointed out a number of times, with the changes made by employers in the pension systems relating to defined benefits. Employers are making their arguments in that respect and the Government has engaged with all of the social partners. It has been a difficult and contentious issue. In the programme, we have spelled out the action we need to take on this issue during the next period. While it is perhaps not the biggest issue on the agenda now, pensions will be enormously important in the future.
We have said that in the short term, we would look at the funding standards and annuity markets with the social partners and pension experts. In the medium term, by committing in principle to providing protections for workers transferring between employments, we are agreeable to transposing the optional provisions in EU law, that is, the transfer of undertakings directive, which deals with pension entitlements in such situations. This was the position of the organised workers and trade union leadership of this country. The matter is by no means straightforward and we have asked the social partners and Departments to work on the issue so that we can finalise consideration by the end of next year.
In the longer term, we have committed to a Green Paper early next year setting out for all concerned the issues about State and private occupational pensions and the optional costs and other implications of choosing various options. The real complexity of this topic means that we must have an informed debate. The Government is committed under the draft agreement to respond to this debate with a comprehensive national pension policy framework. This is something our country has never done, but it is important to do it. Around the world, there has been a change in how employers deal with pension systems.
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