Recovery Plan is bill for economic failure

The Four Year Plan released yesterday afternoon will affect every man, woman and child in this country.  It is devastating – the price we must pay for political incompetence.  Within a matter of hours, I gave a speech to the Seanad.  You can read the whole debate by clicking here.

I welcome the opportunity to participate in this debate on the plan published by the Government this afternoon. This plan is in many ways the bill for economic failure. Regrettably, it is a bill that must be paid over a period of some years.

Having listened to Senator Boyle, I have a real sense that he is finding his voice on some issues and that he may be, in terms of some of the things he said, feeling a sense of political liberation. I agree with much of what he had to say. There is a sense that people have been codding politicians, and not perhaps only Government politicians, and that they may have been unwitting participants in the illusion that we can fund and have the type of public services to which we aspire and should have for our citizens and children, and that these can be sustained and managed at a particular level of taxation. A stark statement on page 91 of the plan, with which no one could disagree, states : “We have eroded the income tax base to an unsustainable level”. This is manifestly true. However, I do not believe income tax is the only element we need to examine in the context of from where we raise taxes. I agree with Senator MacSharry and others who said that it is necessary that we not confine ourselves to only looking at income tax. We do not wish to raise taxes for the hell of it but so that we can look towards having a sustainable economy and public service in respect of which there is certainty in terms of funding into the future. We must never again think we can pin everything on the type of transitional taxation we had during the so-called boom.

I recall sitting beside a politician on a radio programme prior to the last general election. She was a supporter of the then Government and is not now a Member of the Houses. I recall her seeking to sustain the argument over many minutes on that radio programme that it was possible to reduce taxes and improve public services. I do not understand how it would have been possible then or since to do this.

The extent to which any of us was party to such an illusion was a mistake but the principal responsibility must lie with the Government regarding these matters. Opposition politicians can from time to time be criticised for calling for this and that. It is sometimes legitimate to engage in such criticism but it is greatly dwarfed by the legitimate criticism that one can level at a government that has failed to carry out the policies it ought to have implemented.

The document, regrettably and sadly, is a bill and it is not particularly detailed. It has detailed aspects and although it purports to contain a growth strategy and a jobs strategy, it does not. There is nothing new in the narrative on these areas. There is a great deal of generalised, aspirational material, with which it would be impossible to disagree, but there is little relating to a jobs strategy. The IMF is constantly being invoked but its officials are in the House and, in an interim report published earlier this week, they rightly identified the urgent necessity for a growth strategy and to put in place serious measures to get people back to work. That is what we need.

Somebody said to me earlier that when I debated the document, I would criticise it, but that I should start by outlining a number of aspects with which I agree. I must ask myself, therefore, what is acceptable or unavoidable. I very much welcome the Government’s conversion regarding tax expenditures and reliefs. The Minister of State will acknowledge that the Labour Party has repeatedly raised this issue year after year during the budget debate in the context of the pensions system and other tax expenditures. They have been addressed in the plan, with some being front-loaded. However, there has been more front-loading of the income tax measures than of other taxation measures. It is a pity that there is selective front-loading. It would be wrong of me not to welcome the Government’s attempt to address these matters, although some members of the Government have been content in public to be dismissive of them and say they are not as crucial as the Government has belatedly recognised them to be.

It is regrettable that the capital programme has to take a hit. It is unavoidable but any government would be faced with that reality and it simply has to be done.

It is good that the Government has said that water charges will be introduced on a metered basis. That is an essential element of the plan and it is right that the Government parties have taken that view.

A number of elements of the plan are quite curious. Senator O’Toole and others referred to the reduction in the minimum wage. We know all the anecdotal augments. We are all politicians and we all talk to employers who tell us the minimum wage is too high. I have great respect for those who employ people but I have met few of them who would not welcome the opportunity to reduce pay as a percentage of their costs. We should not rely on employers saying that they would rather the minimum wage be lower but on evidence-based analysis as to whether it has a negative effect on unemployment, as is suggested. I would prefer if that were done. This measure will not affect the bottom line of the €15 billion adjustment. It was suggested earlier that it is being implemented on an ideological basis to tick a box or to touch a particular nerve to gain a welcome in particular quarters. Is that why it is being done? I would prefer to tackle the minimum wage on the basis of rigorous analysis and evidence rather than anecdotes.

I do not have a difficulty with a review of registered employment agreements and the regime of employment regulation orders. If there is to be a review, let there be a review but reference is made to a review within three months and, because it will happen so quickly, that means it is anticipating change. There seem to be changes in mind. The orders and agreements are described in the plan as another form of labour market rigidity by preventing the adjustment of wage levels. That is a blunt description of a regime of setting pay for, by and large, low paid workers, which has been in place for 60 years and which has served the economy well. There is a bipartite mechanism to set pay levels through the Labour Court and legislation is in place. Nobody is picking numbers out of the sky; there is a tested process by which these wage levels are reached. I remind the House that they generally apply to low paid workers in the services sector. By all means have a review but let us not jump quickly to the conclusion that our problems can be solved by reducing pay.

Senator O’Toole pointed out there is evidence in the report of a dramatic reduction in the past year of unit labour costs in the economy. People constantly rail in certain quarters about competitiveness and wages being too high but wages have taken a significant tumble in the past 12 months. There has been an enormous adjustment. Let us not get carried away and think cutting wage levels in low paid sectors is the answer. I do not have a difficulty with issues such as Sunday working being examined but I do not commit my party to necessarily saying that should be changed. If it can be demonstrated that, for example, business owners cannot open on Sundays because it would not be worth their while, then the issue should be examined. The Leader said he is aware of this being the case. If so, it should not be difficult to put together evidence in this regard. If there is inflexibility in the agreements for adjusting pay levels, it should be relatively easy to address. I do not know what is meant by a lack of flexibility. Given my knowledge of the Labour Court processes, they are not unwieldy and people can go there if there is a proposal to vary an agreement. If the Government believes it is worthy of examination, nobody could object to this.

I refer to the reductions in public service pensions. The Government is right to address this area, as it is impossible to avoid it in the context of equity and fairness. However, I query the reduction on pensions of between €12,000 and €24,000. That is a relatively modest pension and the issue of the threshold for implementing various reductions also arose when the income and pension levies were implemented.

It is quite likely that people on a pension of between €12,000 and €24,000 have no other income. It is at least conceivable that some people on high public service pensions have other incomes. It is not just that it is conceivable. It is manifestly true that people on very high public service pensions can have another source of income. That is not a criticism of them but it is simply saying by way of equity and on the basis of what Senator Boyle rightly said about spreading the pain and the burden that it is not unreasonable that it would be addressed.

I mentioned that I welcomed the conversion regarding the tax expenditures. They are even listed on page 96 of the plan and that list looks very familiar to the list the Labour Party prepared at least in last year’s budget if not the one before that and which has been repeated frequently by myself in this House and by other colleagues.

There is a great deal in the plan to consider and read. Unfortunately, it is the price of failure. It does not purport to be a document that deals with the banking crisis, which is the great concern, if that is not an understatement, for all of us in terms of the way it will be addressed. It is important we look at planning our budgetary strategy over a longer term and not have this mad rush in the lead-up to a budget, especially in areas such as public expenditure. It is crazy that our system seems only to address these areas for a few weeks, even though we seem to have been talking about them since the summer of this year. As I said previously, there should be an ongoing review of public expenditure, as they have in Canada, rather than seeing what we can cut. It should be possible to have a continuing process of review and consideration of what we want and what is important. We should almost start again in regard to all areas of public expenditure. We should shake all the trees and examine them all, not just for the purpose of cutting but for the purpose of working out in a positive way what it is that we want to cherish and keep.