Good afternoon Ladies and Gentlemen,
I thought that it would be important for my colleagues and I to join your meeting this afternoon to contribute to the discussion on a new agreement, which I know is entering an important phase.
Today has a particular significance, since we are publishing this afternoon the mid-year Exchequer returns and the outlook for the rest of the year prepared by the Department of Finance in that context. I was anxious that members of the Government would advise you, at the earliest opportunity, of our assessment of the situation and the implications as we see them.
I was also anxious that we should have this opportunity to meet in order to stress my commitment, and that of the Government, to deal with the very serious issues which we face in the context of social partnership. As you know, I have been under some pressure to announce specific measures to address the emerging situation, including details of adjustments to spending plans. I wanted the opportunity, however, to engage with you in advance of taking and announcing specific decisions.
My reason for this is that we have, for many years now, operated on the basis of engagement within a framework of partnership. The Government has never, and could never, abdicate its responsibility to take its own decisions within the framework of democratic accountability. However, we have always recognised that the effectiveness of the decisions that we take in the interests of the people is greatly enhanced when they take place in the context of a broader understanding and a co-ordinated approach with the social partners.
Therefore, we are not here today to seek to pass on to the social partners the responsibility that properly is ours. Neither are we intending to negotiate the detail of measures which we believe are required to be taken. But we are here to emphasise our commitment to seeking to manage our way through a very difficult situation in the partnership process, both with employers and trade unions as parties to a pay agreement and with the wider social partnership process.
As you know, the Government has been criticised in the past for its engagement with social partnership. Some have argued that Government has become overly constrained by vested interests as a result. Our view is that, in a small economy, it makes sense to see if a co-ordinated approach by agreement can produce results which are more satisfactory for the individual constituencies of interest, and for the community as a whole, than any likely alternative way of doing business. That is our approach.
Emerging Economic Realities
When we sat down in February to launch the formal review of the first phase of Towards 2016, the economic outlook for the economy was somewhat different to the current reality.
At that time, as Tánaiste and Minister for Finance, I pointed out that, while the Irish economy was facing its most difficult environment for some time, GDP growth in 2008 would be in the order of 3%.
Since February, however, the domestic and international risks identified at that time have now come to pass.
A diverse set of circumstances have contributed to the deterioration over the last few months. Internationally, we have seen:
§ Continued turbulence in global financial markets and consequential movements in interest rates;
§ Faltering economic growth in the US, the UK and other major trading partners;
§ Major exchange rate shifts in terms of the depreciation of the Dollar and Sterling; and
§ Unprecedented rises in oil and energy prices.
At home, the pace and scale of the adjustment taking place in the construction sector has had a severe impact on domestic growth and employment. The effects of rising fuel and food prices are being acutely felt by all of us but particularly on those on lowest incomes.
All of you are dealing with the impacts of these realities on a daily basis, whether it is businesses trying to retain market shares or businesses in difficulty; or workers facing a much more uncertain employment outlook.
I believe that our approach to these challenges should reflect many of the messages of the recent NESC report on the economy, to which many of you contributed and which the Government recently considered. The report addresses the challenges of managing a difficult transition and the current uncertain policy conjuncture. This transition is from a period of exceptionally rapid growth, turbo-charged in the second half of the 1990s by exports and in the early part of this decade by high levels of house-building; it is towards a period of robust but slower growth led by exports once again but with domestic demand remaining significant, and services exports from Irish-owned business as well as multinationals making a major contribution.
The NESC analysis suggests how the successful management of that transition through the difficulties of the current period – and the avoidance of past policy mistakes – can enable us to have confidence in the resumption of growth and the consolidation of living standards for all. Such confidence is based on the strength of our economy across all sectors other than construction, the quality of our people, the enhanced economic and social infrastructure we have developed, the innovation across the economy reflecting much increased R&D activity, and the flexibilities which our system has displayed over many years.
Social Partnership
The strengths of the social partnership process is that it is long-term in its focus and involves:
§ A common analysis of the challenges confronting our economy and our society;
§ A collective engagement by the key actors in society on the identification of economic and social priorities and the difficult policy choices that that implies; and
§ The development of agreed approaches to complex problems.
Above all, partnership is a collective investment in our futures; for our mutual gain; partnership is about putting our shared goals ahead of short-term sectional interests. In short, it is about trust between the parties.
Moving Forward
The eyes of the international community are now firmly on Ireland from a variety of perspectives – politically, economically and from a trade and investment point of view. By making the right decisions, we have a great opportunity to emerge from the current difficulties within the next two years. The wrong decisions based on short-term gain will only result in persistent negative consequences. We must act responsibly to secure the long-term future of our economy and our people.
I hope that we can send out a very strong signal of stability, competence and confidence. From my point of view that means demonstrating that we are constructively shaping those factors which are within our control; and I believe that puts a high value on a new national agreement, on pay and other issues, appropriate to our circumstances.
I accept that a deal should not be at any price – for any of us. The interests of all of the parties have to be reflected in the outcome. But if the choice is between acting responsibly and not acting at all, then, from the Government’s perspective, there is no choice to be made.
I am asking unions and employers to work with Government in developing and delivering a responsible approach.
Responding to Economic Challenges
There has been a lot of media coverage about the economic scenario. My colleague, the Minister for Finance will set out in detail the latest position based on the Exchequer returns which are being published this afternoon.
The key principles that guide us collectively in how we respond to current circumstances are:
· Maintaining employment – over the Celtic Tiger period, responsible social partnership has delivered a record rate of employment growth. All the evidence shows that having a job is the most important positive influence on people’s well-being and contentment. We must minimise the negative effect of the current difficulties on employment and avoid any increase in long-term employment. We must continue to emphasise securing high-quality jobs for our citizens;
· Promoting sustainability in the economy and society - we must be concerned with sustaining all aspects of our capital stock – economic, social and environmental;
· Prioritising those capital investment and investments in R&D which will have the greatest impact on stimulating the economy but paying strict attention to value for money;
· Prioritising front-line services for current expenditure while achieving greater efficiencies across all services;
· Considering a range of microeconomic measures to reduce the cost of doing business in Ireland to stimulate export-led growth and enhance productivity per capita;
· Examining initiatives to increase competition to enhance consumer value and dampen rising prices;
· Payingcareful attention to those on the margins of society for whom the adverse global conditions are making life difficult. We must protect the most vulnerable in society; and
· Maintaining consumer confidence
The menu of policy options available to us in responding to the challenges we now face includes:
§ Managing public expenditure – on pay and other current expenditure such as benefits and pensions; and on capital investment, to enhance the productive capacity of the economy in terms of people and infrastructure and to prioritise expenditure on the most vulnerable in our society;
§ Managing our tax revenues; and
§ Managing borrowing prudently within our agreed EU limits.
What is clear is that the emerging economic realities require urgent action by Government within a timeframe of days and weeks, rather than months. The Government will next week take and announce specific measures to deal with the emerging challenges in the current year. This will reflect a prudent approach to securing efficiencies and managing our spending to achieve a fiscal outcome which is within acceptable parameters.
There is, equally, a need to prepare our budgetary strategy for next year, in the light of what we can now see as clear economic realities. In doing so, we will, of course, pay close attention to the principles to which we are committed under Towards 2016. We are very much aware that the views of the social partners could be a valuable input to our decision-making. In particular, in the area of value for money and policy effectiveness, I believe that those working in the delivery of public services have a valuable role to play in identifying innovative ways of securing greater effectiveness and greater value across all areas of public spending, including payroll costs.
I am therefore inviting you to engage with us on these issues as an integral part of the discussions which will continue over coming weeks. These will cover wider issues, including the complex agenda on employment regulation.
I know that some people have expressed disappointment about the level of progress that has been made in relation to the
legislative commitments in Towards 2016. Significant progress has been made in delivering, for example, the mechanism to address exceptional collective redundancies and the resourcing of the National Employment Rights Authority. But it is important to make the point that, where progress has not been possible, this has not been due to a lack of commitment or good faith on the part of the parties – including the Government.
More recent developments, since Towards 2016 was finalised, have changed the landscape in this area and this has served to further complicate matters.
However, some other developments, such as on Agency Workers and the Organisation of Working Time, have seen advances in the EU legislative framework which will be reflected at national level through appropriate transposition.
The fact remains that, since the talks began in February, some seventeen formal meetings have taken place on pay and workplace issues. Outside of these formal meetings, further intensive bilateral discussions have been taking place over the last couple of weeks aimed at teasing out the range of complex legislative issues I have mentioned.
Despite the complexities, however, we are committed to finding pragmatic solutions that are appropriate to our circumstances and that attract the support of unions and employers. The Government is, therefore, calling for engagement with a renewed intensity on these issues.
Conclusion
In summary, what I am saying today is that the ground, in terms of the economic outlook, has been shifting since these talks first began in February.
We are now confronted with a very difficult set of circumstances and some stark policy choices.
The imperative on us to seek agreed solutions through partnership is, therefore, stronger than ever. I still firmly believe in the sound fundamentals of the economy. We face major challenges but they must also be kept in proportion. Your unique position to influence Government reflects your unique position to lead your constituencies. If we work together to overcome current difficulties there is every reason to expect a return to more favourable growth rates in the medium term.
All sides have a contribution to make – in terms of vision, leadership, creativity and judgement – in an agreement that meets the scale of the current challenge.
For our part, Government will not be found wanting in its willingness to engage on all of the issues. And I would urge the parties to approach the discussions in this next critical phase with a renewed vigour and intensity and, above all, with pragmatism and realism.
Thank you.
ENDS