Managing a Growing Economy
Building on Success
1.) Ireland has made enormous economic advances over the past four years. Against a background of success, our economic objective is simple: the creation of sustainable wealth, and its fair distribution.
2.) Labour’s main priority is to build further on the record number of new jobs created in recent years. We will intensify with specific policies the fight against persistent and long-term unemployment in co-operation with local communities and the social partners.
3.) Our object is to ensure that the factors that have contributed to our economic success continue. These have been and will continue to be:
Future Challenges
4.) The Maastricht criteria relating to issues such as debt levels and borrowing, to inflation targets, to management of the exchange rate have been important constraints on policy. In Ireland’s case in recent years, observing them has been beneficial to our economic performance.
5.) For the future, two main challenges are:
6.) This will require a shared discipline in Ireland in the future. Wealth creation and distribution will have to be sustainable.
7.) In the context of EMU, the Stability and Growth Pact in course of finalisation at EU level will be a particular challenge to fiscal management.
Labour’s Approach
8.) We believe the benefits of economic growth must be fairly shared. They provide an opportunity to tackle deep-seated problems, poverty, and social deprivation. We can raise standards of service, care and dignity for those without a voice – people with disabilities, children at risk, the homeless, people who are frail or elderly, and their carers.
9.) A strong and thriving economy can and must support quality health and education services. Both of these are a crucial part of everyone’s standard of living.
10.)Public expenditure in Ireland is relatively low by EU standards. Standards of public services still lag behind those of many of our EU partners. We therefore propose to strike a fair balance between improvements in public services, an assault on deprivation, and increases in personal disposable incomes through planned reductions in the tax take.
11.) We reject the ideology which would cut public services and curtail any future development in order to channel all the benefits of growth into tax reductions skewed to the higher paid.
12.) In short, our approach is to seek a fair balance between public spending and the tax take, and to continue to reduce our national debt as a proportion of Gross National Product.
13.) That is not to say that the £ 16 billion spent each year is all well targeted, that there is no inefficiency or waste at all, that there is not some misdirection for public expenditure programmes. We will actively encourage the emerging process of public service reform.
14.) The continuation of economic growth at a high level of about 5% on average (it is higher than this at present) provides a framework for arriving at an appropriate balance between expenditure on services, investment in infrastructure, the tax take, and keeping borrowing under control.
15.) Therefore, Labour will plan for:
16.) It follows that the explicit and implicit spending commitments in this manifesto will be prioritised and phased in by reference to these targets.
Partnership at the level of the firm
17.) Our success in managing change will be the key to Ireland’s future economic prosperity, as the only certainty of economic change – new products and services, new production technologies, changes in markets and pricing.
18.) Successful management of change will not happen through confrontation and diktat, but where management engages the workforce as equal partners. Such partnership is a core part of new business methods like World Class Manufacturing and Total Quality Management, and is the hallmark of progressive companies.
19.) Today’s workforce rightly demand a say in decisions which affect their livelihood. Labour will implement in full the commitments in Partnership 2000 on partnership at the level of the firm.
20.) We will seek to develop a system where companies prepare a partnership programme in consultation with their workforce, tailored to the circumstances and scale of the particular business, analogous to the Safety Statement required under law.
21.) State aids to enterprise, whether given through the tax system or directly, will be actively used to promote the agenda for partnership at the level of the firm.
22.) We will examine mechanisms to ensure recognition of trade unions where the Labour Court has established that the union represents a significant proportion of the workforce in question.
Minimum Wage
23.) Ensuring fair wages, and the elimination of exploitation, are crucial issues in an inclusive economy. They are issues that should be addressed in the spirit of Partnership 2000.
24.) About one in five workers is currently covered by minimum wage legislation under the Joint Labour Committees and Registered Employment Agreements. These minimum pay rates are legally binding and are enforced by the Department of Enterprise and Employment who every year recover hundreds of thousands of pounds on behalf of underpaid workers.
25.) Freely negotiated pay rates between trade unions and employers will normally be well above the rates set under minimum wage rules. There are however sectors of the economy where workers are liable to very low pay, in particular those working for smaller employers and in non-union employments.
26.) The problem of low pay extends well beyond the sectors currently covered by minimum wage rules. There is evidence to suggest that market wage rates are failing to respond to short-ages of labour in certain sectors where extremely low pay rates are still being offered.
27.) In the short term, we will extend the sectors and jobs to which minimum wage rules apply, and will increase resources to the labour inspectorate to ensure that workers actually receive the wages they are due.
28.) We will set up a Review Group composed of the social partners and independent experts:
29.) The norm will initially be a guideline for JLCs, the coverage of which will be extended as necessary. In the absence of the guideline being followed, the national norm will be applied by law after further consultation with the social partners.
30.) We will also increase resources towards enhancing the training of unskilled workers as increasing earning power is usually the key to long-term increases in earnings.
Fairer Taxes
31.) On taxation, Labour will honour the commitments in Partnership 2000, which has now commenced, and which total £ 100m in corporate taxes. Economic growth will allow this level of reduction to continue.
32.) Our objective will be to increase the after tax income of every worker well above inflation, with particular emphasis on those on or below the average industrial wage.
33.) There is a great deal of hype about "headline" tax rates. No single person or married couple taken together pay 48% of all their income – their effective rate is far lower when account is taken of personal allowances, the widened standard rate band, and in many cases discretionary allowances.
34.) What matters most in the end is the actual amount left in the pay packet – and that is determined by the total amount of tax taken by the Exchequer. The best measurement of any balanced tax reduction package is the degree to which it reduces the "tax take" in overall terms.
35.) Our approach will be to focus relief on those with low and middle incomes, mainly through changes in personal allowances and tax bands. We will also examine the appropriateness of changes in rates or levies.
Labour’s objective in relation to the Tax Take is:
This is before counting any discretionary allowances such as relief for mortgages and health insurance which Labour will maintain at the standard rate, and which reduce the tax due from many taxpayers.
36.) In the context of Partnership 2000, a change to tax credits and standard rating of personal allowances as a way of equalising tax relief and allowances to taxpayers on different marginal rates will be examined in conjunction with the Social Partners. If such a system were introduced, the money saved would be used to fund other personal tax reductions.
37.) Personal allowances will be increased faster than exemption limits for tax to ease the transition for those on low incomes entering the tax net.
38.) The PRSI exemption limit of £80 per week will be increased.
39.) The age allowance for those over 65 will at least be doubled within the life-time of the next Government.
40.) In line with announcements already made, the proportion of total tax revenue, taken in capital taxes, will be maintained at the average of 1996 and 1997 level. There will be no further significant reliefs in the capital acquisitions tax code, apart from existing reliefs.
41.) Over the next five years the standard rate of company taxation will be reduced, with the object of moving towards a fully harmonised rate after 2010. At the same time, the effectiveness of all special tax breaks for business in creating employment – capital allowances, business employment schemes, urban renewal, and many others will be carefully evaluated.
42.) Labour’s objective is keep the tax take from corporations at least at the same proportion of total tax revenue as the average of 1996 and 1997.
43.) There will be no more tax amnesties. The revenue authorities will be expected to intensify efforts to counter tax evasion and fraud, and to use existing legal powers to the full in pursuing defaulters.
Commercial State – Sponsored Bodies
44.) We support a significant role for the commercial state-sponsored bodies in the years ahead. Many of these have been to the forefront of economic and social development in Ireland over the years: in technological advances and in developing opportunities for communities in rural Ireland.
45.) At present, and increasingly in the future, state companies will be subject to competition at home and abroad: this involves transforming themselves into modern efficient enterprises. Many of these enterprises with the co-operation of the trade unions and employees are now managing the essential changes effectively.
46.) The forces of competition now facing or about to face state companies and utilities requires a new system of regulation which will:
To this end we will establish an independent Multi-Sectoral Utility Regulatory Commission which, inter-alia, will take over the functions of the new Director of Telecommunications Regulation and the regulatory functions of the Minister for Health in the health insurance market.
47.) Labour will retain majority state ownership in these enterprises. Opportunities for expansion to utilise the accumulated bank of skills will be encouraged. Suitable joint ventures, as in the case of Telecom Eireann, and probably in other companies, can be an integral part of the process of ensuring survival, growth and development.
48.) It is crucial that flagship companies in key strategic areas are maintained under national control through majority ownership by the state.
49.) Labour will support in appropriate cases, through tax concessions and in other ways, schemes for employee shareholding participation, and in particular measures designed to facilitate minority shareholdings held by a collective entity on behalf of employees.
50.) In these ways, a genuine partnership and "stakeholding" can be evolved in these companies to the long-term benefit of the company, the Ex-chequer, and the workforce.
51.) Ideological opposition and privatisation agendas will not be allowed to stymie such developments.
Financial Services
52.) Significant sectors of the financial services industry have become more competitive in response to global trends and the consolidation of the single market. In the context of EMU and globalisation generally, we believe that the banking sector is a key strategic area. That is why the state should maintain a significant presence in this sector.
53.) We propose a major review of key aspects of the financial system. This review would be carried out by an expert group which would report to the government within one year.
54.) The terms of reference would be:
Growth from the sectors
55.) Labour is the party of work and the party of enterprise. Without enterprise in the public or private sector, there is no wealth and no basis for social progress. Labour is committed to a strong market economy based on competition. In Government, we will continue to promote measures which:
56.) Current successful sectoral policies, many of which are supported by EU Structural Funds, will be continued – in industry, services, tourism, telecommunications, energy, agriculture, forestry and our marine resources. As developed later in this document, practices across all the economic sectors will need review and adjustment in the context of sustainable development into the future.
Industry
57.) The general thrust of tax, incentive, and training policies is to make industry, especially indigenous industry, more competitive. The availability of equity capital for Small and Medium Sized Enterprises (SMEs) at critical stages of their development will be addressed.
58.) At present, a high proportion of the assets of Pension Funds are invested abroad. Pension funds are averse to investing in unquoted Irish companies in a growth phase. Labour will develop a suitable mechanism where-by pension funds are encouraged to invest in Irish industry.
59.) Options being examined by Labour include:
60.) Irish companies invest in skills development and research at only half the level of the OECD average – we cannot sustain success in the knowledge-based economy on this basis.
61.) Future strategy in providing grants and tax incentives to companies will emphasise as a priority incentives for investment in both research and training. Higher education and research institutes will be resourced and encouraged to provide a much higher level of direct support in research, analysis, and skills development in industry.
Agriculture and Rural Development
62.) Farming and related industries are the bedrock of many rural communities. Direct employment in agriculture, food and forestry is about 174,000 or over 13% of the workforce, and these sectors account for over a third of net foreign earnings from trade. Under the Industrial Development Operational Programme, close to £300m is being provided from national and EU funds over the period 1994 – 1999.
63.) Labour’s aim is to develop these sectors in a way that will maximise their contribution to employment and to the economy with due regard to protecting the environment. Any changes in EU policy must only be carried through in a manner which protects the legitimate interests of Ireland’s farming and rural communities and the food industry.
64.) At EU level, the objective will be that any reduction in agricultural prices will be compensated through direct income supports for farm families. In the medium-term, the liberalisation of markets and world trade negotiations will accentuate the need for a dynamic and efficient agriculture capable of withstanding competition from within and without the EU. In this context, Labour will seek to ensure that any changes in supports and protection will be gradual, phased and compensated.
65.) The development of forestry and related industries is an important priority. Labour supports the strategic plan for the Development of the Forestry Sector in Ireland published in 1996, with the doubling of our planned forest area over the next 40 years, and increased job opportunities.
66.) There is a growing public concern about the deleterious effects of intensive farming dependent on excessive use of fertilizers, pesticides/herbicides and other chemicals. Labour favours the promotion of organic farming which moves away from the use of chemicals as aids to production and depends on the harnessing of nature’s resources to provide food for the general public. Standards will be set in relation to what can be described as organic, health or home made foods.
67.) A certification procedure will be established to ensure that foods described as having been produced organically will meet certain standards. A licensing system will be introduced to ensure that these standards are met. Where there is evidence that standards are not adhered to there will be a mandatory withdrawal of the licence.
Fisheries & Marine
68.) Labour recognises the economic and employment potential of Ireland’s marine resources and marine industries. Policy will focus on the importance of:
69.) We will vigorously pursue the case for a significant increase in Ireland’s allocation of fish stocks within the context of the Common Fisheries Policy, having regard to the principle of sustainable development. We will ensure that action is taken at European level to deal with the threat posed to our domestic fleet by ships sailing under flags of convenience.
Tourism
70.) Ireland has a rate of tourism growth almost five times the European average. The contribution of tourism to the economy is remarkable:
71.) In 1997, visitor numbers will exceed 5 million and employment will reach 115,000. Investment in tourism, with EU support, will total £650 million.
72.) Tourism has the capacity to become Ireland’s premier economic sector. This will require strategic planning and adequate financial and marketing support. Strong and sustained development will require a framework within which investment, marketing, recruitment and training can be facilitated and encouraged.
73.) Labour will put in place the long-term strategy needed to build on the recent achievements. This strategy will be set out in a White Paper within the next year, following extensive consultation with all relevant industry interests. The tourism strategy will be implemented over a five year period and will set clear targets for growth, employment, investment and standards.
74.) The strategy will involve:
75.) Tourism holds out the prospect of real and sustainable growth in a sector which could become the flagship of Irish economic development, based as it is on so much that is best in our country.
76.) It has emerged from its earlier image as a poor, seasonal substitute for more highly rated economic activities. It now represents a high quality, professional sector in which a great deal of investment in both product and personnel is paying off in terms of income and jobs.
Conclusion
77.) Labour has outlined above its long-term and focused strategy for the future. The potential benefits in terms of economic growth and job opportunities cannot be overestimated.
78.) There is an exceptional opportunity to set new standards across the spectrum of services and human resources. We are committed to implement the strategy as a clear priority.
