Oireachtas Joint and Select Committees
Wednesday, 22 February 2017
Committee on Budgetary Oversight
Fiscal Outlook, Competitiveness and Labour Market Developments: Discussion
2:00 pm
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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I welcome the General Secretary of the Irish Congress of Trade Unions, Ms Patricia King, and Dr. Tom McDonnell, senior economist at the Nevin Economic and Research Institute. They will be dealing with fiscal outlook, competitiveness and labour market developments. Before we begin, I remind members and the witnesses to switch their mobile phones because they affect sound quality, recording and the transmission of the meeting.
Witnesses are protected by absolute privilege in respect of the evidence that they give to the committee. However, if they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the longstanding parliamentary practice to the effect that members should not comment on, criticise or make charges against either a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.
I invite Ms King to make her opening statement.
Ms Patricia King:
I thank the Chairman for the opportunity to appear before the committee today. I am accompanied by Dr. Tom McDonnell of the Nevin Economic Research Institute, NERI, which is an ICTU-funded economic research unit. He is happy to assist in answering questions. Core domestic demand grew by 3.4% in the third quarter of last year and the short-term outlook for the economy seems reasonably positive despite the threat posed by Brexit and the uncertainty surrounding US policy. I am informed by NERI that its baseline estimate for real GDP growth in 2017 stands at 3.4%. NERI forecasts that domestic demand will increase solidly in 2017 on the back of a strengthening labour market while the end-year general Government deficit should be close to balance, albeit marginally negative.
As we know, the unemployment rate is improving and we believe that it will reach 6.5% by the end of this year and it is reasonable to expect that hourly and weekly earnings will finally start to rise significantly in 2017. Such an increase in wages is long overdue with average hourly earnings lower now than they were in 2009 and essentially stagnant since 2013 despite three years of fast employment growth and declining unemployment. The medium-term outlook is less positive with a Brexit related recession possible in 2019. Brexit is set to have a negative and long-lasting impact on the Irish economy. We did not say any more about Brexit in our written submissions, but we will answer questions on it if there are questions. We did not wax lyrically about the subject because we attended this committee before with a separate grouping to discuss that matter.
What are the correct responses to the changing global economy and the external threats to our collective economic prosperity? We must act strategically and increase our efforts to build up the economy’s productive capacity over the long term. To this end there needs to be much greater public investment in productive infrastructure such as public transport, rural broadband, the intercity motorways and renewable energies along with higher levels of investment in education, publicly funded R&D and in the development of an advanced innovation system. Such investments will enable the economy to develop sustainably and will improve living standards through productivity-led growth. In particular, public capital investment needs to be doubled from its current unacceptably low level. Congress proposes that an explicit target should be set by Government for total spending on public capital as a percentage of total economic output. A target of 4% of economic output over the economic cycle is broadly appropriate. The public investment target could fall as low as 3% when the economy is booming and could rise as high as 5% during recessions. The Government’s proposed rainy day fund could facilitate this with money adding to the rainy day fund during boom times and then being withdrawn from the fund in recessionary times. This would enable investment to operate as a counter-cyclical force within the economy.
This leads us on to budgetary priorities. Congress has consistently argued for an inclusive equality-proofed budget that places the welfare and betterment of the majority at its very core and that will prioritise higher living standards and deliver this through a transformative programme of investment in infrastructure, services and service delivery.
This must be reflected in a sufficient, fair and progressive tax system. Not only do the long years of crisis demand that the process of social repair begins without delay, but recent events in the US, the UK and across Europe make this a compelling necessity. To the extent that the Government has leeway, namely in the dreaded fiscal space, it should use that limited space to increase investment in the social wage by prioritising four key areas, which we have set out consistently in our pre-budget submissions. These are housing and homelessness, which is now an emergency, child care, community health services, as well as education and training.
Government spending needs to be increased in each of these four areas as part of a strategic plan to improve living standards and social inclusion. We must begin with housing. We do not have a housing and homelessness crisis but an emergency. Existing policy approaches and the market have failed. This should be a source of shame for all people, especially for policymakers. In such circumstances, the needs of the citizens require that the State steps in and leads the solution with a major programme of home building.
Money spent on education and health must be treated as an investment and not a cost. Our health service will only be fixed by moving to an adequately resourced and universally accessible single-tier public system. Likewise, investment in an accessible, inclusive education system is a prerequisite for an equal society and a thriving economy.
Policy failure in child care can be addressed by raising investment to European levels. The high cost of child care in this country is a major barrier to labour market entry and, significantly, contributes to the loss of high quality skills, experience and knowledge in the workforce.
Overall, by improving and augmenting the social wage, we can generate tangible improvements in living standards and address some of the corrosive social deficits which have arisen over recent years.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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I call on Deputy Cullinane.
David Cullinane (Waterford, Sinn Fein)
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I welcome our witnesses.
Ms Patricia King referred to the dreaded fiscal space. These are the parameters with which we are all working, however. Even those of us who submit alternative budgets have to work with the figures presented to us, even if we have differences of opinion as to how the rules should be applied. The difficulty we face next year is that there will be a €500 million carryover cost because of measures introduced in last year's budget for which a full-year cost was not applied. Accordingly, the fiscal space has shrunk from what it was a year ago. That means the discretionary spend has significantly reduced and there will not be huge scope for investment or cutting taxes, if that is what the Government proposes to do.
The only way we can increase the fiscal space is to either achieve savings in public spending or increase revenue and taxes. Ms Patricia King spoke about a fair and progressive taxation system. What concrete proposals has ICTU made for expanding the fiscal space by way of discretionary tax measures? Has it proposals on spending and savings?
An argument can be made that the capital spend should be decoupled from the fiscal rules. Many organisations which have attended the committee have supported this. Ireland has one of the lowest capital spends in the European Union. That happened because the economy collapsed and the easy thing to do was to stop and slash capital spending. Ms Patricia King mentioned transport, broadband, education, research and development. There are significant capacity problems in many of these areas which will require significant investment. How can we do that if we are operating solely on the basis of a shrinking fiscal space and we have to adjust for carryover costs?
I have argued with other delegations before this committee that if we have a shrinking fiscal space with less money available, as well as demands in education, housing, capital needs and so on, how can we continue to reduce the tax base by phasing out or abolishing the universal social charge, as the Government is doing? Is that the best policy decision?
Obviously, public sector pay will create pressures. We have no agreement on it and there are no provisions made for 2019, 2020 or 2021. To unwind FEMPI, the financial emergency measures in the public interest legislation, would cost in the region of €1.4 billion. There are different commitments to do this and it depends on how it is done, when it is done, who is prioritised and so on. What is the position of congress, notwithstanding the Lansdowne Road agreement and it seeing out its timespan? In the context of a new agreement, what is congress's demand for outstanding public sector pay for 2019, 2020 and 2021?
Ms Patricia King:
We have consistently set out in pre-budget submissions and other places our view of a fair taxation system. The OECD, the IMF, EUROSTAT and others say Ireland is not a high-tax or a high-spend economy. When one does a comparison with other European countries, one finds in the pattern that Ireland has a very poor social wage system. Across the EU, be it the EU-15 or wider, the employer social contribution - PRSI - is much higher than it is here. When discussing competitiveness, the cost of wage and labour costs, much inaccurate information comes out about the employer social contribution. The fact of the matter is that one of the key features of the Irish labour market and our taxation system - if one calls it that - is this low social contribution on the employer side. We have made it explicit in our submissions that this has to change.
David Cullinane (Waterford, Sinn Fein)
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Have targets been set or is it just a commitment to increase the contributions?
Ms Patricia King:
We have found very few people are interested in listening to this point. The National Competitiveness Council and other organisations come out with various sets of figures periodically. Ireland has the lowest social wage, as well as the lowest value the worker gets from that social wage, be it sick pay or whatever. The comparisons come out bad on the workers' side. Employers, as well as several political representatives, make statements about tax levels. On the face of it, it is a low-tax regime. However, when a comparison is done with other EU member states, one is looking at an entirely different picture. From congress's point of view, we want to get into a space where there is much more equity. Compare what workers in Ireland have against what workers in France have with sick pay, maternity benefit and child care. We all know child care costs in Ireland are the second highest and highest in the OECD for couples and lone parents respectively.
What happens in other EU states in respect of the provision of those services? The answer reveals a far better picture in other states, even, dare I say, in the United Kingdom, although that comparison will take on a different hue shortly.
We have said in our submissions that reforming the revenue base requires reform of capital taxes and tax breaks. We believe a minimum of €180 million could be raised in budget 2017. I have absolutely no doubt that we will say the same thing for the next budget with particular attention paid to reliefs available at marginal rates and the suite of reliefs related to capital acquisitions tax. In our judgment, there is considerable room to extract unfair tax reliefs and so on. They should be stripped out. We have heard political representatives support and object to the idea. We have consistently argued that there should be a net wealth tax focused on households with net assets in excess of €1 million. We have priced it and we believe it could collect €300 million in net additional revenue during 2017.
Reference was made to the USC charge in principle. This is relevant for the example I have just outlined relating to child care. There are others areas in the education system and so on where we believe it should realise a real social charge. It should be a social contribution. It should be hypothecated effectively to deliver what it is supposed to deliver. That would bring about a far fairer and more transparent system. If we are putting in a given amount by way of social contribution, then a given service should be provided as a result. That is the view we take in general terms.
Several points arise in respect of the Lansdowne Road agreement.
David Cullinane (Waterford, Sinn Fein)
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It was not so much the Lansdowne Road agreement. I am more concerned about-----
David Cullinane (Waterford, Sinn Fein)
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Yes, there is no provision for 2019, 2020 and 2021. The Minister tells us that the remaining cost of unwinding FEMPI is approximately €1.4 billion. I am seeking clarity on the position of the Irish Congress of Trade Unions post the Lansdowne Road agreement.
Ms Patricia King:
We have put our views on the scenario post the Lansdowne Road agreement in the clearest terms to the Government as the employer – we deal with the Government as an employer in this sense. We want FEMPI unwound, gone, disappeared as an instrument. We have set out that position to the Government.
One particular issue cannot be ignored. Let us suppose someone had the wherewithal and there was a revolution in the State tomorrow. Then let us suppose the first thing those responsible did was unravel FEMPI legislation. What they would find is that those who would benefit most are-----
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Can I interrupt for a moment please? The meeting is up here, not down there.
Dara Calleary (Mayo, Fianna Fail)
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It would be a different world after the imaginary revolution. Deputy Cullinane is trying to start one himself.
Ms Patricia King:
In that scenario we would find that most of the money under FEMPI changes would be due to the highest paid public servants. That is a fact of mathematics rather than something anyone has invented. Those who would benefit least financially from the unwinding of FEMPI would be low-paid workers, because the lowest paid are no longer in the restoration category, they are in the pay increase area. For those on the lowest pay, the Lansdowne Road agreement actually meant post restoration and an increase of pay.
The ICTU position is that we want FEMPI to be unwound, most particularly as it is entirely inappropriate as an instrument to deal with pay for public servants. That is our position on the matter and we have set it out. However, we acknowledge that financially, if it were to happen tomorrow, the higher paid would benefit more. A great deal of money would go to certain people in pay increases and this would skew the public service pay bill to the higher paid. That is a difficulty.
David Cullinane (Waterford, Sinn Fein)
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Ms King has said that FEMPI should be unwound. I reckon a distinction needs to be made between taking the law from the Statue Book and unwinding FEMPI in terms of giving everything back to those from whom everything was taken. That would include higher earners. Ms King made the point, rightly, that those on salaries below €30,000, or perhaps a little higher, will not benefit in any way from the unwinding of FEMPI. They would have to get pay increases. Ms King has set out the ICTU position on FEMPI. Is the position that everything taken has to be given back by a given period? If that is the case, what is that period?
Ms Patricia King:
We have not set a time period on it because we expect to go into discussions with the employer in May of this year. The last thing we want to do or should do - anyone who is used to negotiations will know this - is start setting given amounts of money. We have some preconditions but it does not make sense to be giving ideas to the employer. The employer has the wherewithal to do all sorts of queer things with those figures. It would be inappropriate for me to directly answer the question. However, I am suggesting without any equivocation that unwinding FEMPI as an instrument is important from our point of view.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Dr. McDonnell will you address some of the technical questions?
Dr. Tom McDonnell:
Questions were raised on capital spend and how to address the issue. Essentially, there are five ways to do it. We can simply allocate a larger amount within the fiscal space on the basis of faster expenditure growth. That can only be done through discretionary revenue measures, as we know. The Irish Fiscal Advisory Council has indicated the position on current spending. The estimated additional expenditure in a standstill scenario, i.e. taking into account demographic and price changes, is already at the point of the allocation for current spending. The only way we can dig into current spending is through potential efficiency savings. Without changing the composition there would have to be cuts. There is an investment clause. However, it does not apply to Ireland because it is only relevant when the output gap is at a certain level, in other words, when the economy is close to recession. There is a structural reform clause. This is very difficult to invoke and it has never been shown in practice. We would need to show that the reform undertaken would generate a faster rate of growth and would definitely lead to a more productive economy in future. It could be imagined in a post-conflict situation or after a severe recession where there is a clear infrastructural deficit. For example, five or ten years ago it might have been relevant for rural broadband. It might be tougher now. It is something where we would have to see a productivity increase.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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It might be still relevant to that area.
Dr. Tom McDonnell:
It could still be relevant. However, the argument would have to be made on a specific project like that rather than in respect of the overall envelope. My research has shown that as one area where there would be definite gains. We also have special purpose vehicles and the European Investment Funds. These can be used to get certain items off-balance-sheet. I know that is being examined at the moment in the context of additional funding for housing.
We can front-load capital spending because of the four-year horizon currently in use. Essentially, the increase in capital spending could be approximately 25% in the first year and a similar amount could apply in subsequent years. That would be a way of bringing forward capital spending but it does not get around the point that the fiscal space is extremely low for budget 2018. Potentially, the figure is as low as €500 million or €600 million. Reference has been made to new measures. In the context of a growing population and price pressures and so on, arguably these factors are not fully knitted in to the figures.
Short of changing the rules, to increase capital spending we are going to have to cut current spending - already the levels will not provide improvements in 2018 - or increase taxes. That is really it. In future years, we could increase capital spending perhaps by putting less money into the rainy day fund or perhaps by using the rainy day fund as a supplementary form of capital spending. It would be a counter-cyclical measure used to spend more during recessions and less during booms. As it stands, we are rather limited.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Thank you for being succinct on those points.
David Cullinane (Waterford, Sinn Fein)
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Thank you for letting me in, Chairman. I have to leave.
Dara Calleary (Mayo, Fianna Fail)
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I thank Ms King and Dr. McDonnell for coming in. This will be an ongoing conversation for the coming months.
Ms King remarked on the potential for a Brexit-related recession in 2019. I first wish to focus on several points related to Brexit. I note the ICTU has also commented on pensions today, including some stark warnings on the future of our pensions system.
Deputy Boyd Barrett raised that issue in terms of the work programme.
What is the worst case scenario in terms of the impact of Brexit on the economy and in terms of the rights of workers, an element which has got lost? We have difficulties around Tesco and Bus Éireann and we seem to be on a race to the bottom in this regard. Is there a danger that as Britain leaves Europe and we try and keep up with whatever they are going to do, we could go down that road and remove some protections? There is a broader macro point first, and is then the issue of worker protection.
Ms Patricia King:
If we look at the economy as a whole and divide it into the manufacturing and productivity side and the services side, about 230,000 jobs are in what the CSO calls the productive sector. That ranges across agri-food, chemical-pharma and wood, to name a few. More accurately there are about 209,000 jobs in the sector, and with ancillary jobs on top of that the figure is nearer to 300,000. Taking the whole services sector into account we are talking about 600,000 to 700,000 jobs. We can then look at the import and export business that is done with the UK. In 2015, the CSO figures showed an export level of about €13.7 billion and an import level of about €16.4 billion. That gives a round figure of approximately €30 billion between the two countries. The point that we have made consistently at any of the consultations that we have been invited to is that all of these jobs are underpinned by the business that these companies do domestically and abroad. If one plucks out that €30 billion export trade business with the UK we believe that any trade barrier put in place in the absence of any agreement between either the EU and the UK or a specific agreement between Ireland and the UK - we do not know what will come out of these negotiations - could have very serious consequences for those jobs. It is probably inappropriate to say that if our trade drops by 5% then we will lose 5% of jobs. That is probably too course a mechanism to use. My judgment is, having attended a number of those consultations, culminating last Friday in Dublin Castle, that there is a complete underestimation. I shared my view at the meeting in Dublin Castle at about five 3.55 p.m. when all the politicians, with the exception of one or two, and most of the other people were gone. That is how long the trade union movement had to wait to get its point across. I want to keep away from making a political point.
Dara Calleary (Mayo, Fianna Fail)
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Does the witness mean an underestimation of the potential impact of Brexit?
Ms Patricia King:
I mean the impact of Brexit on jobs. IBEC has made some very strong points regarding agri-food. An equal point could be made regarding chemical-pharma. Chemical-pharma faces a double whammy because of the actions of the United States regarding tax. That might wash through the system and have some effect here in our domestic economy.
Congress is an all-island body. We have a remit to represent workers across the island. If there is an export level of 56% of goods from Northern Ireland, two thirds of which is into the Republic of Ireland, and there is some interruption to that there is going to be an effect on jobs on both sides of the Border. I get no sense of urgency from the establishment regarding the level of job loss that could happen in the discussions that I have heard to date in terms of preparation for that very serious set of negotiations that will happen. We are here in the Oireachtas representing the Republic of Ireland. It could be very bad, and there are indicators to suggest that. If there is a trade barrier that will interrupt that €30 billion of trade between the two countries that could have a very bad effect. We have set this out in some short policy documents we have put forward on this.
I am not sure that there is a plan, and I asked in Dublin Castle if there was a plan to deal with the fall-out.
Dara Calleary (Mayo, Fianna Fail)
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Did the witness get an answer in Dublin Castle?
Ms Patricia King:
No. The Minister for Agriculture, Food and the Marine answered and said that he thought that it was correct to ask if there was a plan but that he preferred to do the consultation before making the plan. I am a bit worried about that because I believe that the negotiations are going to start fairly quickly. I have spent most of my life negotiating and I know that one usually has to get oneself ready fairly quickly for going into negotiations of that size.
Another thing that concerns me is that we set out our view at the session about jobs and enterprise in Carrick-on-Shannon, County Leitrim. I attended the second panel and contributed on it. The policy position outlined by the Government representatives was that there are rules in Europe, particularly state aid rules, which would not allow any subventions or otherwise if the effect of Brexit is that people lose their jobs. I said that there surely must be some level of subvention to help companies to transition and to be given a period of time to find diversified markets. The answer was that Europe is based on these rules and that therefore there cannot be anti-competitive subvention. My point on that is that we are in a unique scenario here. We cannot stand by and have thousands of workers and their families lose their livelihoods, and we cannot allow ourselves to be hoisted on the petard of EU rules. We should be clever and come up with something which preserves those rules and allows us to do something else.
I got not sense that people who are going to be in these negotiating rooms would look for this, which worries me. I am sharing here what I have already shared publicly. I try and see these things in simple terms, because there is huge potential to get involved in very long-winded discussions relating to Brexit. The executive of congress made a decision that we become very focussed on what it is we want to protect. We agree with the common travel area and the protection of the Good Friday Agreement. We agree that the Northern Ireland scenario is unique and that there should be no hard Border. We are very clear on that, but we are focussing, in our discussions with anybody who will listen, on the protection of the jobs of our members North and South of the Border.
Deputy Calleary also asked about employment rights, and I will briefly refer to it. There is a strong possibility that when we get into the dogfight regarding trading with our nearest neighbour there will be companies who will try hard to maintain their trade. That is understandable. They want to preserve their business. As time moves on the UK intends to leave the European Convention on Human Rights and has introduced its Great Repeal Bill. It will pick and choose the legislation it maintains in terms of workers' rights and social rights.
If Ireland, and particular companies, are to maintain a trading relationship between the two countries we may have to match what is happening in the UK. If that does not match the terms and conditions we have here then companies will start to push under the heading of competitiveness, which is a word that dogs me every day because it is a code for a lot things, including diminishing terms and conditions of workers. The view then will be that particular companies will only be able to continue in operation if the terms and conditions here match the trading circumstances in the UK. That is what I call the race to the bottom element of employment rights. I have raised this issue in several arenas, including an august select body of the House of Lords, which took place in Buswells Hotel. The employers bodies, of which there are a number, are not opposing what we are saying but they are not saying that it will not happen. Over the last nine months since the Brexit announcement was made, I have heard particular companies in this country say that we will have to match what is happening in the UK. That is scary for workers.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Since Brexit was announced there has been one substantial announcement of a significant employer in the North planning to move operations to the South. Most of the media and economic comment is of movement in the opposite direction. In other words, it is expected that there will be potential employment opportunities, admittedly in the financial services area, in Dublin. I have not heard any commentator speak about Brexit in relation to the race to the bottom argument, which I accept is a legitimate issue to raise. In other words, I have not heard comment to the effect that because the UK will not be in the European Union and will no longer be a party to the convention on human rights, we will return to a very historic relationship between employers and employees in the UK. I have not heard any comment in that regard, which is why Ms King's contribution is interesting. From where is she garnering that view?
Ms Patricia King:
We have acknowledged in all of our documentation that this country will receive jobs. It will receive jobs, probably, mainly, in the financial services sector and, possibly, some in the high tech sector. We expect that in the main these jobs will be in the financial services sector. Our judgment is that the companies concerned will locate, in the main, in one or two areas, possibly Dublin and Cork. There is reason to believe that those jobs will be what we would determine as commuter jobs in that people will work in Dublin Monday to Friday and return home to the UK at weekends and so on. Child care services and housing infrastructure around the Dublin area is so bad that there are issues around whether all of the jobs that could transpire will do so. That is another matter. The jobs in the financial services sector will be, most likely, at the high paid end of the business. In terms of mobility, the jobs that move are the bonus related positions and so on. The high tech jobs are also more likely to be in at the higher end of the payscale.
The agrifood sector is regionally based. As members will be aware, it is closely linked to the live supply from agriculture, such that a definitive characteristic of this will be how that will be dealt with. I am not sure that farmers will be as badly affected because they have a much broader export market than the UK. In the last number of years, they have been diversifying a lot. In terms of retail, Ireland imports a considerable amount from the UK and this causes significant job creation here. Any impediment or turbulence in the market could affect that.
It is going to take longer for all of this to happen, but within a period of five to seven years, unless this is managed very tightly there is a strong possibility of a huge job loss scenario. We need to find a way through the EU negotiations to deal with this. The State agencies, particularly Enterprise Ireland, have been advising on transitionary circumstances and how to diversify. They do not believe that funding is of any use in this regard. We need to teach people how to diversify and to get companies to diversify their markets. Diversifying markets takes time. What does one do in the interregnum? What happens to the jobs? I am happy to say that a huge amount of the jobs about which we are speaking today are jobs, collectively bargained, and with decent enough rates of pay and conditions. It is a matter of grave concern for the trade union movement that this area be monitored.
Dr. Tom McDonnell:
In terms of the economic impact, thus far it has been minimal at a macroeconomic level. Notwithstanding any impact on agrifood, goods trade in food and live animals to Great Britain was down €217 million, or 5.5%, in 2016, which is quite significant. If one strips out machinery and transport equipment, goods trade with the UK was down only 1% in 2016. NERI is tasked with identifying major swings one way or the other. Because there is so much uncertainty associated with the upcoming negotiations, it is difficult for somebody like me to make hard forecasts in terms of what is likely to happen. It is difficult to foresee anything other than an extremely hard Brexit. The negotiations are likely to fail and go badly. As that happens, which will be, probably, in late 2017 to early 2018, we will start to see an impact on the economy. If the trade barriers go up in 2019, as appears likely, that is what I would identify as the most risky in terms of a potentially large negative shock to the economy, as a level effect. It should not affect growth levels in subsequent years but there could be a fall in that one year and there could be chaos for Irish exporters for a period as the uncertainty continues and new markets are sought.
The increased uncertainty associated with all of this is a disincentive to investment because companies cannot be assured about access to markets and so on. This will put downward pressure on growth up to, and potentially beyond, 2019. However, this is all happening in the context of an economy that is still benefitting from pent up demand, rising employment and rising disposable incomes. We are at least coming to it in a reasonably strong space.
Dara Calleary (Mayo, Fianna Fail)
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It troubles me that somebody of Ms King's experience would have that assessment of our Brexit plans. Perhaps the transcript of her remarks could be forwarded, for response, to the Minister in charge. Reference was made to the pressures in Dublin in terms of housing and so on. In regard to the national planning framework review and the national capital plan review, what role will Congress have in terms of the planning framework review and in terms of developing proper centres of growth that might help in alleviating the pressures on Dublin?
In terms of the capital plan review, one of the issues under discussion by this committee is the European Commission desire to release funding for capital plans and the Irish Government's reluctance to go down that route. What are the witnesses views in this regard and what are they hearing from their contacts in Europe in relation to freeing up funds for capital works and, in particular to returning to a point raised earlier by Deputy Cullinane, about decoupling capital spending from the fiscal risk?
Ms Patricia King:
If I might, I will deal with the framework and I will ask Dr. McDonnell to deal with the capital plan.
The Government invited congress to participate in one meeting so far on the development of the framework document on what Ireland will look like in 2040. From our perspective, we argue that there should be a holistic approach to planning the development of towns, etc. Clearly, there are severe problems for workers, even in commuting, how they get to work and where work is located. That has significant social impact and even physical and mental impact in terms of workers commuting for hours to a workplace and then having to do the same to get home. There are also all the issues and fallout from that. Any of the discussions I have taken part in - as I stated, we have had one meeting so far - have been about building holistic communities with health services, hospital services, education services and communities rather than having only low paying jobs available in a particular community and people having to travel further, for instance, to the city, if they want to earn better money.
When we are building communities, suburbs or whatever of Waterford, Galway and Limerick, which cities were mentioned as ones that could be expanded, we must have quality housing and we must make plans for that housing to be available for all who need it. In fairness, a number of sectoral groups, such as Engineers Ireland and Architects Ireland, have quite progressive comments to make about how one does that. We are not experts in how towns are built, but what people want is to be able to live within a reasonable distance of their workplace, have relatively easy access to schools, health services, and so forth, and to develop a good community around them. Getting up at 5 a.m. to be at a desk for 9 a.m. and leaving work at 4.30 p.m. to get on a train and not getting home until the children are in bed asleep has been the pattern that has developed over the past 20 years. As one who has been for years a victim of the N11, I would say I know every leaf on every tree on the way in because that is what one does as one sits for hours in traffic.
We would argue strongly that agencies such as IDA Ireland and Enterprise Ireland have a big role to play in that conversation. We argue that because their job is to attract industry to Ireland. We believe they should do that on the basis of decently paid jobs located in line with that framework. This should all be joined-up thinking. As I said, the conversation is at an early stage. We will argue that we deal with ordinary people who want to lead a good quality of life in a community which has an emphasis not only on work but also on leisure and in which the amenities are available to everybody. We will argue that we do not make the mistakes we made previously where we built low quality housing for people because we think they are working class. I grew up with those mistakes. I saw that all around me. We should have a much more innovative, equal way of dealing with society in order that people can at least aspire to enjoy a decent living in the community or town in which they live.
Dr. Tom McDonnell:
The NERI will make a submission to the planning framework review. In March, two of my colleagues are releasing a paper looking at solutions to the housing crisis - funding models, special purpose vehicles, etc.
Looking ahead to 2040, we will have limited resources. The process begins by looking at what we think will happen to the populations in the various areas and, looking at it from an economic point of view, identifying a small number of regional hubs to act essentially as champion urban areas - Dublin, Cork, Limerick, Waterford, Galway and probably two others - where a disproportionate amount of the resources should go with the goal of encouraging and coaxing people to move to these urban areas. The process begins by completing the network that links Dublin to all the regional areas, including the north west which is currently isolated and is likely to become even more isolated after 2019. Alongside that, the process begins by linking the regions to each other. Waterford through to Cork, Limerick, Galway and up to Sligo and Letterkenny should be completed as a motorway network. Then everyone, with the exception of a few people in Mayo and Kerry, are within a certain geographic distance of that major western road artery. That becomes an extremely important piece. I alluded to rural broadband earlier. That makes it possible to have thriving small businesses in rural areas that are not reliant upon having either infrastructure or those resources there. There are things that can be done to maintain-----
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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It also means that the level of traffic could be eased a little and many could work from home. Many in Kilkenny in my constituency could work from home for a number of days a week if they had proper rural broadband.
Dr. Tom McDonnell:
Absolutely, and that is true throughout the west as well. To an extent, it reduces those pressures. Much of what I have been talking about has been improving the road network, but as population increases, we will simply have the same problems over and over again. Part of this involves having strong public transport infrastructure within each of the cities themselves and creating excellent living spaces à laCanada, which means people will want to come and live in those places because they have amenities. That means going beyond the mere traditional economic infrastructure that we talk about to cultural infrastructure and making them places where people will want to live. The NERI will make a submission. It is one of those areas on which we could go on and on, but we do not have that time.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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There is a lot happening in Leinster House today.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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I am not trying to cut Dr. McDonnell short. Everyone on this committee is in complete agreement.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Dr. McDonnell is correct about the fiscal rules and the need for change. Given that treaty reform is unlikely, the existing structural provision will have to be expanded and changed in some way that will not require a treaty change but will allow the fiscal space to be dramatically altered in order that we can make such capital investment that everybody agrees is required. I am not trying to cut Dr. McDonnell short but I do not want the meeting to be too repetitive. I want to let Deputies Boyd Barrett and Burton in and the others afterwards.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank Ms King and Dr. McDonnell for coming in. Before getting into some of the specifics, do they agree that with the threat, challenge or whatever one wants to call it of Brexit and the concerns involved, there are the immediate and challenging issues that are related and that we confront but which have served to highlight much bigger problems, both economic and political, that predate the political shock of Brexit and which we need to address? Do they agree we need to stand back a little and see the wood for the trees? Much of what we are talking about is a matter of nuts and bolts in terms of the immediate challenges, and it strikes me that we have to stand back.
If we were to stand back, we could argue that the economy is vulnerable because it is not sufficiently diversified and its ability to diversify is significantly hampered by the fiscal and state aid rules we have identified. Does Ms King agree? This problem, which pre-dates Brexit, is an accident waiting to happen. Brexit simply exposed it in stark terms because the economy is not sufficiently diversified. We must give serious consideration to ways of diversifying the economy and identify areas into which it could be diversified, for example, forestry, which I have discussed often-----
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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The Deputy is a champion of forestry.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I am deadly serious about the forestry sector because it has significant potential, which has not been taken seriously. Despite the significant employment potential it offers, development in forestry is being hampered by European Union state aid rules. Renewable energy is another area with significant potential. I ask Ms King to comment.
I fully agree with Ms King on the need for heavy investment in education. We have the potential to move ahead of the curve in a number of areas of scientific and technology development if we had such investment. Developing medicines is another area. While I acknowledge that the pharmaceutical sector is a major industry, we must increase indigenous capacity and develop new medicines through links to universities and so on.
Does Ms King agree that the arts is an area in which there is substantial underinvestment? Given the large talent pool we have and the potential high return on investment in the arts, we must consider the employment this sector could generate.
On the big picture, while the nasty, dangerous right-wing manifestations of disillusionment with the European Union and globalisation we see in Trump and some of the Brexiteers are alarming, do they not also speak to something that the left, the trade unions and all of us who do not want to see this type of expression of disillusionment must address? By this, I mean the deep dissatisfaction with the inequalities created by globalisation, for which the EU bears much of the responsibility as it pushed a neoliberal globalisation agenda that has helped to produce inequality. Where this feeds into much more specific problems is the whole area of increasingly unequal distribution of wealth. We need to discuss this issue more as budgets approach because we often hear about the nuts and bolts and nothing of the overall trajectory we are trying to achieve. People like Thomas Piketty have drawn a picture of this for us. Does Ms King agree that we need to start talking about the issue?
There is undoubtedly increasing inequality in the distribution of wealth and income. The left and trade union movement need to talk about closing this gap and using tax as a mechanism to redistribute wealth. We are much more vulnerable to shocks and booms and slumps because wealth is increasingly unequal in its distribution. With wealth located in fewer and fewer hands, we become increasingly vulnerable to shocks. I ask Ms King to comment.
Mr. Paul Sweeney has done a great deal of work on wage share, an area in which a consistent shift towards profits and bonuses and away from workers as a proportion of national income has been identified. Does Ms King agree that this issue is not discussed widely enough?
I fully agree with Ms King's emphasis on social housing. We and others have been in despair at the failure to address the housing emergency. Much of the discussion focuses on financing housing construction and the narrative from the Government is that loads of money is available. This begs the question as to why social housing is not being delivered at a faster rate. While finance is important, the discussion needs to move on. If, as the Government claims, there is substantial money available from the European Investment Bank, credit unions and so forth, what is the problem? Does Ms King agree that a large part of the problem is that Governments have moved away from the old method of delivering public housing via direct construction by local authorities and that, in addressing a social housing problem, they insist on involving the private sector, which causes all sorts of delays, problems, trade-offs that hamper the delivery of public housing?
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Perhaps we will ask Ms King to respond before proceeding.
Ms Patricia King:
I agree with Deputy Boyd Barrett on the diversification of industry. Ireland is over-dependent on foreign direct investment which can be unstable. For example, a company may locate here and stay for three decades before deciding to exit the country. This in itself brings an instability. My predecessor, Mr. David Begg, was highly knowledgeable of and wrote extensively on the need for Ireland's economy to be based on a much more stable, indigenous industry in which people are trained in different disciplines and so on.
I also agree with the Deputy on the opportunities available in the renewable energy and forestry sectors. This came up briefly at the Carrick-on-Shannon consultation on Brexit where one of the contributors on the panel, who represented an employer group, made the point that farmers must think about switching to forestry and so on. While there is nothing wrong with aspiring to make such a switch, if a farmer's job is to rear 50 head of cattle and bring them for slaughter to the local factory and Brexit creates an impediment or trade barrier which prevents the factory from selling the meat, he will be left with 50 head of cattle. There is no point in telling him to consider planting trees as there is a timeframe involved. The farmer must earn a living and if he is not rearing 50 cattle for a factory and wishes to make money from forestry, he will need a plan and timeframe for diversification if he is to do so. It is not about the principle of diversifying but about having a realistic and practical plan which will allow the income earner to do something different. That is the only caveat because I do not have an issue with any of the principles involved in moving to renewable energy.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Did Ms King express the view that state aid is the key to making this transition and addressing the immediate problem she identified?
Ms Patricia King:
The worrying issue is the point I made to Deputy Calleary, namely, that state aid rules debar. My point, however, is that we are in unparalleled and unprecedented circumstances. We cannot sacrifice parts of the economy because rules are in place. It does not really matter what happens to the poor devil I described with his 50 head of cattle. He can be told to diversify into forestry but he does not have the wherewithal to do so. For this reason, as I argued to the employer at the Carrick-on-Shannon meeting, there is no point telling the farmer to move to planting trees. While it is a very good idea to diversify, people must be given a pathway to enable them to do so.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I agree.
Ms Patricia King:
State aid rules may be cited as an impediment to achieving this outcome but we must get beyond that in the negotiations.
My final point on this issue encompasses some of the other issues raised by Deputy Boyd Barrett.
During the financial crisis, we were in Europe. One of my concerns is that Europe put its foot on Ireland's neck and told us not to burn the bondholders because it set the rules and we had to do things its way. Those of us who lost pay, pensions or, unfortunately, jobs knew what that meant - we would be sacrificed. If it was done once, it can be done twice.
My next point is for whoever will lead these negotiations on Ireland's behalf. There will be bright and brilliant European people involved, but if their main aim is to protect the European model, they will not worry about the man with 50 head of cattle in Leitrim any more than they did when making rules on fiscal Europe. Speaking as someone who has engaged in complex negotiations for years, the Irish negotiating team must get into Mr. Barnier's head, tell him what we want out of this and let it be known that, if we do not get it, we will veto the decision. We cannot just accept that these jobs are going to go. It is a simple point and people might dismiss its simplicity, but I am making that comparison. We have had experience of Europe. Let us face it - social Europe has been gone for ten or 15 years.
I represented workers in the arts and culture sector for years. It is one of the lowest-paid sectors in our economy. That is terrible. We have been fighting for 12 years to get legislation through on collective bargaining rights for workers in that sector, which might be a reflection of how people view it.
I might not have answered all of Deputy Boyd Barrett’s questions as fully as he wanted, but I will comment on housing. The familiar statistics and charts tell their own story about local authorities pulling out of housing but we need to get right the issue of land, its price and what developers are doing with it. The National Economic and Social Council, NESC, a body that I am attached to on behalf of ICTU, has done good work. Those who read that work will get a good exposition of the situation as regards land and its price. Every area’s representative bodies have come up with good stats on the cost of land as a component of building ordinary, semi-detached, three-bedroom houses. It is in the range of €45,000. We are told that 27,000 planning permissions are ready, but why are they not being executed? It is because of an ongoing row. We do not hear of it verbally, but there is an issue with the availability of land. That land is the base price component of housing and the cause of much of its cost thereafter.
The private sector goes into business to make a profit. That is understandable. The private sector is seeking housing incentive packages from policy makers, for example, 9% VAT. Since the Kenny report, land in Ireland has accumulated a large amount of betterment that the public has not benefitted from but from which developers have. That is wrong.
The Deputy might not have read about it but we have argued that there should be compulsory purchase orders, CPOs, on land. A CPO can be applied on a route from Cork to Dublin, but what is more important than housing people? This is the social housing point of view but CPOs should also be considered in respect of vacant properties. We understand property rights, courts and everything else but it might be possible to make this process work and allow the State to take over after a certain time.
There must be strong State involvement. The State should start providing houses, as it used to do previously. Some of us grew up in them and know them well. The land issue, which is not often debated, needs to be dealt with and the price of that component of housing should be reduced.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Does Dr. McDonnell wish to comment?
Dr. Tom McDonnell:
I agree that the economy needs to be diversified. We have a large multinational sector but we all know that the indigenous sector has not performed well since Independence despite a very favourable model. We have geographic disadvantages, of course.
To do what the Deputy has described is more of a medium-term project. He was right to say that state aid rules make it difficult. The Asian tigers pursued a developmentalist model whereby they championed particular sectors and industries. They did this by being entrepreneurial states, that is, doing it themselves or by identifying champion companies. The semi-States are the closest equivalent in Ireland. They also subsidised particular industries and sectors.
If we want to convert much of the landscape from cattle to forestry, we will have to change the underlying economics to incentivise individuals. That would mean subsidies for forestry and the gradual rolling back of CAP. Forestry is capital intensive, there are upfront costs and income streams are not great. It is a big risk to take.
Regarding disillusionment, people need hope and a sense of the potential for progress. There has been an increase, at least since 1980, in the wealth distribution gap. Much of the inequality in wealth is intergenerational, that is, certain people have inherited wealth rather than earned it. Therefore, the policy solution is to nip it in the bud, which means a strong inheritance and gift tax that redistributes at that point with the money being, for example, hypothecated for social housing.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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I thank Dr. McDonnell.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Everyone else got a supplementary question. Will the Chairman allow me one?
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Briefly, as three other Deputies wish to speak.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I have two questions on wage inequality. There was a report today on the gender pay gap widening. It reduced during the recession but that it has widened since is an alarming and disappointing sign. Do the witnesses have comments on that?
Due to the cuts imposed during the austerity period, pay equality is at the heart of the teachers’ dispute. Nurses and various other people, including the ushers in the Houses, have also been affected by this pay apartheid. People are paid different amounts depending on when they started. What do the witnesses have to say about that?
Ms Patricia King:
The Deputy is right about the gender pay gap. Even in the private sector, the recent Morgan McKinley report stated that the gap was 16%, although another narrative has that at 14%. There should be no gap.
There are a number of contributing factors. Child care is a major factor in people, particularly women, being debarred from the workforce and from developing and utilising their skills. If they have children during their careers, they are penalised in the labour market for that period. Consider also the rates at which men and women progress.
All of that would indicate that if, as I have done myself, one has reared children, that is not going to be a help in one's career. We have got to change a lot of attitudes. For example, though I will not say that it will solve all of the problems, I would advocate one of the things that is being proposed, even in the UK, which is that companies with more than 250 employees would have to show their statistics on the gender pay gap, how women are not progressing and related matters. That sort of name and shame stuff starts to build awareness and actually gets people to acknowledge that there is an issue and a problem.
We could have a much longer conversation about this. I saw recent CSO figures on employment levels in the Irish economy for 2016. They said there were 1.06 million males working in the economy and 895,000 females. There was a little piece in it in respect of those who are engaged in home care duties. They registered 10,000 men engaged in home care duties for 2016 and 435,000 women. That in itself paints a picture. The only good thing about it was that I looked at the 2014 figures and there were 465,000 women in 2014 so it is going in the right direction.
There is a whole big picture that we certainly do not have time to discuss but it is unacceptable. Policy-makers, in our judgment, should spend some time working with those of us who are trying to get rid of that inequality in the system. To me, there is not lot of engagement on it. There is in particular areas, but it is seen as specific problem rather than an overall labour market issue.
On the issue of the various different grades in the public service, our judgment has been, as the committee will know, these were cuts that were imposed. We tried to mitigate as far as we could and we only got so far in the Haddington Road agreement. I was engaged in that myself so I am fairly familiar with it. We have asked the public service pay commission to look at this because I have been on record several times in 2016 saying that different rates of pay are untenable and cause all sorts of internal friction, regardless of whether one is in the private or public sector. Whoever dreamt them up, they should not have passed the test on human resources never mind trade unionism. They are, in my judgment, a long-drawn-out problem which ultimately leads people to see an inequity in the system. They should not have been imposed in the period of austerity. We have asked the commission to consider and address it in an ongoing way, apart from the disputes that people are legitimately involved in to try to address it.
Joan Burton (Dublin West, Labour)
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I welcome Ms King. I appreciate that she has been here a long time already so I will just go back to what we are about. We are looking at the review of the capital programme and so I would like to ask Ms King a couple of direct questions about what she would support in the review.
Bearing in mind the comments that she has already made about supporting a regional report, would she broadly support the completion of the motorway system that was undertaken at the height of the boom? I refer, in particular, to the N4 to Sligo, which remains unfinished. Would she also support the notion of the Atlantic corridor? Would she support the notion of developing a contact like the road from Limerick, for example, to Kerry; to Tralee and Killarney, but also the road from Limerick to Cork? There are a lot of people employed in that region in pharma, which Ms King referenced already, but also in agriculture and food processing. We have to make a recommendation to the Minister for Finance and, while roads would not necessarily be the first priority, the most dangerous thing of all is to have a half-finished road where people exit from a full motorway system because this can cause a tremendous number of accidents. I think we know about those. That is one question.
I know congress has been involved in respect of the subject matter of my second question for a long time. I was both angry and shocked by a statement and interviews in the media in the past couple of days by the Minister for Transport, Tourism and Sport, Deputy Ross, to the effect that he is giving the nod, very strongly, to a third terminal at Dublin Airport which he envisages would possibly be privately-owned. I know congress is not necessarily part of a formal partnership, but I find that notion coming from a member of the Government at this point extraordinary. There was a lot of public money invested in the second terminal. While business at Dublin Airport is growing, my understanding is that there is still capacity there. More importantly, airports are strategic national assets. In the context of the development plan, would ICTU share the view that assets like airports, which are publicly-owned in this country, should continue to be publicly-owned in terms of their development? I do not know if ICTU has a position on it, but certainly earlier Ms King was talking about various races to the bottom. I see all the signs of that in the proposal for a third, privately-owned, terminal at Dublin Airport at the moment.
On the issue of upskilling of people for potential job changes, does ICTU have any view? Ms King probably has more insight into it than many of us. When I was in government, and particularly when I was the Tánaiste, I worked very hard to get the apprenticeship programme started again in public organisations such as the ESB. The organisations in question did restart it. I am really shocked that, notwithstanding the development of SOLAS, the numbers taking up apprenticeships are very small. Does ICTU have a view as to how that might be improved? We know that more than 55% of people leaving secondary school are going on to some form of third-level, higher or further education. However, many of the remainder would be interested in apprenticeships. There are very few opportunities being offered to them and I would be quite fearful of those young people falling behind. The number of women apprentices also remains depressingly low. The German and Austrian models, in which there is very strong employer buy-in to sponsoring apprenticeships, offer us a very good model for providing really good opportunities for young people.
In the context of previous discussions on housing, does ICTU have a position on affordable housing? There are many young people employed in the public service and other employments, as the Secretary General of ICTU pointed out. Many of them have now been in employment for eight to ten years. They may want to buy a house on their own, they may be in a relationship, they may have started a family. In the housing debate, my view is that affordable housing is important, particularly for younger people or, perhaps, for older people where there has been a split in a relationship and where the person who is leaving the family home will have to find another home. A large number of the people affected by that are generally men, perhaps in their 50s. In terms of its conversation with Government, does ICTU have a position, not just on ending homelessness on which I think there is universal agreement, but on affordable housing, which is a key starter fact for a lot of young people who are working and who, with loan support and access to credit, would be able to take it up? It just seems to have fallen out of the picture almost completely.
Will the delegation tell us more about what effectively is a strike by developers and builders when it comes to building housing? Perhaps Dr. McDonnell has a view on that. The number of housing starts is appallingly small. Do the witnesses have an idea for a mechanism to solve the problem? There will be a minimum additional inflow or availability of capital funds of an extra €2.5 billion in terms of the review. Does congress have ideas about what would be best value in terms of that additionality?
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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The Deputy has asked many questions.
Joan Burton (Dublin West, Labour)
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Yes, I will leave it at that but I make two other points about Brexit.
Ms Patricia King:
I sit on the board of the Dublin Airport Authority, so I will not say anything that is in appropriate in that regard. Dr. McDonnell may wish to deal with the matter in general terms, but it is safer if I do not do so. He will also deal with the infrastructural points and he covered some of them earlier.
On upskilling, I am on the board of the Apprenticeship Council of Ireland. It was set up by the previous Government with a view, on foot of a review carried out and chaired by the then chairman of the Labour Court, Mr. Kevin Duffy, to extending apprenticeships away from traditional areas and into other areas. The council has - I am sure I should use the royal "we" - have a target of having 31,000 apprenticeship places by 2020. The target is a long way away from the current number of 3,820 apprenticeship places. The Deputy is right that there is a very-----
Joan Burton (Dublin West, Labour)
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Can I be specific in my question? In the context of the additional funding that is available, will Ms King identify a way in which the figures, which we have dragged up, and I know the work that the Apprenticeship Council of Ireland has done, could be significantly increased in the next two years?
Ms Patricia King:
I was surprised that the process was so complex. As the Deputy will know, if a national apprenticeship is offered, the skills level must be thorough. Quality and Qualifications Ireland, QQI, must underpin everything, and rightly so. If somebody claims they have been through an apprenticeship as an electrician or commis chef, we want them to be a fully qualified electrician or commis chef. The process is more complex than anybody on the council envisaged. A lot of hard work is going on in a variety of areas. The council put out a call for apprenticeships and received responses from employer groups which were prepared to sponsor. Some of those were oven ready, so to speak, some needed more work and some were way off. There are three lots. The council is making another call because some key groups did not come forward in the first phase. One such example is child care. I have argued strongly that an apprenticeship training scheme in child care is necessary, progressive and good. I hope that the child care community come back on that.
On the matter of another area that I believe would drive up numbers, there is an established grade in the health sector called health care assistant which, in my judgment, would be very positive, and I have contributed this at the Apprenticeship Council of Ireland. There are thousands of people working at that grade in the HSE alone, apart from the private employers and so on in the health services. If we were to get such an employer interested in taking up that on the apprenticeship scheme, which, as the Deputy rightly said in her contribution to the employers when they attended the committee, which I read, is a combination of the German-Austrian model. It is work-based and classroom-based training. That would drive up the numbers greatly, but it would not just be about driving up numbers but also about getting a good, strong practical training standard at that grade level in the health sector.
The calls have been made and a lot of hard work is going on with apprenticeships. The target is 31,000 places. If we were to succeed in getting key apprenticeships in those sorts of areas, it would be much easier to achieve the gender balance. I am heartened by the level of work that is going on to develop apprenticeships.
The council has discussed getting involved with and having conversations with the Central Applications Office in order that these are real offers and that when young people coming up to the leaving certificate are making decisions with their parents about what courses they are going to take, apprenticeships outside of the construction sector are real options for them.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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All of the committee members would agree that this is what should happen. The issue has come up a lot.
Ms Patricia King:
The council has worked positively on that. We have discussed housing a lot. We are very much in favour of affordable housing. We think that, even with the crisis and emergency that exists, there are great opportunities to develop different models of supplying houses. Even one of the documents issued by NESC suggested that an arrangement should be made with NAMA, perhaps in a pilot scheme, to get up to 2,500 mixed income rental units in Dublin for precisely the cadre of people described by Deputy Burton. These units might not be their final home but they may be the type of living these people want at a certain point in their lives. The State, instead of expecting NAMA to give a return, which is what the current NAMA legislation does, could adjust the remit of agency in that legislation to allow the agency to make a return to the State over a much longer term via that rent.
Eamon Ryan (Dublin Bay South, Green Party)
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Section 12(8) of the NAMA legislation allows for that.
Eamon Ryan (Dublin Bay South, Green Party)
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The legislation was written with that in mind. It was specifically intended and the legislation allows for it.
Ms Patricia King:
If it does, that is much better news. From our perspective, if there are 27,000 housing permissions and NAMA has the legislative ability to do this, we should develop in the first place a model to provide mixed income, good quality housing units which will make a return to the State over a much longer term. We are very supportive of this and we argue for it when we are in bodies like NESC. We do not have many conversations with Government, but whenever we do, we argue for that.
Dr. Tom McDonnell:
Questions were asked about the capital programme and housing. There is a limited budget and things must be prioritised. It is not all about motorways. Public transport in cities will be very important, particularly in Dublin. We are a very small economy. We do not have scale within Cork, Limerick and Galway combined. Completing the motorway from Cork to Galway and even on to Sligo should be close to the top of the list. I imagine the planning framework review will identify Sligo as a place with a strong potential for growth, and as a north west champion.
On the issue of the motorway that connects Sligo to Dublin, I know there are a lot of problems around the Longford-----
Joan Burton (Dublin West, Labour)
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It stops.
Joan Burton (Dublin West, Labour)
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The motorway stops around Bunbrosna and goes to Rooskey.
Joan Burton (Dublin West, Labour)
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There are probably people in the room more expert than me on the exact delineation of the road. The road is very dangerous when it gets very small.
Dr. Tom McDonnell:
That is right. Completing the spokes from Dublin to Sligo, Galway, Limerick, Cork, Waterford and then linking Waterford and Cork and around again will be important. Whether that should outrank other areas of need is something that will come down to a cost-benefit analysis. However, any such analysis will invariably show that something done in Dublin will have a better cost benefit because more people live there. If we are interested in regional development, we have to look beyond that and look at what the west needs.
The west needs transport infrastructure. Again, I emphasise we are not just talking about roads but also about public transport infrastructure within Cork, Limerick and Galway. Galway city, in particular, has a terrible traffic problem. It is worse than Dublin in many ways.
As for the builders' strike, it is somewhat perplexing. The first item one would look to is the dysfunction within the banking sector whereby it is impossible to borrow. Certainly, Ireland fares very poorly in international metrics regarding the quality of the banking system and the availability of credit. However, such is the scale of the issue at present that, to refer to Patricia King's initial comments, we have an emergency and the State will have to take on a far more substantial role. My colleagues are working on a paper, which is currently out for external review, so I do not wish to comment too much to pre-empt that, but it is possible to finance this within the public sector, although, of course, not the entirety of the annual need. To do so will require up to €2 billion per year to generate 10,000 housing units. My expectation is that what we are seeing is a lag and that the evident demand that exists, particularly in Dublin, will be met with increasing private sector supply. With house prices continuously increasing it simply makes more sense to do so. I anticipate that private sector building will increase, and also on the commercial side.
There is a competitiveness aspect to this as well. Rising rents, mortgages and so forth will have to be reflected ultimately in increasing wages just to stand still, and obviously there is a competitiveness aspect to that. Of course, if we want to get those 50,000 London jobs, for which we, Paris, Frankfurt, Luxembourg and other places are fighting, that means there must be a quality of life within the city. That means we must deal with the housing so the State is essentially building the place to which they can come, "Field of Dreams" style. In addition, Patricia King has repeatedly referred to the child care issue. That is a major issue for quality of life in Dublin as well.
The State must take a far more substantial role, and the envelope that has been identified and suggested by the Minister for Public Expenditure and Reform in terms of capital needs is clearly insufficient out to 2020.
Joan Burton (Dublin West, Labour)
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During the debate on NAMA, I proposed the social investment clause which the then Minister for Finance, the late Brian Lenihan, accepted. It was one of the few changes a Minister for Finance ever accepted in anything. I am disappointed it has not worked out or been utilised more. However, there is something that might be helpful to the committee or to Ireland in general. Patricia King referred to NESC on a number of occasions. If it was possible for an opinion to be published again by such a body setting out those proposals regarding mixed models of funding and so forth, it might be very useful to do it now. Certainly, there is a strong perception of huge inhibitions because of the rules referred to earlier on state aid and the structure on which NAMA was based suddenly coming in for later attack. In fact, there have been suggestions in the public media by a group of developers that they are contesting even the current NAMA housing section on the principle that it constitutes an unfair state aid. If there was advice through ICTU or NESC that was strong and robust, it might give the Government more courage in that regard.
I was delighted to hear Dr. McDonnell mention the Maynooth line. The electrification of the Maynooth line in the current plan is not sufficiently prioritised in my view. In terms of product, that is the one that will produce the greatest commuter benefit and has the highest potential to reduce private car flow into Dublin. There have been a number of positive developments, such as the line up to Broombridge and the opening of the tunnel under the Phoenix Park, but the electrification is being long-fingered now. Does ICTU have a view on that development? The west side of Dublin, like Fingal, is the key population development area for the future and the electrification of that line would accelerate the trains, particularly if it was carried out far down on the line.
I have a final question. In the context of the challenges facing Ireland with Brexit, do the witnesses think it is possible, perhaps using the European Globalisation Adjustment Fund as a model, to make a proposal for a compensation fund for Ireland in respect of the costs that will arise from Brexit and the re-adjustments, re-alignments and so forth that will have to be made? ICTU is part of the European Trade Union Confederation. The fiscal stability rules were set by Germany quite a long time ago but the EU does not appear to have found a satisfactory mechanism for change up to now. When one talks to people privately they are quite open to change but no mechanism has been found yet. Are there ideas in the European trade union movement as to what the mechanism would be? The Italians want to invest more capital and for that not to count as part of the deficit. There are many other examples. Greece would like to do that and it would make a great deal of sense. From the witnesses' wider international contacts do they see any model which, perhaps, the committee might put forward to the Government as a means of getting over this huge inhibition relating to the fiscal rules? I have met Andrew McDowell, as I am sure the witnesses have, who was formerly the adviser to the Taoiseach and is now the European Investment Bank's representative to Ireland. He is dying to spend money and we are dying to receive it, but we do not seem to be able to bridge the gap.
Joan Burton (Dublin West, Labour)
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He has undergone a considerable conversion.
Joan Burton (Dublin West, Labour)
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He is now wearing a European hat.
Ms Patricia King:
The globalisation fund would concern me and the word "compensation" concerns me too. The reason is that our main aim is to try to protect the current jobs rather than look for a formula after they are lost. That should be said. The main premise of the globalisation fund was training. Indeed, we ended up with one situation where it was not even fully utilised. We became very aware of it in the Dell situation when all those jobs were lost. We should not pre-accept that there will be huge job losses. We should try to find a formula, which is the big conflict or issue, around the state aid rules so that we can protect the jobs in these extraordinary circumstances with subvention and without breaking state aid rules.
On the housing issue, the Nevin Economic Research Institute, together with ICTU, will publish a comprehensive document on 23 March relating to housing. The Deputy will find that the document will address some of the issues she has raised.
Eamon Ryan (Dublin Bay South, Green Party)
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I am sorry I was not present earlier. I had to put a question to the Minister for Foreign Affairs and Trade and I will have to leave again soon. We do a great deal of multi-tasking here. I wish to pick up on the question asked by Deputy Burton relating to the national planning framework. The committee received a submission from the Irish Business and Employers Confederation, IBEC, on 8 February last which I believe was spectacular in the lack of sustainable thinking displayed.
IBEC connected its submission to the national planning framework and gave a presentation on it again this morning to Oireachtas Members. It was more motorways and dual carriageways everywhere with thousands of kilometres more of motorways. They said we must finish our 20th-century solutions before we start looking at 21st-century solutions. I could not believe it because we are one of only two states that will not meet its climate targets in Europe and we are one of four states not meeting renewable targets. If one drives out on the N7 in the morning there are tens of thousands of people stuck in traffic jams and all these union members are spending an extra two hours per day getting to and from work. This is a huge imposition on the quality and the cost of work.
I am slightly nervous as Deputy Burton seems to be talking up motorways to Sligo and from Cork to Limerick. For four decades we have sprawled, and we have sprawled spectacularly, because we have spent four to one on roads versus public transport. Everything in my political antenna says that we are being set up for the same thing again. Pretty much every Deputy from around the country is going to say that they want motorways everywhere and that they must have dual carriageways here, there and everywhere. The numbers are going to be stacked up on that. I do not know what but it will take something to try to change our ways to bring development back to the centre. It is part of the corruption of land and land pricing that Ms King spoke of earlier. We must radically change our development process. The planning experts know that and have said that but everything I hear is the opposite; we are just going to keep building more and more roads and sprawl further out.
We have had a very good experience in recent years of talking with ICTU and other trade unions on the ideas around just transition, a recognition that the jobs are going to come to the centre, in sustainable solutions and in efficient high-tech clean industries. That is where the economic future is. Our country has no interest in it, our political and public systems have no understanding of that and we are going to miss the opportunity. I plead with ICTU as it has an interest in just transition. Maybe it could use its voice to say funding should be spent on public transport first on this occasion. It will not advantage workers to be stuck in yet longer traffic jams. Galway's issues will not be solved by another outer ring road at €600 million. If we put that amount into some decent public transport solutions in Galway we might start to see the city really develop with further jobs. It is a fantastic city but it is about to gridlock and no amount of roads will solve that problem. The only way to solve it is with proper public transport and planning but we are not doing that. I was slightly worried when Dr. McDonnell listed off about a half a dozen other projects. This would eat up the entire capital freedom we have, we would not have the public transport and we would be another decade or two going towards unsustainable sprawl the direction in which, God help us, IBEC wants to drive us.
Dr. Tom McDonnell:
I consider that the main point is that the capital budget as outlined by the Minister is wholly insufficient. I identified those roads - as the Deputy said - but I also made the point at least twice already that I believed public transport to be just as important. The Deputy is correct that Galway's problems are internal to the city and I made that point also. Deputy Ryan is right that it is a great city but it is extremely hard to go anywhere after 3.30 p.m. and one does not get into the car between then and 7 p.m. as traffic will not be moving. Public transport must be the answer for that city, as it is for Dublin. That goes beyond buses and involves further extensions for Luas and light rail and ultimately linking up all of Dublin city. The same goes for Cork, Limerick and other urban spaces that are large enough to do that.
Housing policy must look at putting people into the centre of cities. There may be implications for maximum heights for buildings which I know is not necessarily liked by the Green movement but there is a debate to be had there.
With regard to the just transition, the Deputy is right. We are going to have to do it anyway and perhaps a commitment to climate change targets is one area where there could be a sense of European purpose to come out of the Council meetings in March. Green infrastructure throughout the EU, with the ultimate aim of becoming completely sufficient in renewables, is something that NERI and ICTU would completely support. Obviously there would have to be transition mechanisms to deal with workers who are in the polluting industries and that applies also to Ireland.
Reference was made to potential for a globalisation fund. Although I would associate that with Brexit, in this case it would be a de-globalisation fund. Ms King responded that the goal should simply be to keep those businesses going and tapered subsidies were suggested. There will need to be some mechanism in place, some kind of EU fund to deal with the industries that will go down because of these measures. It must be a combination of both. NERI is currently working on developing an enterprise policy for Ireland that would apply at a European level also. I assure Deputy Ryan that the green economy is very much central to that policy.
As for the planning framework review, the emphasis must be on the cities and in getting people to move to the cities. That, however, will create what would be perceived as losing regions. Ultimately, that is where our analysis would lead us. The perception will be that if one focuses on Limerick, Cork, Galway and Dublin, then all the areas that are not mentioned are immediately going to kill their view because they would be seen as the losers. The importance of a motorway network and rural broadband is that they ensure other regions of the country are not isolated from the economic hubs.
Eamon Ryan (Dublin Bay South, Green Party)
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Whatever about Kilkenny and the other cities we need to develop, Dublin will not have any big public transport projects for ten years. There is no budget for the interim solution for providing for bus, cycle and walkways. There are no plans for Galway, Cork or Limerick. There are no plans for Kilkenny other than to build more roads in the city centre. We are in a bit of a crisis on the planning front and while we need higher density centres, there is no point in having the higher density unless there is public transport because it is the only way to service the higher density population centres. When economists assess a scheme, they will look at the cost-benefit analysis of a road and they love it because it will show all the figures. Yet, they cannot do an economic analysis that shows the benefit of planning for better, sustainable transport options; the social and societal benefits we get from having land use and transport planning done together. I wish to flag this slight crisis in our cities because they are starting to gridlock as the economy grows at 5% per annum. My city is going to gridlock and it needs radical change in investment in public transport and emergency funding. There is nothing in the current budget. Transport Infrastructure Ireland is brilliant at spending and the reason the construction industry loves public private partnerships is because the industry knows how to do them and roll them out. We have done nothing but motorways in the last 20 or 30 years, other than a couple of Luas lines. The construction industry loves it, those companies know how to do it, they get money for it and it will all be done. If that scale and urgency of investment went into public transport in all our cities, it would benefit the regions. Economic development is happening in our cities whether or not we like it and if we do not start doing this in our cities, we will lose jobs and our economic success.
Ms Patricia King:
A practical example for those of us who believe in public transport can be seen where a big conflict is about to happen. One of the contributory reasons for this potential conflict is that if we want to uphold a public transport service then we would want to do it on the basis of offering and attracting private operators to deliver that service. This attraction would be based on the lowest possible wages and conditions and the public transport provider who is trying to offer a better rate of pay and a wage, gets knocked off the market because it cannot compete with the lower-cost operator. Policy makers who keep on saying it has nothing to do with them have a role to play in stopping that nonsense carrying on.
Eamon Ryan (Dublin Bay South, Green Party)
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It has to be a just transition.
Dr. Tom McDonnell:
Perhaps the committee could recommend that the Department of Public Expenditure and Reform would perform its cost benefit analysis using the triple bottom line of economic impact, equality impact and environmental impact and not just look at the economic side so that those aspects are fully incorporated.
John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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We will consider that for our report. Today is one of those days when an extra amount of activity is going on in Leinster House, but I thank Ms King and Dr. McDonnell for their presentation. It was very good. Members were in and out, but there was a lot of interaction which will be used by us in the publication of our report.