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.