Billy Kelleher (Cork North Central, Fianna Fail)

I welcome the opportunity to speak on the Bill. It is timely that we also discuss the broader issue of industrial relations and wage-setting mechanisms in the context of it being almost 100 years since the Britain and Ireland trade boards were established to give legal certainty to committees in the context of the setting wages and conditions. It was primarily in areas where wages and conditions were poor at the time in the context of organisation around unions being able to exert pressure to achieve proper pay and conditions for lower-paid workers. It is time, 100 years later, that we discuss this particular matter. The review of the transitional agreement, Towards 2016, looked specifically at the issue of employment regulation orders, EROs, and REAs on foot of decisions. A commitment was made to the effect that they would be strengthened, so that the EROs would have the status of legal certainty. I welcome the provision in the Bill which deals with that area.

At national level, social partnership is going through a very difficult period. The Government had to act unilaterally because it could not get agreement in the context of the burgeoning deficit, which is very regrettable. It is regrettable that we could not reach a consensual arrangement whereby there would be agreement on how to deal with these challenging times. Nobody is under any illusion. It would be very difficult for union leaders and representatives to recommend pay reductions and carry the day with their members at national level. However, this is happening at local level all the time, whereby employers, unions and employee representatives discuss in an organised fashion how pay, terms and conditions are arrived at. In very difficult circumstances such talks may lead to a reduction in pay and changes in working conditions. It may be due to a challenging period in a certain sector or in the context of a certain type of business. This is happening continually.

I regret, in the context of this debate, that the proposed inability to pay clause has been so controversial. It is not a substantial part of this Bill, and neither is it reinventing the wheel. It has been availed of for many years in the context of industrial relations and discussions around pay, where the inability to pay hardship clause has been used. I am no supporter of the race to the bottom and believe in proper terms and conditions and a just reward for labour, as I believe every Member of this House does. Equally, as Minister of State with responsibility for trade and commerce, when I travel abroad I am aware that competitiveness is the key to sustaining exports, which itself is the key to sustaining employment. If a sector of an economy or indeed the entire economy is going through a difficult period because of a global economic downturn or in the context of the financial credit crisis which has fed into the broader economy, there is a lack of credit and a drying up of demand internationally, exports fall and jobs are lost. That is a very real problem for individuals and society. However, it is not credible for people to assert there will never be a time when a wage reduction will not have a benefit in the context of retaining jobs. If we are to be honest, sometimes that is inevitable.

Some commentators say a reduction in wages will have a detrimental impact on employment and the economy. If that economic philosophy is to be adopted, if we want to improve things, then we should pay ourselves a great deal more. That simply is not a credible argument. Both the tourism and the retail sectors have gone through very difficult and challenging times. Employers, unions and employee representatives in these sectors, however, were able to come up with pay and conditions rationally that reflected the industrial reality at those times for a number of reasons. It was quite obvious that the tourism, catering and retailing sectors were going through challenging times. To preserve these sectors and, more importantly, job opportunities, it was agreed that deferrals in pay and changes in work practices were needed. I see this as a very mature way of doing business, with both sides recognising the difficulties individual companies face, or particular sectors or even the broader economy.

It puzzles me that if this can happen at factory floor or sectoral level, why can it not be done at national level? Again, wearing my trade hat, when I go abroad I find there is significant interest in how Ireland came from where it was in the mid-1980s to where it was in 2007, and indeed where it can get to again. We said that social partnership was always one of the key ingredients when explaining Ireland's success. Now that we are in more challenging and difficult times, it is disappointing that we cannot use the social partnership model to reconfigure the economy, make it more competitive and efficient, achieve changes in work practices and restore the edge it so badly needs. Even though there has been a drop in unit labour costs, there are other areas of the economy that cause difficulties in terms of Ireland being competitive. Competitiveness is not some grandiose word, but, in fact, equals jobs, and that is extremely important for people to understand.

Sometimes we hear simplistic arguments about business people, or political parties perhaps, who just want to cut wages. It has nothing to do with cutting wages, but rather ensuring that we have a competitive economy. That includes many areas such as competition in energy and other sectors right across the board and involves issues such as relaxing regulations that may be causing difficulties, greater flexibility in work practices and so on. Obviously, as a major cost in any business, wages are also an issue. At a seminar in November 2008 I mentioned that wages must reflect reality, and many people took this as advocating a race to the bottom proposal. If a business is going well, the rewards should be dispersed and shared with those who created them, namely, the workers in the particular area. Equally, if a sector is under significant pressure, there is no point putting our heads in the sand and believing we can continue to pay the same rates as always, because this will mean fewer people can work in that sector.

Honesty should be brought back into the debate. If consensus can be achieved at factory floor level, then I am quite sure there can be maturity at national level among the wise heads that have negotiated national agreements over many years to ensure that this can happen at this level also. I understand, however, the political consequences for union representatives at national level of the fact that the civil and public service pay bill is not sustainable and that pay decreases are a prerequisite to ensuring that the economy recovers. It is not popular to proclaim that people will have to make a contribution to their pensions, but it is realistic. This is something we will have to do continually in the years ahead to ensure that there is a sustainable pension system and a workable budget so we can provide services and social welfare payments, as well as health and educational aspects of services, to the public.

When we enter into debates, we must be very conscious of the need to be honest with ourselves. I am particularly aware of this when I hear statements about taking from the public sector and giving to the banks. That is a very catchy phrase, but it is far from what any government wants to do or is doing. If we had never had a banking crisis, we would still have a structural budget deficit that has to be tackled, regardless of what happens in the banking world. The situation has been exacerbated because of that, but we would still have had to deal with the particular structural deficit inherently embedded in the current financial system.

When referring to pay, we should make our comments in the context of reality and what it means for people if some say there should never be a pay reduction. In effect, this would mean there is a good chance people may lose their jobs. If a company has a monthly wage bill of €100,000 and if events conspire to prevent it making that payment over a short duration, there are two alternatives - either the wages go down or people are laid off. That is a choice that people regularly make at factory floor level. By and large, following mature discussions, they will come to a consensual arrangement. Having discussed this matter in factories and other businesses with those concerned, I know that more often than not employees will take a wage reduction rather than keep the same rates of remuneration and let their colleagues go. That is a mature and fair way of ensuring that we retain as many people in employment as possible.

I welcome the Bill before the House. The debate about inability to pay is not about a race to the bottom, it is about ensuring that in difficult times we can be responsive and reflect the realities out there. Equally, in good times the opposite can be the case.

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