Joan Burton (Dublin West, Labour) | Oireachtas source

When the Government took office, we set ourselves three key goals for success: to regain control of the public finances; make economic recovery a reality; and reform and modernise our politics and public institutions. These goals are not abstractions but serve to expand the employment prospects, prosperity and democratic participation of all the people. Only by the sustained creation of jobs can we enhance their prospects, prosperity and participation. Three years on, I can report that we are on the right road. The troika has checked out for the last time; Ireland has exited the bailout; the economy is growing again and, crucially, we are getting people back to work. In the year to the end of December, employment increased by 61,000 or 3.3%, to reach just over 1.9 million. It is probably difficult for people in Opposition parties such as Sinn Féin and even Fianna Fáil to recognise and acknowledge that internationally, by any yardstick, having an extra 61,000 people back at work is a very significant achievement which has been welcomed by the markets and resulted in our being able to borrow at much cheaper interest rates. Unemployment is down from a crisis peak of 15.1% to 12% now. That is the European average which I think is too high, but compared to where we were, it is a very significant improvement. Since the nadir of the economic crisis, almost 70,000 jobs have been created. From when the economy bottomed out we have had a net increase of 70,000 jobs, a very significant performance. The live register has fallen on a seasonally adjusted basis for 20 months in a row. There are many within and outside this House who were utterly dismissive of the Government's target to create 100,000 extra jobs by 2016. People argued both inside and outside this House that it could not be done, but we are well on the way to achieving and even exceeding that number and the evidence is there for all to see.

Three years on since the Government took office to rescue the country from the worst financial crisis it had ever suffered, Ireland is in a much better place and we can be confident about the future again. The crisis is over and recovery has begun. That was the first phase. I will speak about the second phase: ensuring the recovery is felt in every person's life and every community across the country. This means building the recovery from the bottom up and the middle out, rather than the top down. It means a dividend for those who were squeezed most by the crisis. It means doing our utmost to deliver full employment, fair wages and an income tax system that gives the hardest pressed workers - those in the low and middle-income categories - a break. I will deal with each of these issues in turn.

When the financial crisis erupted, it brought with it a devastating impact on jobs. At one stage, the live register looked set to smash 500,000 and some commentators feared Ireland would not see full employment again for decades, if ever. The Government took a different view. I introduced the Pathways to Work strategy and my Cabinet colleague, the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, introduced the Action Plan for Jobs. The strategies complement each other to ensure the creation of new jobs and that as many of them as possible will go to those on the live register. Pathways to Work represented a sea change in how the State tackled the issue of unemployment. As the OECD noted, "Labour-market activation policies were relatively weak in Ireland prior to the crisis".

The Department was, by and large, a passive benefits provider, providing income support for jobseekers but little in the way of concrete employment supports that would help them to get back to work and leave the live register. Through Pathways to Work we changed this for the better, introducing significant structural reform and transforming the Department into an active and engaged public employment service. We have replaced the dole offices of old with new Intreo centres, one-stop shops in which for the first time jobseekers receive their income and employment supports in the one place. Last month the Taoiseach and I opened the 44th such centre in Castlebar and the energy in the room from both staff and prospective employers was palpable. They are united in their determination to get Ireland back to work. By the end of this year we will have completed the roll-out of Intreo to all 63 of the Department's offices nationwide. In all of this, the buy-in of employers is crucial. Already the Department has a range of employer supports and services to help businesses to expand and find the right recruits. We want employers in Ireland to follow the example of their counterparts in countries such as Germany and Austria and be willing to give not alone young jobseekers but also long-term unemployed persons work, training and apprenticeship opportunities.

It is critical our employers are fully active in giving unemployed persons an opportunity to get back into work. That is why I appointed a labour market council of leading industry and policy experts, featuring representatives from some of Ireland's biggest employers, to drive implementation of the Pathways to Work strategy. The council will help to deepen our engagement with business and advise on what further actions can be taken across government to increase employment. The Intreo offices, the Pathways to Work approach and the work we do with employers are all making a massive difference and the employment figures prove it. However, a 12% unemployment rate is still far too high. That is why, this year and beyond, my priority will be to ensure the live register falls substantially further, with full employment the central target. Make no mistake about it: we want this to be a country in which there is full employment. It will take us some time to get there, but an additional 61,000 jobs in 2013 puts us well on the road to getting there. It will not happen overnight, but I am confident it will happen faster than anyone could have predicted when the Government took office and I am not the only one who believes this. In his column on the employment figures last week the respected economic commentator Dan O'Brien also pointed out that there was a long way to go but added, "If current momentum is maintained, we could return to full employment far sooner than almost anyone would have thought even one year ago."

There is another aspect to employer buy-in - to recognise what existing employees have done for employers. I appreciate that businesses suffered significantly during the crisis, that the recovery is still nascent and that not every business has yet felt the benefits. However, many businesses have. Their order books are growing again and their profits are returning to healthy levels. These businesses must recognise that their employees were crucial to this recovery and they acknowledge this. Those employees took pay cuts or accepted pay freezes, reductions in hours worked and, with their employers, hung on in. Their solidarity in hard times needs to be recognised as the outlook improves. As employers see the benefits of the recovery, so too should their employees. I do not think it is unreasonable to say companies which are prospering again should recognise the contributions of their employees and ensure they, too, share in that prosperity. I know from meeting employers all around the country that a number of them have already begun to award pay increases to staff.

In the same vein, there is scope, as the economy recovers, to examine the introduction of a living wage in Ireland. A living wage would be higher than the minimum wage and provide the income necessary to meet basic needs, including housing and health care, over and above items such as food and heating. We should consider a gradual phasing-in of a living wage, beginning on a voluntary basis, with a buy-in from employers. Much like full employment, a living wage would boost tax revenues, reduce the welfare spend and create room for additional investment in essential public services. However, decent wages are only part of the solution. We also need to reduce the tax burden on low and middle income workers, when feasible. Danny McCoy of IBEC was not wrong when he said the effective 52% higher tax rate kicked in far too early. It acts as a barrier to people taking on more hours of work and more responsible and better paid roles. Just this week I had to deal with the case of a mother of four who had gone back to work part-time, for 20 hours a week. When she looked to increase her hours to 25, to her dismay she found that the majority of the extra money she was earning would be taken in tax due to hitting the higher tax rate band so early. She will now go back to working 20 hours and the economy will lose the extra wages and productivity it would otherwise have enjoyed. A tax system that discourages people like her who want to work more, earn more and take on greater responsibility is one that, without radical reform, risks being discredited.

It is also important to remember that not every family or worker earns enough to be taxed at the higher rate. We need to find a way to ease the burden for low income workers also. One of the first things the Government did on taking office was to take 330,000 low income workers out of the universal social charge net and restore the minimum wage to its previous level. When there is sufficient scope to examine the tax burden, we must look further at the USC, as well as the marginal tax rate, to ensure both low and middle income workers share in the social dividend. Such a move would be socially just and enhance the living standards of those on the lowest incomes. It would also be economically sound for a shared social dividend of this nature would provide a vital stimulus, boost consumer spending and inject money into the economy.

The recovery would also pick up pace if viable businesses had sufficient credit to expand, but credit remains constrained because the banks are still working through the problems caused by the crash. As a result, viable projects are struggling to get off the ground. Work is ongoing on the establishment of the strategic investment fund which will utilise the €6.4 billion in the National Pensions Reserve Fund for infrastructural and commercial investment, including the provision of credit for SMEs. The fund will be a crucial next step in further boosting the recovery by part-filling a credit gap. However, it will not be sufficient to close the credit gap for SMEs and capital investment. We, therefore, need to be more ambitious and set out a clear plan and timeline for the establishment of the strategic investment bank committed to in the programme for Government. The strategic investment bank would work along the lines of the KfW bank which has played a key part in Germany's economic development. It would ensure that in the medium to long term a secure credit line was available for high potential, high growth companies. This, in turn, would place the economy on a more sound long-term footing. The strategic investment bank could also be a stable and carefully scrutinised source of medium to long-term finance for another important area, housing. One of the problems during the boom was that the banks had sunk all of their lending into one asset class, property, with disastrous consequences. Now they have overshot on the other side and almost developed a phobia against property and construction lending. We went from building too many houses in the wrong areas during the boom to building too few houses in the right areas now. We need a rebalancing. The strategic investment bank would be motivated by sustainable returns, rather than short-term profits, and provide the long-term investment capital necessary for the right projects in the right regions at the right times, in line with Government policy.

In the meantime, the construction strategy the Government will bring forward in the coming weeks will contain a number of important elements. One such element will see the extension of the use of social clauses in public work contracts. These social clauses will ensure a set number of the jobs created through such contracts will go to people on the live register. The clauses are another valuable tool with which we will further reduce unemployment. Members can be sure that where they see fine new schools being built or refurbished in their area, they will see local unemployed people being employed under these and other public investment contracts.

We have made significant progress in reducing the toxic debt that the public was saddled with courtesy of the disastrous bank guarantee. We have secured lower interest rates and the extension of maturities on our EU loans, meaning a €40 billion reduction in the State's funding requirement in the next decade, but we will not let the matter rest there. We have exited the bailout and the troika has gone home.

See this speech in context