Seanad debates
Wednesday, 26 October 2005
Lisbon National Reform Programme: Statements.
1:00 pm
Noel Treacy (Galway East, Fianna Fail)
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Is cúis áthais dom an deis seo a bheith agam labhairt i Seanad Éireann faoi chlár athchóirithe na hEorpa chun slí eacnamaíoch na hEorpa a fheabhsú faoi Chlár Lisbon. Tá mé ag súil go mbainfimid taitneamh as an díospóireacht agus go nglacfaidh a lán daoine páirt inti. I am pleased to have the opportunity to address the House with regard to Ireland's national reform programme under the relaunched Lisbon Agenda.
In 2000, the then 15 member states set the ambitious objective of making the European Union by 2010 "the most dynamic and competitive knowledge-based economy in the world, with more and better jobs and greater social inclusion". This goal was to be achieved by an extensive reform programme, including the establishment of an effective internal market, boosting research and development, and improving education. While much of the work involved in implementing the Lisbon Agenda appears complex, it is really about people's lives. It is about the bread and butter issues which are important for every citizen and every community, both here in Ireland and across the EU. They are bringing about tangible benefits in the daily lives of our citizens — supporting workers in their employment, assisting the business community in managing the transition to a knowledge-based economy, protecting our environment and promoting greater social cohesion. This is a challenging agenda. It is unique in that while it sets common goals and targets across member states, they can only be achieved by acting in partnership. European institutions, national governments and all stakeholders must therefore work together towards the common goals.
Under the Irish Presidency of the EU in 2004, a mid-term review of progress across the EU was initiated. This found that the overall results were disappointing. The outcome of the mid-term review acknowledged the scale of the challenge facing Europe, in particular the widening growth gap with other major world economies. Failure to address this gap would see Europe experience further economic decline, with inevitable pressure on its social and environmental policies. In this context, the European Council earlier this year agreed that the Lisbon Agenda would be relaunched as a partnership for growth and employment. It would focus particularly on two urgent priorities, growth and jobs. The overall process would be simplified and streamlined. Each member state would produce a three-year national reform programme setting out its national priorities and commitments to improve economic growth and create further employment. For its part, the EU Commission would focus on measures to be taken at EU level to reinforce the programmes being undertaken by member states.
While the European Council agreed to focus on two urgent priorities of growth and employment, it also endorsed action in two complementary areas — promoting social cohesion and sustainable development. In terms of social cohesion, the Commission's communication on the social agenda addresses vital issues of tackling poverty and disadvantage. This social agenda will help achieve the Lisbon objectives of full employment and social cohesion. Likewise, the new focus on growth and employment expressly acknowledges the importance of the environment and overarching role of sustainable development. The declaration on guiding principles for sustainable development, which was adopted in June last, is a basis for achieving sustainable growth.
The member states and the Commission agreed on an integrated set of 24 broad guidelines to be considered during the preparation of the various national reform programmes. These guidelines, covering macro-economic policy, micro-economic policy and employment policy, replace the broad economic policy and employment guidelines which were previously reported on in two separate processes.
Ireland is fortunate in that, owing to the broad range of policies being pursued in recent years, we are performing well, according to many of the key economic indicators. Over the past ten years, GNP has increased at an annual average rate of 6.3%, and is forecast to continue to grow at close to 5% over the term of the national reform programme. Expressed per capita, our GNP has almost trebled since 1994. Government debt is down from close to 90% of GDP in 1994 to less than 30% in 2004. Unemployment has fallen from 14.7% in 1994 to 4.4% last year. The employment rate rose from 52.2% to 66.7% over the same period. Overall, we are making solid progress towards the Lisbon Agenda goals and starting from a relatively strong base with our new three-year reform programme.
Many factors have contributed to this strong performance. The programme for Government, agreed in 2002, provided the framework for action across the entire policy spectrum and is entirely consistent with the Lisbon Agenda. Two of the central pillars of the programme for Government are sustaining economic growth and maintaining full employment in the economy. To achieve this, the Government committed in its programme to maintain the public finances in a healthy condition and to keep down personal and business taxes in order to strengthen and maintain the competitive position of the Irish economy. Within these constraints, the Government reaffirmed its determination to concentrate the available resources on improving the quality of public services and delivering further real improvements to pensioners and people on low incomes.
Underpinning these aims, we have a strong track record under our social partnership model of forging consensus with and among the social partners on the right measures to take. Over the past 18 years social partnership has provided us with a much needed framework to take corrective measures to address the problems of the mid-1980s and, since then, to build up and improve overall economic and social progress. Bringing together the various key sectors — employers and trade unions, the farming sector and the community and voluntary organisations — to work in partnership with Government has served this country well. It has helped to create the necessary conditions and consensus to give rise to growth, jobs and better social provision instead of rising taxation and spiralling debt. It has contributed to providing stability and certainty over a multi-annual timeframe and has unquestionably yielded significant benefits in terms of industrial peace. Not surprisingly, successive Governments have reaffirmed the centrality of social partnership to economic and social development.
In the broader context, it is clear that the Lisbon Agenda is consistent with our own national goals and priorities. It is hardly surprising, therefore, that when the member states committed last year under Ireland's successful EU Presidency to create national reform programmes to engage more closely with the social partners, it was decided that our existing social partnership model would serve as Ireland's reform programme.
The current partnership agreement, Sustaining Progress, runs to the end of 2005 and nobody underestimates the challenge of securing a new agreement. However, drawing on the experience of the past, we know we stand a better chance of tackling problems by working together. In some respects it might suit us better if the national reform programme did not have to be prepared for another few months. That said, we will update our Lisbon programme in the light of the outcome of future engagement with the social partners.
The Government is acutely aware of the need to maintain competitiveness and improve productivity, despite our recent impressive performance. No matter how successful we have been in recent years, we cannot simply rest on our laurels. We are fully committed to the important linkages between our economic performance and our social policy to achieve a fair, just and inclusive society. It is fitting, therefore, that the national reform programme gives us an opportunity to put together, in an integrated way, the policies and initiatives that are being implemented to ensure continued success.
I will outline the content of the programme in the areas of macroeconomics, microeconomics and employment guidelines and in line with the priorities which we have set. The range of structural reforms envisaged under the Lisbon reform programme must take place in a stable macroeconomic environment, with a particular commitment to sustainable public finances. As I have already outlined, our public finances remain in a good position. Nonetheless, we must remain alert to the risks to our economy, particularly the high level of oil prices. Our levels of competitiveness must be closely monitored and, in particular, the ongoing reliance on the construction sector for our current level of output. We must be sensitive to the potential impact of an eventual reduction in construction output levels.
It is vital that Europe becomes more competitive, in its actions as well as its words. We must accept that the global picture is important, given that the EU now competes directly with other regions of the world for mobile investment in knowledge and research. Europe, therefore, must remain an attractive location for future global investment. Improving our competitiveness within the domestic economy and internationally is critical to Ireland's continuing success. By 2004, Irish income per capita had overtaken the EU 15 average, driven largely by increases in employment. In future, further improvements in living standards will depend less on increasing employment and more on increasing productivity. Ireland's economic development strategy is now aimed at developing a more dynamic, enterprising and innovation-based economy. Our competitiveness will be enhanced over the period of this programme by the creation of an environment where enterprise can flourish and consumers are protected.
Research and development is an area which can have a major impact but is one where we are still under-performing relative to international benchmarks. Consequently, continuing to increase research and development investment, capacity and output is a particular priority under this programme. Ireland's gross expenditure on research and development is approximately two thirds of the EU average, at 1.62% of gross national product for 2005. However, that is not to say that we have been ignoring research and development up to now. Government investment in research and development increased fivefold, from €500 million between 1994 and 1999, to €2.5 billion under the National Development Plan 2000-2006. Several key steps have been taken to build further on this positive start. Earlier this year, the Government adopted a new national action plan for research and development and an interdepartmental committee is finalising a proposed implementation strategy, such as science and technology, energy, environment, marine and agriculture.
Strong foreign investment, exports and domestic demand have led to sustained reductions in unemployment over the past decade. A greater emphasis must be placed on productivity by encouraging greater levels of innovation and entrepreneurship across the enterprise sector. A range of key initiatives is under way to drive this development, drawing on the work of expert bodies such as the enterprise strategy group and the small business forum.
Ireland's level of public investment, at close to 5% of GNP, is among the highest in the EU and is approximately twice the Union average. Public investment under our national development plan is targeted at addressing the infrastructural deficit to improve the potential growth of the economy in the longer term. The Government is now in the process of setting out a new blueprint for investment for the seven-year period after the expiry of the current plan. The new national development plan will focus on priorities for investment in public, economic and social infrastructure in areas such as transport, environmental services, housing, education, health, child care and research and development. In particular, we will continue to build on the major investment that has been made in our transport infrastructure through the ten-year capital envelope for transport.
We must ensure that where it is necessary to regulate, we do so in the best way and with proper consultation. The 2004 White Paper, Regulating Better, sets out the Government's approach to better regulation. Guidelines on consultation for public sector bodies were published in June of this year. The Government has established a group on better regulation to oversee the implementation of the commitments and action plan arising from the White Paper. In addition, the Government has introduced a policy of systematic regulatory impact analysis across all Departments and offices. In the business sector, a new business regulation forum has been set up to report to the Minister for Enterprise, Trade and Employment on burdens imposed on business by outdated, inefficient or disproportionate regulation and to advise on business regulatory issues.
Economic progress and improving social inclusion and quality of life must go hand in hand. Ireland's strategic approach to social inclusion is set out in the Government's national anti-poverty strategy and the national action plan against poverty and social exclusion 2002 to 2005. Increasing access to employment has been a key part of Ireland's strategy to combat social exclusion and significant reductions in unemployment have contributed greatly to rising living standards. We must continue to facilitate participation in employment as a major strategy for tackling poverty and social exclusion.
Under the national reform programme, we will work to encourage the sustainable use of resources and strengthen the synergies between environmental protection and growth. Ireland is already well on track to meet the target under the EU renewable electricity directive for 13.2% of electricity to be generated from renewable sources. In addition, the decoupling of energy and emissions growth from economic growth began in 2002, with economic growth at 3.7% in 2003 and energy consumption remaining flat at 0.2%.
Ireland has continued to achieve high levels of employment. Employment growth continued in the second quarter of 2005, with the number of jobs up by 93,000. This represents the largest annual rise in employment since 2000, with the number of persons in employment now at 1.929 million. The long-term unemployment rate remains extremely low, both by historical and international standards, at 1.4% or, in figures, 27,600.
Under the national reform programme, we will ensure labour market policy contributes to making the economy more knowledge based and innovation driven. A wide range of initiatives are in operation, designed to prevent and counteract long-term unemployment. FÁS assists those who are longer than six months on the live register to gain employment, training or to enter active labour market programmes. Other initiatives are ongoing and are aimed at expanding the workforce and include lone parents and redundant workers. An independent review of the prevention and activation process is under way as well as an expenditure review of State supports for the long-term unemployed.
In addition to these measures, we are committed to increasing investment in human capital through better education, skills and lifelong learning. Our national education policy aims to ensure that all young people leave the education system with a high quality education and with qualifications. A total of 85.3% of those aged between 20 and 24 years have completed upper secondary education and a majority of these go on to third level education.
To reach those at a disadvantage in society, the Department of Education and Science published a five-year action plan for educational inclusion, Delivering Equality of Opportunity in Schools, in May 2005. This plan will be implemented on a phased basis and will tackle literacy and numeracy as well as attendance issues, progression, retention and attainment. Early school leaving policies have been shown to have a positive impact, with a rate of only 12.9% of early school leavers in 2004. This is clear progress towards the EU average rate of 10%.
Higher education has seen major expansion over the last two decades in terms of numbers and investment. This is reflected in an increased participation rate for school leavers of 55% in 2003 compared to 20% in 1980. A particular challenge is to upgrade the competencies and qualifications of the workforce, particularly those with low skill levels and in low level occupations. This challenge will be addressed through a range of initiatives, including implementation of the national framework for the development of lifelong learning, continued priorities in the implementation of this framework, including addressing skills needs and widening access to lifelong learning, tackling disadvantage and addressing access barriers.
Increased labour supply will be met from the underlying population increase, increased participation by the unemployed, access for those outside of the labour force and migration. We are experiencing a significant influx of workers from the new EU member states. The net inward migration figure for Ireland in the year to April 2005 was 53,400 people, of which over one third were nationals of the ten new member states. Legislation is being introduced by the Minister for Enterprise, Trade and Employment to codify work permit arrangements, improve protections for migrant workers and allow for a new green card system.
I am satisfied Ireland is unquestionably playing its part in helping the European Union as a whole to realise the goals of the Lisbon Agenda. It is appropriate that the relaunched agenda places greater emphasis on member states pursuing policies appropriate to national priorities and circumstances. That said, we must all work together to bring our Lisbon goals back into sight. Member states cannot just look over their shoulders at each other, but must look outwards. Globalisation is a fact of life and we must deal with it. The threat to Ireland, and Europe, is increasingly global, whether from the Americas, India, China or from other new tiger economies. Standing still is not an option, regardless of how well or badly we are doing. This goes back to the 1970s when former Taoiseach, Mr. Jack Lynch, said standing still was not an option. We had no option but to join the then EEC and we are now members of a successful Union in which we played our part. The Government, as this new national reform programme demonstrates, is fully committed to working in partnership with other member states and the EU Commission, to ensure Europe's economic and social future, in the challenging and exciting years ahead.
I wish to warmly welcome our visitors, particularly those from Northern Ireland.
Paul Bradford (Fine Gael)
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I welcome the Minister of State to the House and extend good wishes to the visitors from Northern Ireland.
Rory Kiely (Fianna Fail)
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I have reminded Senators on many occasions that it is the role of the Chair to greet visitors.
3:00 pm
Paul Bradford (Fine Gael)
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The Minister of State's remarks are helpful and interesting but we need to concentrate on the Lisbon Agenda as much from a European as an Irish perspective. Europe's problems are Ireland's problems and Europe's solutions are Ireland's solutions. We must work together on all the economic and social issues facing us, of which there are many.
As the Minister of State said, the Lisbon Agenda was launched on the European stage in March 2000. At that stage it was considered a bold and brave statement on Europe's economic future. I am not sure the level of attention or debate it received in this country was adequate. When we switch on the debate about Europe at parliamentary level or in a wider context, we do not get much of a response. It is important that we try to disseminate to everybody involved in the political process and the wider public the importance of the ongoing debate, because no debate about Europe is more important than the one on future economic strategy.
The declared aim of the Lisbon Agenda was to transform the European Union into the most competitive and dynamic knowledge-based economy in the world. It was an ambitious project because it was to be carried out with a ten-year programme. It mentioned, as the Minister of State did, sustainable economic growth with more and better paid jobs, better social cohesion and the highest possible level of environmental protection. It was a radical plan but its delivery has been much more modest.
I am disappointed there has been so little public debate in this country and throughout the European Union on the subject of the Lisbon Agenda. If we were to conduct a poll among the citizens of Ireland, the vast majority would not have heard of it, notwithstanding its importance for the economic and social life of every citizen in the European Union. Its proposals still can transform the lives and prospects of those citizens for the better. As everybody in the House knows, the domestic political debate in the next 12 to 18 months will focus on what policies the next Government will pursue and on the parties which will make up the next Government. If we were honest, we would concede that the debate about the future economic and social direction of the European Union will have a much greater impact on every Irish citizen than any domestic consideration. The economic and social trends will be set in the Union. Therefore, we must play a full role and involve every person in the debate. To date, we have failed to do so.
I was glad the Irish Presidency decided that a mid-term review of the progress of the Lisbon Agenda should be conducted. The expert group headed by the former Dutch Prime Minister, Mr. Wim Kok, was correct in concluding that not much progress had been made. The report indicated that the agenda should be refocused with particular emphasis on growth and employment. The new report is certainly more modest than the March 2000 programme but it will be of benefit if there is the political will to drive it forward.
In Ireland and across the continent we must realise where the economy and that of the European Union are going. We know and can recite ad nauseam the story of the Celtic tiger and the great strides we have made. We would, however, be living in cloud cuckoo land if we believed the economy can continue to grow at a consistently higher rate than that of the European Union and avoid some of the pitfalls faced by our European neighbours. As the Minister of State said, the economy of the European Union cannot stand still. It will either move backwards or forwards. If it moves backwards, all of Europe's citizens, be they from Dingle or Dussledorf, Mallow or Madrid, will suffer pain. We cannot ignore the fact that the current performance of the wider European economy is simply not good enough. The Minister of State mentioned the steady Irish growth rate but we will pass or fail on the performance of the broader European economy.
Average growth in the Community is approximately 2% per annum, little more than half the rate in the United States. In China the current growth rate is 8% as the whole south-east Asian economy continues to boom. Unemployment figures across the European Union average almost 10%, almost twice that of the United States. The profile of our workforce is elderly and older people with skills are leaving the workforce. Americans often refer to "old Europe", which is sometimes seen as a political jibe by so-called "neocons" in the United States. When they speak about "old Europe", they are not just talking about politics but the fact that, demographically, the workforce in Europe is literally growing old. It is aging. The population is falling and there is a low birth rate, creating a major problem for the funding of pension entitlements and social security programmes. This is an issue we must tackle head on. We cannot afford to wait any longer. In that regard, the focus on economic growth and employment creation must be maintained.
There is no secret as to why the economy has thrived since the mid to late 1980s. Social partnership has worked well and taxes have been lowered, giving employers the incentive to create jobs and employees the incentive to take up work. There has been an easing of bureaucracy and, to some degree, regulation. This agenda has also worked well in countries that have followed the same formula. Unfortunately, in other European countries economic and political change has been less radical and the necessary adjustments to allow the European Union to compete against the United States and south-east Asia have not been made.
I accept that economic and social change is painful but we also have to recognise that without the necessary changes, there will be no guarantee of the European Union remaining a prosperous economic zone. Some will argue that it is not all about economics and they are correct, yet without economic growth and development, we will not have the jobs to employ our young people or the taxes to provide social services and pension entitlements. We must, therefore, keep the idea of economic reform, greater flexibility, lower taxation and regulatory reform to the fore of a European strategy. In this country we have made great progress in that regard but we cannot stand alone. Our adoption of such progressive measures has served us well but in the long run we must ensure it happens all across the European Union.
I will refer to two issues which cast doubt on the Government's ability to improve competitiveness and enhance basic infrastructure.
The Minister of State referred to competitiveness. The country has slipped from fourth place in 2000 to 30th in 2005 in the World Economic Forum's global competitiveness report, a steep fall. Such a fall is mainly a result of the Government's failure to control prices. A debate occurred during the summer, stimulated by a television programme, about rip-off Ireland. There is a general acceptance that there was a failure to check massive price rises across various sectors. It is crucial that the Government responds in a meaningful fashion to the issue of increased costs, be they in local shops, raw materials or production. The cost base should be examined as the country must remain competitive. The country is living on the edge with regard to competition, and perhaps it has been comfortably coasting along for the past few years. A further loss of competitiveness will bring a loss of jobs across the economy.
I welcome the Minister of State's remarks about the need to be very sensitive about the potential impact of an eventual reduction in construction output levels. That issue should be addressed as we know such an occurrence will come about. It is not a political point. The current rate of construction of new houses in the country, even taking a mathematical perspective, cannot continue indefinitely. Hundreds of thousands of people are employed in the construction industry, and we should be ready to deal with the consequences for jobs as the current rate of construction cannot go on indefinitely.
Another vital infrastructural issue is technology. I bring to the attention of the Minister of State a report stating that Ireland is 14th in a table of 15 countries with regard to broadband penetration. The survey was carried out by the European Competitive Telecommunications Association. Ireland has only 64,000 broadband lines, whereas Denmark — a country of similar size — has 839,000 broadband lines, a large multiple of the Irish number. This is unacceptable and the issue should be addressed by the Government. We cannot allow the country to be bottom of the class in the broadband school.
This leads to the education issue, particularly educational disadvantage. This issue must be addressed as part of the national reform programme and Lisbon Agenda across the Continent. In Ireland we must examine carefully educational progress. We all acknowledge that the introduction of free education in the late 1960s was not merely a major social step forward, but arguably the most important economic decision ever made by a Government. The rainbow coalition Government's decision in 1995 to pay college fees for the vast majority of students followed on from this and completed the broadest possible opening of the education door. However, challenges are now to be faced in the sector and unless they are tackled, the country's youth could fall behind their European colleagues.
I draw the Minister of State's attention to recent figures which show a drop in school retention rates. In some schools, a drop-out rate of up to 60% exists. Under the Lisbon Agenda we gave a clear commitment to increase the number of pupils finishing their schooling but we have failed on that front, and the Government has not matched its aspiration. For example, more than 1,000 children are not even making the transition from primary to secondary school, a very disappointing fact and a dreadful mark of failure. Although we speak of the Celtic tiger economy some children's education ends at 12 years of age. For more children, education finishes at 15 or 16 years of age. The gateway to the future is being shut for those young people. It is politically, socially and morally unacceptable, and the Government should be given a low mark for its efforts on the issue. Much more must be done, as education will play a key role in the ongoing economic and social development of the country.
As my time is nearly concluded, I thank the Minister of State for his presentation. This debate should be kept to the fore. The Lisbon Agenda, more modestly called the national reform programme, is at the centre of where Ireland and the European Union are going. We should be proud of where Europe has come from, with peace and democracy being spread across the Continent. The process has been an amazing success, and the European bloc is a fine solid economic unit. We must not rest on our laurels. Europe cannot stand still as countries such as the United State, China and India, as well as the south-east Asia region, are not standing still.
There are tough decisions to be made and it is in all our interests that we participate in debating and making these decisions. I look forward to an ongoing debate. I suggest that in the Seanad in particular, where we refrain from tossing political charges as often as in the other House, the debate should be kept open-ended, and a regular review of the progress of the agenda should occur.
Mary O'Rourke (Fianna Fail)
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I welcome the Minister of State, Deputy Treacy, to the House. I wished to be present when he entered the House but I was unable to do so. I listened carefully when he spoke in the Dáil on the Lisbon Agenda, or the national reform programme as we call it.
When the Lisbon Agenda was published in 2000, everybody labelled it as radical and interesting and as something that would do much good for Europe. The process has clearly slowed in other European countries, although not here. I will not boast about Ireland, but it is amazing how much the national reform programme mirrors what was detailed in the Lisbon Agenda, or what is now the Lisbon National Reform Programme. The programme contains many guidelines that this country has operated under for approximately the past decade. Although we may be tired of hearing it, people often ask how Ireland is in such good shape, with sustained growth beginning around 1994, sustained employment levels, and a sustained downward trend in unemployment.
There have been some bad elements also, and Senator Bradford is correct in pointing out the lack of penetration for broadband, which is quite amazing. The Internet penetration issue may have been slightly better when I was Minister for Public Enterprise. We have never achieved a breakthrough, although I do not know why. The technology is being implemented throughout the country, the roads have lines running along them, people have had lessons and money has been given towards small and large grants. We are all now computer literate, but people may still prefer to do business on a personal level. This may contribute to this lack of penetration, as the lack is not down to an absence of providing the technology.
Even where penetration exists, an accelerated take-up of the Internet is not occurring. Perhaps people are wise to it and will not go along the route of constantly relying on technology when people skills are our main stock and trade. Such a hypothesis could be considered the reason for the low penetration and take-up.
The programme is laid out somewhat like a budget for a country or how one might lay out a growth pattern. The Minister of State's presentation was quite good, and the Department of the Taoiseach has outlined headings, such as research and development, of what the country hopes to achieve. We cannot emphasise enough the necessity to focus on and finance education.
The regional technical colleges were established many years ago when Dr. Hillery was Minister for Education. The money to build them came from the World Bank and as Members know, they were all built to a pattern. Subsequently they have all been enhanced through the addition of extensions or through reconstructions, etc. What would have happened had we had not moved ahead with the regional colleges at that time? Originally, there were to be eight colleges, but the former Deputy Neil Blaney secured one for Letterkenny and another college was established in Tralee. I remember the excitement in the town of Athlone when it was designated as a site for a regional college. They are now, rightly, called institutes of technology. When a definitive history of the growth in education in Ireland from that time comes to be written — I am sure some already have been — the institutes will play a pivotal role. They contribute to their surrounding regions and while many qualifications are the speciality of a particular college, they have achieved national standards of excellence.
Throughout our education system, we have established primary schools, all of which are good, as well as secondary, comprehensive, community and vocational schools to serve our young people. I share Senator Bradford's unease at the non-retention rate in second level schools, which is enormous. Many schools now have a teacher who is known as a retention officer. For example, in Moate Community School, which is a large school, there is a teacher whose duties include retention duties. This involves meeting parents and pupils constantly and encouraging them to stay put. While acknowledging there is a wider world in which such pupils may earn money, if the climate changes, they will no longer do so. They will be obliged to return to school.
How often have Members met people who want to return to school? I meet such people constantly, including young women who left school to become waitresses, to work in shops or something else. They then decide they want to study for their leaving certificate examinations in subjects such as English, mathematics and history. They take subjects they perceive to be regular. I always encourage them and try to get them into a college or school which will be friendly towards returned students and which will provide an atmosphere where they will not feel out of place and will feel comfortable pursuing their further studies. Nevertheless, I do not like the increase in the non-retention rates of young people at second level schools. I expect the allure of earning money and of entering the marketplace is responsible. While there is big money to be earned, a student or young person entering the marketplace without a formal qualification such as a leaving certificate or whatever are at an enormous disadvantage, because it is a passport to better jobs and wages. Some young people do not even have junior certificates.
Eventually, such people may wish to enter a third level college. The third level colleges now run wonderful access programmes where people who left education early can return. In some cases their life experiences are rightly considered as if they were educational modules. Such people are able to develop a portfolio of credits based on experience and thus enter third level college. The significance of such programmes cannot be overstressed.
When people ask me how Ireland maintained its success rate, growth rate and employment rate, I ascribe it to two factors. The first is education and the second is the development of the relationships between the trade unions and the other social partners. We have given various names to those consensus building arrangements. Historically, the premium on education was a major factor in Ireland when people had little else. I do not wish to sound trite when I refer to hedge schools, but it is true. Historical links endure in life. There was a premium on education and parents did not care what it cost or how it was secured if they could get their children into proper schools. The idea that proper education is needed lingered in people's minds.
Moreover, unlike the United Kingdom, in the 1960s, 1970s and 1980s, we did not go down the primrose path of adopting experimental methods for primary and secondary schools which originated in the United States. We kept to proper education, whereby one was taught to read, write, multiply and do one's basic sums. As we did not have the money to experiment, we did not do so. We were correct because ultimately, it has been proven that formal education, delivered now in happier milieus than heretofore, has served the nation well.
As for second level education, I have always thought that the English approach of specialising in three subjects after completing the equivalent of our junior certificate was incorrect because pupils only had specialised knowledge of those subjects. Irish pupils sample six or seven subjects and acquire a nodding acquaintance with many of them, including various languages. While one might not be proficient, one certainly has a good acquaintance with many subjects. It is daft to ask young people of 14 or 15 years of age to decide on their further careers when they have plenty of time to do so at 17 or 18. In addition, the world is not static. Nowadays, few people stay in the same jobs forever or retire from them. People's minds are now required to be versatile. They are required to think laterally as well as vertically. People must be open-minded and lateral thinkers so they are available, ready and willing to change jobs and move about.
This is a strong point in our favour and cannot be emphasised enough. All Governments, no matter how straitened they were for money, provided rich and robust education budgets. This was the case when I shadowed the then Minister for Education, Gemma Hussey, even though money was then very tight. Naturally, I claimed it was not.
Paul Bradford (Fine Gael)
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That is not what the Senator said at the time.
Mary O'Rourke (Fianna Fail)
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Of course I did not. However, the budgets were rich and robust.
Mary O'Rourke (Fianna Fail)
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The education budget was maintained in bad times and good, because the people were willing to give up their taxation to education. I have never known a Minister for Education who did not fight like a tiger for his or her money and get a fair amount. All Governments paid great credence to education and put great faith in it.
The various arrangements under the first partnership agreement, the Programme for National Recovery, were agreed in 1988. While the programmes went through various colourful names and became more embellished as they went on, they were very good programmes. It was a major achievement that people in trade unions, agriculture, women's groups, etc., could come together and hammer out an agreement in which all promised and undertook to work well together.
When I outline how it works to people, they ask if it means there are no strikes. As all Members know, it does not and when one considers the matter, that is correct. One cannot nullify and neuter all the trade unions and no one tried to do so. Nowadays, strikes are concerned with fair issues like better wages. I remember there were some strikes in CIE which concerned such issues. Iarnród Éireann relied too much on overtime and the workers did not receive a decent basic wage on a five day week. Consequently, the problem was worked on and was resolved satisfactorily.
Progress on renewing these arrangements is currently on hold. The Taoiseach has given reassurances to SIPTU, which constitutes 40% of the entire trade union movement's membership. SIPTU is rightly worried about a "race to the bottom", to use a recent phrase. It is worried about migrant labour and the displacement of jobs and employment. It has every right to be worried about these matters. Competitiveness is an enormously important part of the Lisbon Agenda. However, competitiveness does not or should not mean there is to be a scaling back of decent regard for workers or decent wages. I have never felt this was the kind of competitiveness that we should be engaging in or striving towards.
When I was Minister for Public Enterprise, there was a huge emphasis in all the semi-State companies on trade unions. I always believed that, if one explained the circumstances, laid out one's stall and talked matters through, one could bring trade unions on board. I am a great believer in talking and engaging in discourse with people at various levels of employment. I hope that the assurances the Taoiseach will provide to SIPTU and the other unions will allay their fears about a new three-year programme. There is no doubt that many good activities will depend on having this arrangement in place.
It has been 18 years since the partnership process started and people ask whether it is time to have an open marketplace. We should wait to determine what it will be like. Be it red clawed socialism or something else, the consensus arrangements cannot be beaten if they can be worked through. Mr. Jack O'Connor has been entirely fair in this matter and has warned the trade unions that they must get a proper——
Paschal Mooney (Fianna Fail)
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The Senator has one minute remaining.
Mary O'Rourke (Fianna Fail)
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There were many other issues I wished to discuss but one speaks about what one knows best. I thank the Minister of State. It is good that we will have a staging post for the Lisbon Agenda. The mid-term review occurred under the Irish Presidency of the EU, which led to this. This in turn will determine what we will do for the next number of years until a further review.
The Lisbon Agenda was far-reaching, innovative and radical when it was formulated but we have all moved on and it now seems reasonably ordinary. It is worth examining what has happened to other countries. Germany lost itself in a sea of directives, half of which there was no need to be involved in. I have always been amused that countries rushed to adopt EU directives but never implemented them. I am not speaking about Germany but countries such as Spain and Greece, which stayed clear of implementing them. The Minister of State will have encountered this. We have been too eager in adopting the directives in their wildest forms.
I am not taken in by President Barroso's burning of 70 directives. I do not know whether they were old or new directives but he burned them in a macho theatrical show to state that was what he was going to do in the EU. The formulation of the directives should be thorough and painstaking. If there is no need for it, do not do it. I thank the Acting Chairman as he has been very lenient regarding my time.
Feargal Quinn (Independent)
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I welcome the Minister of State and his statement. We are discussing the national reform programme of the Lisbon Agenda and the Minister of State has explained very well what Ireland is doing. We have been told to take on board and adhere to this three year programme but it gives me no pleasure at all to say that the Lisbon Agenda is, to all intents and purposes, a dead duck. I say this with the greatest regret as I have been one of the agenda's champions from the very beginning. I loved the terms it uses, such as "knowledge-based economy" and "competitive area of the world by 2010". I welcomed it because it offered the EU as a unit a position in the world that had nothing to do with throwing its weight around. I have always resisted the idea that we should become another world power or a counterweight to the United States of America. For me, the mission of the EU is to be a peaceful trader. If we excel in this respect and become the most competitive area in the world, so much the better.
I also welcomed the priorities of the Irish Presidency in 2004 when it sought to revive the Lisbon Agenda and put it on the front burner again but we saw all too clearly that our attempts met with meagre results, which I say with a certain sense of sadness. We should recognise that the agenda is a dead duck for all practical purposes due to a number of reasons. First and most obvious, the results achieved. Instead of closing the gap with the US since launching the initiative, we in the EU have done the very opposite. In all of the benchmarks that matter, whether they are in productivity, spending on research and development or, as Senator Bradford mentioned, the penetration of broadband, the gap between the EU and the US is getting wider every day. We are living in cloud cuckoo land if we believe we can even close it by 2010. There is no point in setting ourselves a target that is clearly unattainable. It would be better to be realistic and come to this conclusion. I am speaking about Europe as a whole and will return to the difference between the EU and its 25 member states later.
One of the reasons we have failed to close the gap is that we lack the mechanics to do so. This was a European initiative but was never within the competence of the European institutions we established to make it happen. All Brussels could do was exhort, encourage and push the member states to do what was needed. It was clear from the beginning that any action on the Lisbon Agenda must be taken by individual states. Despite all of the huffing and puffing, they have singularly failed to do so. The truth is that while the Lisbon Agenda was a priority for the Commission, it was never a priority for the larger European states. They must take the hard decisions to make the agenda work but, almost without exception, they have lacked the motivation to do so.
Taking Dr. T. K. Whitaker in 1959 as an example, the Government faced a number of tough decisions. We had grown used to a way of life that worked reasonably well for us in the 1930s and 1940s in terms of what we wanted to achieve but when Dr. Whitaker put forward an economic plan in 1959 it took courage to tell people something difficult needed to be done and that we needed to do away with protectionism. These are the same types of decisions facing the larger member states but they have not faced up to them. Many of the larger states have more pressing domestic concerns to pay attention to instead of getting involved in making the reforms, which would be very unpopular in many cases. It is fair to say that when it was proposed to do away with car assembly activities here, there were howls of protest from the people whose jobs would be lost. Others are not facing up to the same problems we addressed in those years and this is why the gap is widening. No one in those countries is working hard to close it.
Another reason we have failed is the nature of Europe's economy. In comparing the amount that industry in Europe spends on research and development with the United States and others, the European figure is much lower. It is worth examining why this is the case. The reason is not, as many people believe, that European industrialists are more stuck in the mud than their American counterparts, although this may be part of the reason. If this were the problem, we could try to get them to do something about it. The reason is due to the nature of our economy. The vast bulk of the EU economy, especially in the larger member states, consists of low technology, traditional style industries where the scope for research and development is low when compared with the greater proportion of the US economy, which is centred around the high technology industries of the future, where research and development is the very life blood of activity. Taking the Continent as a whole and the larger countries in particular, Europe's real problem is that its industries are old-fashioned and its structures are out of date. These are survival issues and the EU should focus on dealing with them. Talking about leading the world in this context is simply absurd.
I have discussed the EU as a whole, a single, continental entity and what I said remains true for as long as we examine problems from that perspective. However, when we examine closely the countries that comprise the EU, we see a different story and one that is much more complicated. It is worth our while to examine this closer picture as, by doing so, we can find the right path for Ireland.
One of the great aspects of the European Union which is being threatened all the time is that lovely word "subsidiarity". When I heard it first, I was not quite sure what it meant and now believe we must protect it. It makes a great deal of sense to make decisions in certain areas at the top in Brussels. However, the answer to this problem lies in ensuring more decisions are made closer to home and the markets. The overall European economy is not doing well and the outlook remains bad for the foreseeable future. However, within Europe certain areas go against this trend and not all European countries are uncompetitive.
In recent years Ireland's economic performance clearly outpaced the European average. Recently I visited two eastern European countries and South America. The regard with which Ireland and the economy are held makes one proud to be Irish. I recently watched a British television programme that was 30 years old. I was jolted to hear Irish jokes being told. I realised I had not heard that type of joke for ten or 15 years. Anti-Irish jokes are no longer told because we are so highly regarded. I state this with a great sense of pride. Hearing the jokes reminded me how out of date they were.
In recent years Ireland's economic performance has outpaced the European average and left all of the laggards behind. However, Ireland is far from being at the front of the pack. That is the main point I wish to make. Recently, we discussed the growth competitiveness index produced by the World Economic Forum. If one examines it, one sees the most competitive country in the world in 2005 is Finland which I got to know in 1971 and during the 1970s. I found its history, population and traditions had a great deal in common with those of Ireland. It has a large neighbour that ruled it for many years, influenced it and forced its language on it. At the same time as the Gaelic revival movement sought to ensure Ireland's independent culture in the 1890s, there was a similar movement in Finland.
Finland beat the United States into second place in the world competitiveness stakes. This is not a forecast for 2010, or any other time in the future. Finland is not only a European country, it is one with approximately the same population and many of the same traditions as Ireland. It is interesting to note Finland's performance is not a fluke. Which country is third on the competitiveness index? It is Finland's neighbour and a fellow EU member, Sweden. Which country is fourth? It is another small Scandinavian country, Denmark, which also has much in common with Ireland.
The Lisbon Agenda may be a dead duck as far as Europe as a whole is concerned. Some EU members are clearly acting in a successful manner. Three of our fellow members, two as small as Ireland, are already in the top four most competitive countries in the world. Where do we come on that scale? We are way down the list at No. 26. Taking the 15 EU member states before the recent enlargement, we rank tenth. While our growth rate is above the EU average, our competitiveness performance is certainly not. What I am saying is simple. We need to pay less attention to Europe as a whole, which is why I am excited about maintaining and protecting subsidiarity and ensuring it is not allowed to slip. More attention must be paid to those fellow members which are getting it right in the competitiveness race. We need to lift our eyes to the Nordic region where Finland, Sweden and Denmark have much to teach us. We can also learn from Norway which came ninth in the competitiveness index and it is not even a EU member state.
Examining the Government's reform programme that is the subject of this debate, I see a great deal of motherhood and apple pie, an all-American phrase which means one makes nice statements with which no one can disagree. Much of this document smacks of a desire to fill in the boxes for Brussels, rather than a determination on our part to get to the heart of the real challenges that face us. Rather than go into play with a huge shopping list such as the one before us, it seems we are not paying enough attention to two main priorities.
It was interesting to hear the Leader of the House, Senator O'Rourke, discuss education. I spoke to a university professor during the week. He told me that when he started lecturing three or four years ago, he was jolted by the poor standards of undergraduate students in mathematics and basic English. He could not believe their inability to communicate in a written form or handle basic mathematics. Education is the foundation for the creation of future prosperity. If we spent half of the effort and money on education that we invest in roads, we would go a long way to transforming the country in the way necessary. All of the Nordic countries have a superb education system which produces great results for them.
We also fail to focus on the information society, although there are exceptions. I raised this issue last week. I spoke on the Order of Business and three or four minutes later I received a text message congratulating me on the tie I wore that day, which was similar to the Cathaoirleach's. I looked around to see if the person who had texted me was sitting in the Visitors Gallery. He was in Melbourne, Australia watching what was happening on the Internet. He must have had little to do. He is an Irish man living in Melbourne.
Noel Treacy (Galway East, Fianna Fail)
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It must have been a long tie.
Feargal Quinn (Independent)
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I had not realised it was possible to broadcast what happens in this House. Perhaps he is watching now. I am wearing a dull tie today.
We have this ability. However, I am critical about what has happened to our position in the information society, the context in which we hope to compete in the future, the knowledge-based economy to which we referred in the Lisbon Agenda. We are failing to reach out to grasp the opportunities it provides. Nothing captures our attitude and failure in this regard more than our miserable standing on the key issue of bringing affordable broadband services to the mass of the people. Senator Bradford also referred to this issue. The Nordic countries excel at this and have embraced the information society superbly. They are countries the size of Ireland.
To sum up what I have to say, we should follow the winners and do what they do. Some of those winners are the same size as Ireland. The lessons they offer us are clear. We have only to listen to what they say and follow in their footsteps. I was a rugby player at school in Newbridge and our trainer was Fr. Hegarty. On one occasion he discussed the attacking and defending teams. I interrupted to ask him whether the attacking team referred to where one was standing on the pitch. He thought for one moment and answered that it did not. It depended on who was in possession of the ball. If one is in possession of the ball, even on one's own back line, one is on the attacking team. Europe and subsidiarity, if we defend it, can give us possession of the ball. What we do with it is in our own hands. We can achieve. If we have the ability, we must focus on achieving what we set out to do.
Martin Mansergh (Fianna Fail)
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I presume Senator Quinn would be quite willing to pay individual and corporate tax rates as they apply in the Nordic countries. Perhaps they should be studied also.
I welcome the Minister of State and his officials. I was a humble member of the delegation at the time the Lisbon Agenda was adopted. Arguably it was over-ambitious, given the starting point, to aspire to making the European Union the most competitive economy. It had the ring of a grand-sounding political target. The problems in some of the larger countries which have not yet been resolved make it difficult to achieve. I see signs of hope in Germany. I have great hopes that——
Martin Mansergh (Fianna Fail)
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——the new coalition led by Angela Merkel will get its act together, continue the reforms that have been started and bring back confidence because the underlying strengths of the German economy are considerable and I believe they will benefit us all.
Senator Bradford said we do not hear much about the Lisbon Agenda here and this is true partly because it has not posed the same challenges to Ireland as it did to other economies. It has not required us to take the difficult decisions that have caused disquiet in countries such as France and Germany. In recent months — and this is the reason for the pause in the social partnership negotiations — there has been concern about an outflow of jobs. We are still experiencing a considerable net increase in jobs but have lost certain, mostly low skilled, manufacturing jobs to eastern Europe and had a debate on employment conditions and the "race to the bottom". The Lisbon Agenda was inspired to a degree by the then Portuguese Prime Minister Barosso, who has since become European Commission President. Much of this is a political problem. It is not a technical economic reform issue about what countries should do. It is about persuading people to come with one and the economic advantages of so doing. We have gone through this process twice. Senator Quinn mentioned the Whitaker report of 1958. The process was repeated a generation later in 1987. I have been following the various competitive indices for at least 15 years, and I used to order them from the Department of Finance. They all come to totally different conclusions and I would not have an exaggerated respect for them.
Martin Mansergh (Fianna Fail)
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The basic statistics for the Irish economy are incredibly strong. Ireland has the lowest unemployment level in Europe at 4.4% and the second lowest debt level at 29.4%. The briefing notes of the national reform programme indicate where Ireland stands in terms of income per capita. We are not the second wealthiest country in Europe. Our GNP per capita is 106% of the EU average. That is a good position to be in but it is not 120% or 130% as is sometimes maintained when people confuse wealth and income.
There are certain newspaper groups that do not like social partnership and who miss no opportunity to knock it and say it is no longer needed. This is nonsense.
Martin Mansergh (Fianna Fail)
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As a small community we must keep pulling together. It is not merely a question of setting objectives and deciding together what must be done. We also need crisis management mechanisms to deal with issues that regularly crop up causing severe problems. There are no disputes over whether people should talk to Government; the access mechanisms are there. At the beginning of most partnership negotiations there is an initial stand-off and apparent doubt about the outcome and that is understandable as part of the pre-mating routine.
Martin Mansergh (Fianna Fail)
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The benefit is overwhelming. At 5% of GNP, our current level of investment is making a real impact countrywide. There is more to be done and while I cannot detail the different projects now, I look forward to the ten-year transport infrastructure programme. Our employment rate is approaching 2 million, compared to approximately 1,080,000 in the mid-1980s. I hope that by 2007 we will be able to say that we have doubled employment. The Minister will remember there was a Government back in those days that doubled the national debt. It would be nice to be able to say we doubled employment.
Our Leader referred to education. There is a wide gap in our education infrastructure in the south east. We need a university in Waterford. Some of the arguments against it, which may come from competitors in other regions, do not hold water. The south east now has the second lowest income in the country.
Reference was made to North-South economic co-operation. The Minister for Finance is in the North today. That is very important. Yesterday Mr. Peter Hain announced a significant development, which would be unwelcome to the business community — a 19% rise in rates. The clear message behind this is that the different parties must get their acts together and put together a devolved government, that they should not expect the British taxpayer to subsidise political difference and stand off but will support parties that are working together. It is a clear warning shot and has not come before time.
One criterion of the Lisbon Agenda is that we should act in a way that supports economic and monetary union and the euro. We have done that in a model fashion. We are a small country and one could argue that by ourselves we could not create any great strain. In fact we have not created any strain but eased it. Senator Quinn is right to say there is considerable difference in performance between the countries of Europe. I do not want to sound overly complacent — we have many problems and challenges that we must confront — but nobody can deny we have been making substantial, rapid progress. If other countries made the same progress at the same rate maybe Europe would be closer to achieving the overarching Lisbon Agenda objectives.
Derek McDowell (Labour)
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I welcome the Minister. Senator Quinn summarised the Lisbon Agenda wonderfully when he said it was "motherhood and apple pie". It has always been that and in a sense it was designed to be that way. It was put together at a Council of the European Union comprising prime ministers of so many different political hues that to get them to agree to anything was difficult.
We ended up with a faintly compromised formula which, on the one hand, talks about employment, growth, competitiveness and so forth and, on the other, genuflects to the left by reference to maintaining social provision, increasing job protection and so forth. If that was not sufficiently compromised, a couple of years later in Stockholm the concept of environmental sustainability was added to the pot. We are left with a formula which, frankly, means either nothing or everything. What it means varies according to who one talks to or the perspective of the individual or government. All in all, it has not worked or brought about appreciable improvement in the economic performance of EU states. It has not secured improved social provision throughout the eurozone, the EU or the new member states.
The Government attempted during the Presidency last year to refocus the agenda, particularly on the issues of employment and growth. By and large, I agree with that. I accept the general proposition that one cannot have social provision if one does not have employment and growth. To that extent, therefore, prioritising employment and growth is good and healthy. Whether that will translate into meaningful policy agendas is a different matter. The Minister of State's relatively short speech today covered an astonishing menu of issues. That is positive proof of how broad the agenda can be if one wishes to make it so.
An interesting and useful spin-off of Lisbon has been the debate we have had in the past couple of years, generated in part by economic problems in France and Germany, about the European model, particularly the European social model. I read an interesting report earlier this summer by André Sapir, a member of a think tank in Brussels who, among others, is an adviser to the Commission on these issues. He produced a report to the ECOFIN in Manchester in June which has now become the consensus within the European Union and which states, in effect, that there is more than one European model.
That is hardly a surprise. There are three or four identifiable, separate models. Sapir pointed to the old Franco-German, so-called continental model where there are high levels of job protection matched with high levels of social provision, such as unemployment benefit, retirement benefit, old age pension and so forth. In northern Europe and Scandinavia, the countries Senator Quinn mentioned, there is, by and large, a lower level of job protection and more flexibility in the labour market but a higher level of social provision. If one loses one's job, therefore, one will get more unemployment benefit. In southern Europe, that is, Spain, Portugal and Greece, there is a low level of social provision. Unemployment benefit is relatively low and does not last long. These countries concentrate most of their social welfare provision on old age pensions. However, they still have a high level of inflexibility in terms of job protection.
Then there is the British and Irish model which is something of a mix. Welfare benefits are average. They are higher than in the United States but lower than in France or Germany. The level of job protection is also lower than in France and Germany but higher than in the United States. Mr. Sapir makes the point, and I am persuaded by it, that the determinant of high levels of employment is more the level of job protection than the level of unemployment benefit and benefits which sustain the labour market. To put it another way, flexibility in the labour market is more important in determining levels of employment than the level of social provision.
It is an interesting conclusion and one that is gaining ground. To my surprise, and slight horror, I read that Commissioner McCreevy endorsed this notion last week in the IEA. I always get slightly queasy when I find myself in agreement with Mr. McCreevy. There is substantial merit in the conclusion and if there can be a level of consensus on it, it represents a way forward.
One must ask, however, what this means for Ireland, where there are two different and parallel systems. I am not sure how healthy that is. In the private sector a certain set of rules applies while in parts of the commercial public sector a wholly different set of rules applies. I refer, for example, to work practices. The day is long gone in most of the private sector where one could expect disturbance money for an improved system of IT or moving to improved offices. The day is also long gone where uncertified sick leave is seen as just another holiday or where one would expect to get paid overtime for filling in for a colleague who is out sick. There are occasions where such work practices are appropriate but there are plenty where they are not.
Unfortunately, however, that is not the case in parts of our commercial public sector. Perhaps it is appropriate that it should be said on this side of the House but these work practices are not sustainable in the long run. I support giving people good conditions of work and good basic pay but we cannot sustain the type of inflexible work practices which, frankly, ultimately cost us jobs. I will not be more specific than that but it is something that should be borne in mind.
The mantra in Europe ten or 12 years ago was that we had to get the Single Market in place and then implement the single currency and everything that went with it. We have been reasonably successful in getting the Single Market in place where goods are concerned but spectacularly unsuccessful, particularly in recent years, where services are concerned. The real problem that has arisen is due to expansion and the accession of the new member states, where product prices and wage levels are so different and where the threats and, presumably, the opportunities are much greater. That has slowed down the process.
We saw it most recently in the famous case in Sweden with the Estonian builders. Frankly, it is easy to see both sides of the argument. It is good for consumers, who are paying the price of services, to have competition from the east which is based on lower wage rates. However, it was not good for local construction workers in Sweden. The same could conceivably be true in Ireland.
I listened with interest to the debate about rip-off Ireland. On one level, it is very superficial. We talk as if prices exist in a vacuum. Prices are high, for example, in the tourist sector, because people are paid half decent wages. That is the major, although not the sole reason, prices are high. We cannot simply say we want lower prices but we still want bar, restaurant and hotel workers to be paid at a high level.
4:00 pm
Derek McDowell (Labour)
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We must get the balance right. We could start by having a decent, honest debate about it rather than suggesting rip-off Ireland is a phenomenon that exists purely on one side of the equation, as it were. With regard to free trade within Europe, we must complete the Single Market. Commissioner McCreevy should be supported in implementing the services directive but he must have due and proper regard, more than he has demonstrated so far, to maintaining decent standards of employment in the countries where services are being traded.
Let us not kid ourselves that this will do the job. Whereas it was fair enough to say 15 years ago that a Single Market and competition within Europe was sufficient, we must now look far beyond the boundaries of Europe. Much of our competition now and 15% of our manufactured goods imports come from China and India in the Far East. Are we ready for free trade with China and India? I am not an ideologue on these issues. I do not believe, as Commissioner McCreevy clearly does, that free trade is necessarily and always a good thing. If one opened the floodgates in the morning, one would flush out a huge number of Irish and European jobs.
This issue must be tackled sensitively. It will quite rightly take time. There are industries, for example, clothing manufacturing, where we simply cannot compete and those jobs and industries are now gone from our shores. However, we could lose far more of the Irish and European economies to China and India if we do not retain some protective measures between now and 30 or 40 years hence. Festina lente on this. It is all very well to claim free trade is good and these countries provide consumers as well as competition but we must be careful. Our primary duty must be to our own people.
I wish to express a view on some of the matters that arose during the debate, one of which is broadband. This touches on an interesting issue, that is, the role of competition in a very small economy such as Ireland. The issue is well pointed up, for example, in the area of electricity supply. We are being told by the electricity regulator, and one supposes by the Government, that in order to get the level of competition they deem desirable we must increase prices, both to consumers and to industry and business, in order bring in other players into the market to compete with ESB, which was doing quite a good job to start with.
There is a somewhat similar aspect to the broadband argument. I acknowledge the argument about local loop unbundling and I am just about persuaded that Eircom should go that road,——
Mary O'Rourke (Fianna Fail)
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They are still unbundling years later.
Derek McDowell (Labour)
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It should unbundle, get done with it and allow the competition, but I am not persuaded that even if this happens, all parts of County Galway or County Mayo will have broadband within a reasonable time.
We need Government to take the lead here, to state that it regards this as a matter of licence and that it will simply trade the licence to provide broadband to the entire county of Mayo, or to most of Mayo, to a particular company which will tender for it. We need to go that route. We need to encourage competition between companies for that tender and part of the price will undoubtedly be paid by the users of the service although it is likely it will have to be subsidised by Government. There is a need for the Government to grasp the issue. We cannot wait for the market to deliver broadband because I do not think it will ever do so on the Erris peninsula. We just will not get broadband in the measure needed, as quickly as needed and as widespread as needed.
Tax is another issue to which I want to refer. I have long been a believer, as the Minister of State, Deputy Treacy, and as the Leas-Chathaoirleach will know, in harmonisation of tax but this is an argument that is becoming increasingly more urgent. Many more countries in Eastern Europe, the newly acceded states, have moved to a flat tax and l listened last night on the BBC to the Prime Minister of Estonia who made it quite clear that the notion of progressive taxation is a thing of the past to which he has no intention of returning. It is inevitable that this will become more common in existing member states of the European Union. The notion, as the House will be aware, famously surfaced briefly during the German election and, thankfully, has now gone away.
Derek McDowell (Labour)
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Senator Hayes's colleagues, yes, quite.
Derek McDowell (Labour)
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I suppose we can probably do here too what can be done in Germany.
Derek McDowell (Labour)
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I mention this because I am against the idea of flat tax. The only realistic way of doing it in a fashion, which is controllable or which makes sense, is by agreeing, first, that there must be a broad base of taxation throughout the European Union so that we all agree in principle we will tax corporation profits as well as taxing income and, second, that there is a minimum rate at which it will apply. I am not saying any more than that — that, in itself, would be a more than sufficiently radical notion to get us going — but we must intervene in that and our rigid adherence in this country to the notion that we will not allow any interference or harmonisation on tax will do us down sooner rather than later; it is a matter on which we need to keep an eye.
These debates are always useful because they allow us an agenda of such width and breadth. I am glad the Minister of State, Deputy Treacy, had the opportunity to come in and share his time with us this afternoon.
Ann Ormonde (Fianna Fail)
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I, too, welcome the Minister of State, Deputy Treacy. I have listened to so much of the debate this afternoon that I am a little confused. I came in with one set of guidelines for myself and now I am——
Mary O'Rourke (Fianna Fail)
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The Senator should stick to her own.
Ann Ormonde (Fianna Fail)
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I am good at that all right but I would agree with many of the points raised, which perhaps were not in my own thinking when I started out initially.
The Lisbon Agenda started in 2000. The idea behind it was that by 2010 the Europe Union must be the most dynamic and competitive knowledge-based economy. I began to think about that sentence, asked myself what it means and considered how we should go about that. The Lisbon Agenda was launched when there were 15 member states. I asked myself how could we achieve the above goal with 15 member states all of which have different philosophies, social thinking etc.
Then I discovered that the Lisbon Agenda would be reviewed. I did not give it any thought between 2000 and 2004 because it was not part of my thinking, but then it again came onto the agenda for discussion in 2004 under Ireland's Presidency, where it was felt the agenda had to be reviewed because of enlargement. I began to take stock then because I was spokesperson on European affairs, it was an interesting time for Ireland and the Taoiseach was then the President of the European Council.
Reforming the Lisbon Agenda on the basis that the EU now has 25 members with different social backgrounds is back on the agenda. The ten new members are coming out of times of political instability. They are only familiarising themselves with democracy, now they have this agenda, that Europe must achieve economic co-operation in order to achieve growth, prosperity and competitiveness. There is such a combination involved that I am not sure this will be possible.
The White Paper is strong on the subsidiarity clause, which mentions that each country must go after its own achievements. I welcome that each country and national parliament must determine where they are as regards economic growth, prosperity, the competitive and social agenda etc. between now and 2010. I welcome the necessary review of how we go forward with this Lisbon Agenda.
We can only speak about Ireland. At the end of the day, people will want to know what at this point in time will make the quality of life better for the man in the street in securing good employment and achieving economic prosperity. That is the key to the Lisbon Agenda.
No doubt there is a need for collective responsibility because we must take on the challenges of globalisation and the Lisbon Agenda is probably all about the following question — how do we face up to the globalisation of the Far-East, China and India, which are growing at such a rate and the need for these countries to combat their own poverty? There must be collective responsibility in Europe in order to take on that challenge. We must take on the challenge of the United States as well. There is, therefore, a gap and it was overly ambitious in 2000 to set these goals.
Having said that, Ireland is doing very well. We have sustained economic growth, competitiveness and practically full employment. The question is how we can sustain these to reach the goals set for 2010.
I have departed from my speech and started to wander, which is perhaps the best way to approach these matters. We must put a few measures in place and I am glad this reform programme has identified priorities. The priorities are that we must maintain our competitiveness, keep national debt low, and keep our taxes low in order to enhance the activation of employment among the population. That is my philosophy.
We also must recognise that Ireland has an aging population. I welcome the decision to set up the National Pensions Reserve Fund in 1999 to deal with that matter and to put in requirements so that there will be early retirement packages. That is important to allow for the mobility of workers. In addition, the decision to increase the age of retirement was also important. These are measures which now must be put in place for Ireland.
I do not know what the new member states will do. They will have different ways of achieving their targets. It is at the end of the period that there must be collective responsibility when it comes to dealing with the Lisbon Agenda and how we achieve it. One must not expect every member state's agenda to be the same. That is not possible.
We also must look at how we manage our public expenditure and we have done so. I can only think of the examples of the overruns in the past on infrastructure projects. I am glad measures in that regard are being put in places. I suppose we can quote Mr. Eddie Hobbs and "seek better value for money" and provide for wage benchmarking to allow that any moderate increases in pay will be identified with productivity. We could talk around the clock on this issue.
Many Senators have pointed out that it is important we invest in education. We do pretty well in the area of education although there may be some gaps on which we could improve. Primary education is first class and second level education, despite the faults we find with the leaving certificate points system, is a good passport for any student to any part of the world. Students can use it as a passport for entry to universities in many of the member states of the European Union. Nobody should suggest that our leaving certificate is not a passport to a good third level education. Despite the points system, it provides a rounded second level education, unlike in some states where students have almost completed their education by the time they are 15 years old.
We must put initiatives in place for the disadvantaged. The Minister of State must be aware of the need to fill the gaps. We have large drop-out numbers from education, particularly when students reach the age of 15 and think there are jobs for them, in particular in construction. They slip away from education because they want to make big money. It would be pity if we allowed this to continue to happen. FÁS must be part of whatever initiatives are put in place in this regard and must ensure these young people are drawn back into the education system. They may not want to do an academic leaving certificate programme but can do an applied leaving certificate programme. We should have more co-operation between FÁS and the education system to allow these students to continue their education. We must also provide lifelong learning programmes or second chance education for people who have fallen through the gaps in the education system between 15 and 18 years of age.
We have four years to put these ideas and our new initiatives in place as part of the national reform programme, to ensure we become a knowledge-based economy and to ensure we have research and development programmes equal to the best in Europe. We have professional qualification programmes in place for this. Somebody suggested we open more universities. I am not convinced another university is the answer. Waterford Institute of Technology has excellent research and development programmes. I would like to see this acknowledged by making the Waterford institute a key area for research and development, rather than by making the WIT a full-blown university. That is the way forward.
We have everything going for us here with regard to getting it right. Although there have been some mistakes, we are a model economy. Many of the member states of the European Union see us as a success story. Let us not constantly knock ourselves but consider how we can improve. When we get to 2010, let us be among the best. Let us combat globalisation and international crime and make a success of our economy so that we stand out then as one of the most successful economies of the world.
Brian Hayes (Fine Gael)
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I welcome the Minister of State at the Department of the Taoiseach, Deputy Treacy, to the House. He is well aware that we have many Ministers of State and that the numbers tend to grow each year. Some Ministers of State have responsibility for such areas as the OPW and Dublin traffic, all of which are neat, well-defined areas. Deputy Treacy seems to have responsibility for delivering the Lisbon Agenda.
Brian Hayes (Fine Gael)
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I congratulate him and wish him every success. Delivering the agenda is no mean feat for one man to do.
The idea that the Lisbon Agenda can be delivered across 25 different states, each with its own economy and level of modernisation, is daft. As a previous speaker said, much of the motivation behind this is politics. It tries to keep the impression abroad that the entity that is the European Union today, the 25 states, can deliver something, despite being in competition with the likes of Chinese, the Indian economies and others. I do not want to compete with those low wage economies, nor with many of the jobs on offer in the United States of America.
The political imperative for the leaders when they agreed this at the Lisbon summit was to ensure that we would have the most competitive economy in the world by 2010, etc. The idea that we can bring the levels of difference between all the economies of the Union together is daft. It is an aspiration we will find difficult, if not impossible, to achieve.
Many colleagues have asked how we have managed to gain our high employment levels over the past ten to 15 years. The answer is not a state secret. One, possibly the most important, ingredient was the low level of corporate taxation that existed for foreign multinational companies that wanted to invest here. We should not forget that America invests more in Europe than anywhere else in the world. While others in the European Union tut-tutted in our direction and lost many of those companies to us, we managed to gain a foothold and, as a result, built huge numbers in employment here from that source.
Another reason we succeeded was that we had a large, unemployed, well educated young population with low expectations. That has changed radically in recent years, because of high levels of employment among young people, something unique in Europe. Unemployment is a significant issue throughout Europe. The big problem among the new eastern European EU states is a high level of youth unemployment. One need only look at this problem in Poland to understand why so many of them are here doing jobs our young people will not do. They are here because the opportunities do not exist in Poland. They will travel the length and breadth of the Union to gain employment and language skills.
The English language, an international language, has been a significant factor in our economic success. Significant employment resulted from that on account of our large young population and our access as a bridge between America and mainland Europe. We must keep these facts in mind. Our economic model is, therefore, completely unlike that of other western European economies, for example, the French, German and British models which traditionally had a large concentration of manufacturing employment until the late 1970s. We never had a significant level of manufacturing industry, as was the case throughout western Europe, in particular France and Germany.
I agree with all Senator McDowell said on the issue of a flat rate tax. The notion that every taxpayer should pay the same percentage of his or her salary at one rate is regressive. I like the notion prevalent in many western countries that the more one earns, the more one pays. This is right in a progressive society. One can operate a flat rate tax in Slovenia, Slovakia, Lithuania and other countries which are virtually basket case economies. The introduction of a flat rate tax there might stimulate economic growth.
Another advantage of a flat rate tax is that it would eliminate overnight tax shelters and the like by which some people can hide their wealth. Nevertheless, I agree with Senator McDowell that the introduction of a flat tax regime throughout Europe runs contrary to notions of economic fairness and equality on which our tax system should be based. The idea of a flat tax rate was brilliantly employed by one of our political opponents at EU level in the recent German general election, but the political party in question now finds itself in government with its erstwhile opponents.
Derek McDowell (Labour)
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Things were much more interesting when we were allowed to disagree.
Brian Hayes (Fine Gael)
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Senator McDowell is more upset about it than I am. The EU Commission and the Council of Europe issue platitudinal statements on issues connected with the Lisbon Agenda but there is no level playing field in respect of the euro. One set of rules applies to small countries such as Ireland, the Netherlands, Belgium and some of the Nordic countries, which adhere strictly to the limitations on public expenditure. Another set of rules applies to France, Germany and Italy, which decide to ignore these limitations year after year. The fact that there is no mechanism to deal with this must be addressed. Perhaps it is not a drawback but we do not need to be lectured about our commitments to staying within the Stability and Growth Pact when others, particularly France and Germany, have shown scant regard for the kind of limitations on expenditure that are regularly brought to our attention.
Reference was made to our economy's over-reliance on the growth in employment in the construction industry in recent years. The notion that this high level of employability in the construction industry can continue is not sustainable. We will not be able to build, on average, 50,000 to 60,000 new houses a year for the next 12 years. We face enormous challenges in terms of creating a much wider and more diverse range of employment options within our economy. We are far too reliant on jobs in the construction industry. A small increase in interest rates would have a devastating effect on house building and the levels of new jobs in the construction industry would also be affected. The Government should realise that we cannot not allow the construction industry to act as the mainstay of new jobs.
Despite the economic success of recent years, we face problems. Senator Ormonde has spoken about the problems facing people who are returning to education. We do not support people who leave school at the age of 18, go into full-time employment and cannot find either the financial incentive or opportunity to return to full or part-time education. The amount of money Ireland plc gives to each person between the ages of 18 and 21 on a full-time educational course is vast. I understand the figure was approximately €45,000 per student per year even before the introduction of free fees, which represents a massive investment. However, there are no opportunities for a person who began working at the age of 18 or 19 and who now wishes to return to formal education at the age of, say, 26. Neither the State nor his or her company will support it. The Government should consider introducing an educational credit. This would involve giving every citizen a certain amount of money to spend on education at some point in their lives. It is more flexible than giving all the opportunity to people in the formal education sector up to the ages of 20 or 21.
We will face an enormous competitive disadvantage over the next three years. The Minister of State is aware that the British Prime Minister and eminent socialist, Tony Blair, has abolished free fees and introduced top-up grants, which will apply throughout the UK and will have an impact next year on Northern Ireland. For the first time in many years, many third level institutions there will have a considerable competitive advantage over our institutions because they will have additional money generated from top-up fees. I understand that this additional money will be used for research, technology and investment that our institutions will not have because the amount of money we spend in terms of investment and research in third level institutions is paltry compared to that in other EU countries. Over the next number of years, colleges in Northern Ireland will be out of the stratosphere with regard to additional funding opportunities brought about by the new system. We need to invest more in our third level sector to ensure the success of the technology and knowledge-based sector. I wish the Minister of State every success with regard to his very simple objectives.
Don Lydon (Fianna Fail)
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I welcome the Minister of State to the House and commend him on his work in European affairs. I welcome this opportunity to consider the Lisbon national reform programme. It is difficult to overemphasise the importance of the success of the Lisbon process, particularly during the period of reflection on the future of Europe during which questions have and will be asked about the direction of Europe. The success of the European project has and will be grounded in economic success. However, the citizens of EU member states cannot be expected to be taken on the European journey without being informed of the destination and itinerary. It is, therefore, appropriate that we consider the national response to the Lisbon initiative here today.
The European Union faces two over-riding economic and social challenges in forthcoming decades. The first challenge lies in Europe's lack of competitiveness vis-À-vis the US and the emerging economies of the Far East, while the second challenge lies in the aging profile of Europe's population. Something must be done about the fact that we are not replacing ourselves. In response to these challenges, the EU Heads of State and the Government decided at the meeting of the Council of Europe in Lisbon in 2000 to make Europe "the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion". A subsequent Council meeting in Gothenburg subsequently added the concept of environmental sustainability.
I am a member of the Oireachtas Joint Committee on European Affairs, a sub-committee of which considers European legislation. This sub-committee considered the recommendations of the Commission in respect of employment policies — COM (2004) 239 and COM (2005) 141. These recommendations follow from the Lisbon initiative. The Joint Committee on European Affairs has also considered this matter which clearly outlines the issues at stake. The Lisbon Agenda is a wide-ranging set of policies which reaches into all aspects of the European economy and much of society. It covers areas such as the information society; policies in respect of enterprise, innovation and research; the Single Market; education; employment; social protection; social inclusion; the environment and macro-economic policies. Its implementation will take place through a mixture of European and national policies, not on the basis of legislation and sanctions but on a range of commonly agreed targets and benchmarking among member states which is known as the open method of co-ordination. It is now widely believed that the range of initiatives which began in 2000 have not made the progress that might have been expected across Europe and that commitments made by some member states have not been delivered. Ireland has a very positive record that is regarded as a model in some respects for other member states.
Some speakers have mentioned that when they travel abroad, they are asked how Ireland has done it. The features of the Irish model include high levels of sustained economic growth, relatively low inflation and high levels of employment. Each EU member state needs to decide for itself how it can strike the right balance of measures to address its particular challenges. There is no single template that is ideally suited to all member states. There is no template for economic success. Therefore, the Lisbon approach which involves putting in place national reform programmes is the right one.
The Taoiseach has identified competitiveness, more and better employment, sound economic policies and sustainable growth as the four elements of economic success. If we increase the resources being allocated for research and development, we will take a significant step towards achieving further success in these areas. The EU Commission has proposed an ambitious expansion in this regard in its package for the seventh framework programme. It is regrettable, however, that the programme has not placed a greater emphasis on small and medium-sized enterprises which will be one of the innovative motors in driving the Lisbon process forward. The Commission has asked member states to focus on economic reforms and to invest in the realisation of a knowledge society, based on human capital, education, research and innovation. As many Senators said, Ireland has made very good progress in reaching the goals set. The Lisbon programme of national reform will drive this success even further.