The key test for social partnership will be the delivery of key infrastructure and public services to underpin economic growth prospects, according to the National Economic and Social Council (NESC). Borrowing to fund this investment should be considered, NESC argues in a report published yesterday.
The NESC, on which the Government, employers, unions, farmers and community organisations are represented, published its outline recommendations for the new national agreement last November. The agreement was approved by employers and unions last week.
The detailed analysis that supported the NESC conclusions was published yesterday and, in an accompanying statement, the council said that "Ireland's prospects now depend critically on successfully addressing a set of structural supply-side issues". These arise in the public utilities, planning and infrastructure, and services such as transport, health and education.
There is a need to ensure the necessary investment takes place to ensure high-quality services and value for money, and the need to make the organisational and institutional changes necessary to achieve this. Exploration of how to do this is a central task for the Government and social partners, and "willingness to adopt the best arrangements is the central test of social partnership".
To pay for this investment, the NESC says "that it may be appropriate to ease the overall fiscal position". While borrowing may be needed for the next couple of years, it recommends that the Exchequer position be returned to balance when growth picks up. Infrastructural investment should be maintained at 5.5 per cent of GNP each year, it says, roughly this year's planned level.
As previously reported, the NESC also believes a rise in the tax burden may be needed to pay for investment and public services. It calls on the Government to examine the tax reliefs and allowances, some of which it feels should be abolished and others granted only at the standard 20 per cent income tax rate.
The council does not identify specific allowances that it feels should be abolished. It does point out that the bulk of the benefit from pension tax relief goes to higher earners. While the low pensions uptake points to the need for policies in this area, there is a need to ensure that these objectives are achieved effectively and equitably, it says. It also calls for a new support for low-income families, saying that merely increasing child benefit is an expensive way of addressing the issue of child poverty.
NESC says the proportion of the population in consistent poverty, i.e. unable to afford the basic necessities, fell from 17.8 to 5.5 per cent.
