Higher living standards for workers and increases of up to 16 per cent in social welfare payments are among the major recommendations of the National Economic and Social Council report on a new national pay agreement to succeed Partnership 2000. The NESC is likely to agree a final draft of the report when it meets tomorrow.
"Rising real disposable incomes will gradually begin to replace employment growth as the principal benefit from further economic progress", the report states.
Entitled Opportunities, Challenges and Capacities for Choice Overview, it was requested by the Taoiseach, Mr Ahern, to set the parameters for discussions on a new national agreement.
Given that wage moderation had helped to create extra jobs, the report says that investment in human infrastructural needs such as "lifelong learning", better childcare facilities and "family-friendly workplaces" is now more relevant to meeting wider economic and social agendas.
It suggests that improved public transport, affordable accommodation and better access to education and health services could raise living standards as effectively as pay increases. These might be "preferable alternatives" in some instances, given the "constraints of the single currency".
The draft report, a copy of which has been seen by The Irish Times, is extremely optimistic about the prospects for building on the success of the previous national agreements. However, it cautions that a "new vision" is required to lead us into the next century, based on a more socially inclusive society and on improved quality of life as well as on economic success.
While there is continuing emphasis on the need to maintain competitiveness in a global market, and for workers to be flexible in adapting to a changing workplace, the report states that it should be possible to improve workers' incomes without undermining competitiveness.
"With the attainment of high rates of employment and a slower prospective rate of increase of the labour force, the balance between pay and jobs can shift towards improving the reward for work", the report states.
While it does not attempt to suggest ways of negotiating a new pay deal, it says that it is in the interests of employers and workers to "maintain co-ordinated wage bargaining in which there is an element of co-operation and a focus on long-term interests". Consensus was most likely where agreements covered "pay, the public finances, housing and other policies to address social exclusion".
Inevitably, there are some contradictions in the report. Despite the emphasis on improving public services, it expresses concern at the rate at which the Government's current expenditure - mainly driven by public service pay - has been rising. It maintains that the average rate of increase in the 1990s, at 6 per cent, is unsustainable.
Assuming a 5 per cent annual growth rate between now and 2005, the Exchequer would be left with very little leeway. If growth was to fall to 2.5 per cent, the EU average, we could have a current budget deficit of 4 per cent by 2005. The report strongly recommends reducing the annual growth in public spending to 4 per cent. At the same time, given the "healthy state of the public finances", there is "scope for further tax reductions while holding the tax take, as a GNP share, close to present levels". The emphasis in future budgets should be switched from cutting taxes to improving public services.
The NESC favours the "50 per cent average income threshold as a new benchmark for social welfare payments". For people on long-term social assistance rates of £73.50 a week, this would mean a rise of £12.02, or 16.4 per cent.
On incomes, it warns against the twin dangers of "temporarily boosting incomes and public expenditure on the basis of an assumed continuation of exceptional conditions" and on withholding "justifiable improvements in economic rewards".
In short, the NESC says, the present delicate balancing act of the social partners must continue.