Sir, - The former Taoiseach Garrett FitzGerald has cautioned that future social agreements are "threatened" by the Government's decision to reduce the 48 per cent tax rate and "the provocative and socially regressive decision to halve capital gains tax" (The Irish Times, December 27th). Dr FitzGerald conveniently ignores the flawed nature of past social agreements which have consistently and disproportionately rewarded the public sector at the expense of PAYE private-sector workers. If the public-sector unions had been squared up to then, the immediate past and previous Budgets could have delivered on Dr FitzGerald's fiscal and social goals.
All decent people share these goals, but not all sufficiently appreciate that the wealth created has to be proportionately distributed in accord with the risk reward ratio, i.e., those in risky jobs should expect their pay packets in good times to reflect that risk.
The overspend on the Public Sector Pay Bill (PSPB), when compared with private sector increases during the lifetimes of the two programmes PESP and PCW and the first year of Partnership 2000, is a staggering £1,392 million.
Last year alone the public-sector pay bill increased by 10.5 per cent, when the agreed industry increase was just 2.5 per cent. The public-sector pay bill will increase again this year by some 10 per cent, or five times the rate of inflation. Some 90 per cent of the increase in this year's Government current spending is due to the increases in the public-sector pay bill.
Over the past eight years this has been running at nearly three-and-a-half times the rate of inflation before account is taken of the tax concessions.
Clearly, if the public sector unions had been persuaded of their obligations to the low-paid and socially deprived, those unwarranted increases in the public sector pay bill could have been forgone and Dr FitzGerald's tax and social priorities could have been delivered in full before this year's Budget.
The success of public-sector unions in gaining disproportionate wage increases for is grounded on the fact that they can threaten with impunity the social fabric of society by virtue of their dominant position. That is, as the figures clearly show, what social consensus up to now has been based upon. Once conceded, those pay increases cannot be withdrawn. In an economic downturn they will be paid for by increased taxation and job losses in the private sector. Ruairi Quinn recognised the problem as Minister of Finance but got no support. Charlie McCreevey did highlight the problem on Budget day. His resolution to tackle the problem has yet to be tested.
Dr FitzGerald wrote about lowering high tax rates and widening tax bands as if it was a Hobson's choice. It isn't. A prudent Government would pursue both aims. - Yours, etc.,
From Frank Mulcahy
Chief Executive, ISME, Kildare Street, Dublin 2.