Next month's budget must reinforce social partnership and inclusion

The budget is the primary annual instrument for tackling inequalities and redistributing wealth.

The budget is the primary annual instrument for tackling inequalities and redistributing wealth.

A practical orientation is required, that is not too distracted by theoretical or statistical arguments, about the degree of inequality that is tolerable or intolerable, Ireland's comparative standing on this in the OECD, or whether gaps between rich and poor, depending on how they are measured, are widening or narrowing.

Healthy public finances create a wide margin of manoeuvre, subject to long-term sustainability, to underpin both a dynamic economy and advance a more inclusive society.

In a fast growing economy, a few people have succeeded in making previously unimaginable fortunes. An increasing number are very comfortably off, and, as families grow up, have money to save, invest, or spend abroad.

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A large section from varied class backgrounds manage or survive by keeping their ambitions modest. It is hardest for the least well off who are struggling on very low incomes to watch the rest of the world go by with greater ease.

An old man on a non-contributory pension made the observation recently that young people nowadays seemed to have unlimited money to spend. People like himself who had to work in much harder conditions and who, in some cases for historical reasons, have meagre pension entitlements no longer have any means of supplementing their income.

It is an illustration of the reality of relative poverty, accepting that much progress has been made in reducing absolute and consistent poverty.

For most of the lives of people now grown old, the State has operated a spare, even spartan, system of social entitlements. Even though State pensions have greatly improved in recent years, it is acknowledged even by Government that the State pension on its own will be perceived in future as quite inadequate, unless steps are taken to supplement it.

Encouraging people to provide for themselves beyond a basic income is one thing. Compelling them to do so, however, would be widely regarded as a form of extra taxation, in conflict with the stated commitment of most parties to retain a low tax regime.

As of now, several categories of older people are effectively marooned by rules that were designed in earlier times.

Farmers, who took up the farm retirement scheme some time ago, and who did not have enough PRSI contributions since it was introduced for them and who were not allowed to make up the gap voluntarily, find themselves on a reduced non-contributory pension, once the farm retirement pension, which is not index-linked, runs out.

Whereas today's farmers, of whatever age, will receive the single farm payment in lieu of various headage subsidies, largely "as a reward", as it is put, for their past work, those who retired some years ago receive none of that benefit.

Where sons or daughters have taken over the family farm, at least the value of the work done over the past generation remains in the family. Many aspects of these problems are the subject of a report by the Oireachtas Joint Committee on Agriculture earlier this year by Ollie Wilkinson.

To take a completely different example, former post office employees of the department of posts and telegraphs, who retired before An Post became a semi-state body, have not received equivalent benchmarking increases under recent partnership agreements, because they are not deemed to have fulfilled the productivity conditions.

This is a line of reasoning, particularly when in An Post even standard pay increases are being linked (at least by management) to productivity that is bound to have the effect of widening the gap between those in employment, and those who are stuck with conditions that applied at their retirement. This raises a fundamental equity issue. Should productivity benefit only those at work, or should it also benefit past employees who laid the foundations for today's advances?

While not done in a politically deliberate or conscious way, the State is too inclined to maintain a restrictive legal interpretation of provisions, vis-a-vis the numerous people on low incomes, while seemingly having little problem about costly incentives to the more limited class of investors with large amounts of spare cash.

This is not just various construction schemes, which are the usual focus of public comment, but also practically unlimited subsidisation, to those on high incomes, of pension funds which can run into millions, for the benefits of individuals, whether the scheme is private or corporate.

At times, budgetary policy and welfare administration seem to operate on the gospel principle (though doubtless not a favourite text of Cori): "for he that hath, to him shall be given: and he that hath not, from him shall be taken even that which he hath" (St Mark's Gospel, Ch. 4, v.25).

There are two possible reactions to that; the egalitarian and often socialist one, and an often shrewder trade union one. The egalitarian instinct, confronted with visible wealth and somebody enjoying high rewards, is to reduce rewards or confiscate a part of them. While this satisfies certain basic instincts, there may be no tangible benefits for people down the line.

A trade union reaction, for example, when Ministers and senior officials are awarded an independently-recommended pay increase, is to use that as a platform or benchmark to obtain better conditions for everyone else in State employment. This assumes, which has been the case in recent years, that the money available is elastic to some degree, and not just a zero-sum.

Creating a greater sense of cohesion and community solidarity is in the interests of society as a whole, and of a stable and productive economy.

Ruthless management practices, sometimes characterised as the "race to the bottom", have put social partnership, which is up for renewal, under some strain. What is not always so visible is trade union inflexibility, which sometimes tends to drive managements down that path.

Apart from alleviating the cost of child care, which is on everyone's agenda, the budget should be used primarily to reinforce social partnership and inclusion.