The NESC can help ensure that future social partnership agreements are underpinned by economic and social reality, writes Frances Ruane.
The National Economic and Social Council (NESC) is celebrating its 30th anniversary. Anniversaries are times to reflect. Has the council done a good job? Is it still relevant, given the economic, social and institutional changes that have taken place since 1973? How does it need to change to continue to be relevant into the next decade? Does it still meet its original terms of reference, namely that it should "analyse and report [to Government] on strategic issues relating to the efficient development of the economy and the achievement of social justice"?
The role the NESC has played in the development of economic and social policy over the past 30 years has been profound. In addition to its series of strategy documents, it has produced more than 100 reports on issues ranging from capital taxation to private sector investment, from energy policy to housing policy, from regional policy to health policy. These reports reflect the very considerable changes that have taken place in Ireland in the past three decades.
In 1973, as a nascent member of the European Community, Ireland was a small open economy that was at the margin of the world's high-income countries. Thirty years later, it is one of the most open economies in the world and in terms of per capita gross national income, is now in 14th place in the world (ahead of Canada, the Netherlands and the UK, for example) according to the World Bank's World Development Indicators for 2003.
In 1973 we were engaged in national planning exercises, which were high on rhetoric and low on resources. Today we are engaged in development plans with public investment amounting to more than 5 per cent of annual GNP compared with between 2 and 3 per cent of GDP in most EU countries. In 1973 we looked to the UK as our outside reference point. Today we talk of Boston and Berlin but not of Birmingham.
But not everything has changed. For example, there is an uncanny similarity today in where we stand on spatial planning. Some 30 years ago we had just decided to ignore the Buchanan Report, which had been commissioned by government to advise on spatial development. That plan favoured development of an identified number of growth poles and regional centres. Today we have just completed the process of developing the National Spatial Strategy, which is the first attempt in 30 years to put spatial development on to a rational base; its proposals are not a million miles from those proposed by Colin Buchanan. However, attitudes to its implementation seem, at best, to be lukewarm and evidence of action is scarce.
These attitudes beg the question why, as a State, we have been happy to use the insights of economics and sociology to inform economic and social policy, but when it comes to spatial policy, we have made no serious attempts to call upon the disciplines of urban and regional planning. Is it simply because space is so political? Indeed, if the same approach had been taken to economic policy, we might still be in the era of protectionist tariffs, with foreign direct investment being prohibited and no talk of the need for competition to bring down domestic costs.
And what about the management of our public finances? Despite the long-term horizons generated by successive ESRI medium-term reviews and the recent process of preparing a seven-year €50 billion National Development Plan, we still run the public sector on the basis of a cash-flow, annual budgeting exercise.
This exercise involves an estimates campaign that is resource-intensive and prone to encouraging inefficient rather than efficient behaviour from Government Departments and agencies. Recent moves to multi-annual budgeting that were a logical evolution of the NDP process have yet to bear fruit, with consequential failures for achieving a commonsensical balance between capital and recurrent expenditures and "the efficient development of the economy".
It would be widely accepted that the NESC has had considerable influence on economic policy-making in Ireland, and that the council has played a key role in developing the "shared understanding" that has been essential to achieving social partnership over the past 15 years. However, if NESC limits its role to that of a talking forum to underpin social partnership, what body should be fulfilling NESC's original terms of reference of reporting to Government on "strategic issues relating to the efficient development of the economy"?
Were that task given to another body, there is increased risk that the context in which the "shared understanding" for partnership is being developed will become separated from economic reality.
Such a separation would add to the danger that, having had a decade where outside factors have worked in our favour, negotiators of any future partnership agreements would forget just how lucky we have been during the 1990s and just how bad things were in the 1980s.
Rates of economic growth of 4 per cent, which are now within our grasp, are not inevitable. They will only be realised in an environment where real constraints are recognised, policies make sense, and resources are properly utilised. This environment requires, inter alia, a faster rate of regulatory and institutional reform than has hitherto been the norm, as well as realistic pay agreements.
If the NESC is to continue to play a valuable role in Ireland, it must ensure that the "shared understanding" for partnership is based on economic and sociological analyses that stand up to rigorous scrutiny. For this to happen, a clear distinction must be made in the council's activities between analysis of issues and achieving consensus on policies.
Major issues such as immigration, ageing, spatial planning and rural development would all benefit from careful analysis by NESC, with the full range of policy options being considered, and not merely those options that are acceptable in the context of social partnership.
The model adopted in the early days of NESC, where the council comments on the analysis undertaken rather than seeking to concur with every detail in that analysis, may be a way forward. Such a change might allow NESC to fulfil its terms of reference more successfully and ensure that any future social partnership agreements take full cognisance of economic and social reality.
Frances Ruane is professor of economics at Trinity College and was a participant in the conference on Deliberation and Public Policy held by NESC to mark its 30th anniversary.