Social Bodies And Irish Government To Reunite On Fiscal Policy

by Robert Lee, Tax-News.com, London

09 April 2009

Following the invitation of the Irish Prime Minister Brian Cowen on March 24, the government and social partners have agreed to reunite in talks to engage in cooperation in building a framework for a pact for stabilisation, social solidarity and economic renewal as agreed in January. The latest discussions will based on the subsequent report of the National Economic and Social Council (NESC) which emphasises the importance of an integrated policy approach which addresses all five dimensions of the current crisis.

This engagement has focused on developing a shared understanding of how to respond to the five interlocking sets of problems identified by the NESC:

• An economic crisis, reflecting the severe downturn in international conditions, compounded by the severe impact of the sharp depreciation in sterling relative to the euro, which has resulted in reduced demand in export markets, and reduced demand in the domestic economy, in addition to other domestic factors;
• A social crisis, caused by record redundancy levels across all sectors of the economy with the clear expectation that this trend will continue;
• A public finance crisis, due to the sharp reduction in tax revenue and the strong downside risk attaching to the outlook, resulting in an unsustainable deficit in the public finances despite the adjustments to spending levels already made, and arising from the impact on revenue and expenditure from rising unemployment;
• A banking and financial crisis, reflecting the global restrictions on lending and credit and particular problems within the domestic banking system, and
• A reputational crisis affecting international perceptions of, and confidence in, Ireland.

On January 28 the government and social partners agreed a framework for a pact for stabilisation, social solidarity and economic renewal.

In the framework, the government and social partners agreed on the importance of a shared response through partnership in finding a way through current difficulties facing the country.

In particular, they agreed that urgent and radical action is required to restore stability to the public finances, to maximise economic activity and employment and to improve competitiveness, and set out a broad framework within which those actions would be pursued and which would be fair and equitable.

Recent discussions with the Irish Congress of Trade Unions (ICTU) and the Irish Business and Employers Confederation (IBEC) have focused in particular on:

• Protecting jobs, and assisting those who lose their jobs;
• Responding to the challenges facing the pensions system;
• Support for enterprises facing particular difficulties at present;
• Taxation and expenditure adjustments required to return the public finances to stability;
• Maintaining a sustainable level of social protection;
• People encountering difficulties meeting their mortgage; commitments as a result of job losses;
• The transformation of public services;
• The concept of a national recovery bond;
• Corporate governance concerns arising from recent developments; and
• Employment rights and industrial relations.

There has also been engagement on issues relating to pay, and related matters including the pensions levy.

The government and each of the ‘pillars of social partnership’ have agreed, in the light of the progress to date, that they will resume discussions following the supplementary budget introduction on April 7.

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