Persisting with benchmarking will be our downfall

Budget 2003 will be difficult. It will be difficult to frame, given all the conflicting demands on the Minister for Finance and it will be difficult for most people to accept that the good times are over, at least in the short term.

But Budget 2003 could be a watershed. It could provide the basis for resumption of moderate economic growth or it could fuel a rapid decline into the vicious cycle of stagnant growth, high unemployment and immigration.

Reaching consensus for a new national agreement as we move from boom to less favourable and uncertain times will not be easy. However, the Minister must frame his Budget to immediately prevent any further slippage in competitiveness and to restore the loss of competitiveness that we have experienced in the recent past.

The report from the National Competitiveness Council last week, that we are second-highest out of 16 countries in wage growth per employee, must be central to the Minister's strategy in finalising his Budget. To effectively address this over-arching issue of competitiveness, the Minister must address wage rates in the public sector, infrastructural investment and inflation.

Benchmarking will prove a difficult task for the Minister but it will prove a disaster for the economy if he fails to address reality. The comparative analyses, which it is claimed support benchmarking wage increases, even if they were ever true, would be merely measuring relative to the private sector of two or three years ago.

Let me give a real life example, which vividly reflects what is now happening at all levels in the real economy. A medium-scale service company recently advertised for an accountant. More than 20 trained accountants applied for the job. The position was filled by a qualified accountant with more than five years' experience, who will receive a salary of €40,000 and no other benefits and no job security. This is the new reality.

If benchmarking goes through, the private sector will pay on the double by extra taxation and job losses as the deterioration in our competitiveness gains momentum.

The Minister should stick to his stated view and implement a wage freeze of at least six months in the public sector. The Irish Creamery and Milk Suppliers Association (ICMSA) has already stated that there should be no increase in the wage bill in the coming year in the food sector. If there is any wage rate increase in this sector, it will have to be funded by increases in productivity and a reduction in numbers employed. I would strongly advocate this approach to the Minister. Any pay increases under benchmarking must be phased in over an extended period and be firmly based on, and funded by, real and measurable productivity.

Infrastructural investment, both major national infrastructural projects and support for private sector investments, should be a priority for the Minister.

ICMSA fully supports the National Economic and Social Council's view that the Minister must continue with infrastructural investment of 5 per cent of gross national product to fully implement the National Development Plan and other infrastructural projects.

From a farming point of view, farm investments amounting to €1 billion will be required over the next three years to meet the various new environmental regulations. It is totally unrealistic that the Government should cut the allocation for capital investment in agriculture by 44 per cent in the Book of Estimates. The Rural Environmental Protection Scheme, which attracts 65 per cent co-financing from the EU, has been cut by 19 per cent. From a sectoral and national point of view, the Minister should restore the funding for these two schemes in his Budget.

The Minister may have little scope to directly improve inflation. However, he must resist the temptation to increase indirect taxation that will add to our already high inflation rate. The Minister should seek to bring about an inflation rate of close to the European norm of 2 per cent by the end of 2003.

Finally, the Government will have to make decisions regarding people dependent on social welfare. While we support this redistribution of wealth, there must be a limit established on additional distribution of wealth from the productive-exposed sector to the protected public sector.

• Ciaran Dolan is general secretary of the Irish Creamery and Milk Suppliers Association