By SIMON COLLINS
Finance Minister Michael Cullen says he is impressed by Ireland's "social partnership" system, which allows it to trade off conflicting goals.
Dr Cullen spent Friday in Ireland, where he met officials in the Finance Department, Treasury, Revenue and Forfas, the agency responsible for research, industrial policy and trade. He also visited the Fiscal Studies Foundation.
He told the Herald from Dublin that he was interested in the "major role for the Government" in Ireland and the integration of its economic, social and environmental strategies through its partnership agreements.
The agreements have been negotiated every three years since 1987 and now involve a wide range of social and environmental groups, as well as unions, employers and farmers.
Under each agreement so far, the unions have accepted wage increases below the increase in national output in exchange for tax cuts and better education and public services.
"They lay great stress on their social partnership agreement, which is quite the reverse of the track we have followed over the last 10 years or so," Dr Cullen said.
"It's harder to recreate that. It required a highly centralised industrial relations system to make it effective."
But he said there were "elements we can work on" in the partnership model to achieve more "social cohesion" than New Zealand had seen in recent years.
Dr Cullen said the Irish also saw their 10 per cent tax rate on manufacturing companies as a key element in their economic success.
But he said: "It's very hard in our situation to do what they have done."
He noted that despite Ireland's low tax rate, corporate tax still accounted for about the same share of gross domestic product (GDP) as it did in New Zealand: about 3.5 per cent in Ireland and 4 per cent in New Zealand, according to the last report on Ireland by the Organisation for Economic Cooperation and Development.
"To say that our corporates are highly taxed is not entirely true," he said.
The OECD report noted "a dramatic recovery in profitability" in Ireland. Between 1992 and 1999, profits jumped from 34.6 per cent to 39.7 per cent of GDP, while wages dropped from 45.8 per cent to 39.4 per cent because of wage restraint under the partnership agreements.
In the same period, profits in New Zealand rose only from 30.2 to 32.4 per cent, while wages slipped only from 45.7 to 43.9 per cent.
Depreciation was steady in both countries at between 9.5 and 10 per cent. Net taxes rose slightly in Ireland from 10.1 to 10.9 per cent of GDP, while they fell in New Zealand from 14.7 to 13.5 per cent.
Meanwhile, Dr Cullen was reluctant to comment on his meeting in London last week with the world's largest pharmaceutical company, GlaxoSmithKline, which is seeking higher prices for medicines from the Government's drug-buying agency, Pharmac, in order to justify possible investments in NZ biotechnology firms.
"They said the present funding may discourage research and may not lead to optimal health outcomes by not comparing treatment by drugs versus hospital treatment [fairly]," he said.
He said he gave "no specific undertakings" but would discuss the issue with Health Minister Annette King and Science Minister Pete Hodgson.
Dr Cullen meets Scottish development agencies, fund managers and the bus company Stagecoach in Edinburgh today. He will also meet ministers and the rating agency Standard & Poor's in Singapore before returning home on Thursday.
Ireland's social pacts for growth impress Cullen
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