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Investment in QualityHowever, the long period of rapid growth brought the threeelements into greater tension with one another, as structural andsupply-side bottlenecks and problems in service delivery impactedon inflation, the public finances, wage bargaining and the value offixed incomes. At the same time, macroeconomic developments,particularly the weakness of the euro and pro-cyclical policy,impacted on distribution, competitiveness and supply-side bottlenecks.This highlighted how critical structural and supply-sidechanges are if a consistent macroeconomic and distributionalapproach is to be maintained.While the slowing of economic growth in the past year and a halfmight be thought to reduce tension between the three, since itrelieves some of the most acute bottlenecks, this is a limited andtemporary effect. In fact, the slowing of growth has added anotherstrand to the tension between the three elements of policy. Theshortfall of revenue has increased the difficulty of maintaining thepublic investment programme and improving public services.In a context of continued high inflation, this puts pressure onwage bargaining. Independently, the slowing of output andearnings growth means that attention tends to shift from ‘growingthe cake’ to ‘dividing the cake’. Distributional issues—over pay,prices, housing, service availability, rent earning, taxation andprofits—become more salient (as is discussed further inChapter 6).These developments increase the importance of a consistentapproach, yet make it more difficult to achieve. This is one way ofcharacterising the challenge that government and the social partnersnow face. The difficulty makes it tempting to achieve a minimalconsistency between macroeconomic and distributional approaches.Maybe structural and supply-side improvements are too hard toagree, to dear or too difficult. Maybe they can wait. The Councilrejects this approach. A minimal consistency between macroeconomicand distributional approaches will not work:●It will not work because social exclusion cannot be furtherreduced if the quality of services is not greatly improved (seeChapter 8 below);174