Brian Cowen (Laois-Offaly, Fianna Fail)

I propose to take Questions Nos. 3 to 5, inclusive, together.

The Government has made it clear for some time that the public finance position is unsustainable. Our tax revenues have fallen sharply back to 2003 levels. This means we will have a deficit in the region of €22 billion this year. To bridge this gap, we are borrowing more than €400 million per week. We have made it clear that this cannot continue.

By the end of this year, the national debt will be about €76 billion, double the level at end of 2007. Our main priority now is to stabilise the public finances. The Government has stated unambiguously that the public service pay bill must make a significant and proportionate contribution to the necessary adjustment in the public finances in 2010 and subsequent years. Furthermore, the Government was keen that this significant adjustment would be achieved by agreement.

Against this background, the Minister for Finance and I held discussions with trade union and employer representatives in Government Buildings on 20 October. In the course of these discussions, we set out in detail the context framing budget 2010 and provided an assessment of the medium-term economic outlook. We also elaborated on some of the key choices facing Government in the period ahead. Similar engagements with the other pillars of social partnership took place on 27 October last.

Following this initial round of meetings, the trade unions represented by the public service committee of ICTU proposed that the necessary adjustment could be found by means other than cuts in rates of pay. In good faith, the Government facilitated the trade unions with detailed information about the composition of the pay bill and the implications in cost terms of various potential changes. Discussions also took place with the associations representing the Garda Síochána and the Defence Forces.

On the morning of Tuesday, 1 December ICTU presented its proposal based on pursuing payroll reductions through the accelerated implementation of an agenda for change and transformation of the public service. This was a positive vision that would reflect in many respects the Government's own vision of the public service of the future, which we had provided at the request of the unions. Savings would arise over time.

Given that such transformational changes would take some time to put in place, it was suggested that an interim approach would be taken by deducting payments from the payroll in 2010 on the basis that staff would take 12 days of unpaid leave in a way which would avoid disruption of services. This approach was discussed by Government on Tuesday, 1 December. As the amount of the savings in 2010 was less than the minimum amount required, it did not provide a basis for agreement and the Government reserved its position. The Government informed the public service unions that this was not the basis for agreement and the public service unions responded by indicating that they wished to develop their proposals further.

In the Dáil on Wednesday, 2 December I confirmed that a basis for agreement would exist only if the scale of the reduction in the public service pay bill were sufficient, it were permanent in character, and any transitional arrangements did not impact negatively on services to the public. I also made clear to the House last Wednesday that proposals emerging from the discussions were considered by the Government and that it was indicated to the unions that they did not in their present form provide a basis for the Government to confirm that it could not consider other options to effect the necessary savings.

In discussions that followed, the unions felt that they would be in a position to increase the level of savings to be offered in 2010 on the basis of the structure which had been already proposed, namely, a voluntary reduction from pay associated with 12 days of unpaid leave. Discussions with management in the various sectors of the public service also clarified the nature of the change agenda which would be undertaken by agreement and these changes are significant and worthwhile. The unions also indicated their agreement that the arrangements for the taking of unpaid leave could be spread over a period of years.

It is clear that the level of savings generated in 2010 would need to be sustained and increased in 2011 and subsequent years. Accordingly, the proposals would require an assessment to be made of the level of savings generated from the change process and further discussions next year on other steps necessary to secure the necessary level of saving.

The Government considered that the proposals did not constitute a basis for agreement. This was because of the combination of the requirement that the pay savings in 2010 be accompanied by a reduction in days worked, albeit over an extended period, and that there would be no certainty about the specific basis upon which the necessary savings would be achieved in 2011 and thereafter.

The Government has made it clear that the fiscal adjustments to be made in 2010 must stabilise the public finances; reduce, on a permanent basis, the structural element of the deficit; and form part of an overall package of adjustment measures which are balanced in terms of their certainty and effect. We must now proceed to implement our plan to reduce the public service pay and pensions bill by €1.3 billion next year compared with 2009.

As I indicated in my statement last Friday, the Government is appreciative of the constructive and dedicated effort of trade union officials to develop proposals which would be helpful overall. The engagement with all of the social partners during this difficult period has been most welcome and the contribution made to discussions on these issues is very much appreciated. The Government continues to believe in the value of social dialogue as a way to maximise common understanding and engagement between all sectors. The inability to achieve consensus, although regrettable, does not alter the fact that the savings are essential. The Government must act in the interests of all our citizens.

I understand from media reports that the Public Services Committee of the ICTU has signalled that it is considering a "long and sustained" campaign of industrial action. I regret this development and hope that if any action is undertaken that it does not adversely impact on the delivery of public services especially at a time when we need to ensure we make best use of the limited resources at our disposal to protect services to the most vulnerable in our society and that we do not create obstacles to economic recovery.

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