Brendan Howlin (Wexford, Labour) | Oireachtas source

My Department is very different from most other Departments in that we are the policemen on the expenditure side for everybody else. We are engaged in dialogue with every line Department with regard to the reduction of the ceiling of both current and capital expenditure to be achieved each year in order to reach the target set in the memorandum of understanding with the troika and indeed, with the commitments in the programme for Government. We all know what are the main stepping stones. The Government is committed to having a general government deficit of no more than 8.6%. We are determined to achieve that and it will be achieved. It is a painful and difficult process but we will do it. The target for next year is 7.5% and we need to work incrementally to reduce the deficit below 3% - our target is 2.9% - by 2015. This will be achieved in a number of ways. We have set out the medium-term fiscal framework by way of both reduction in expenditure and tax increases and we have set out the annual plan to achieve this. For next year, 2013, the ambition is to reduce expenditure and increase taxes to make a consolidation of €3.5 billion. This will be a reduction on the expenditure side of €1.7 billion on current expenditure; €0.55 billion on capital expenditure which is already in the capital framework; the balance of €1.25 billion will be from taxation. These are challenging and very demanding targets and doubly so in the context of increased demand on public services. For example, a manufacturing company which decides to reduce staff numbers and costs will find it very difficult to increase its productivity to the extent that we are expecting the public service to increase its productivity. However, we have done this.

There has been much negative comment about public sector workers. In my view they have risen to the challenge. They have taken very significant pay cuts with an average of 7%, plus a pension levy of 7%. The average reduction across the public service is 14%. It ranges from 3% at the bottom to about 30% at the top. A ceiling has been imposed on top pay so rates at that level have been significantly reduced.

The Chairman's specific question is about public service pay. Some recent commentary has said that if we could just savage public service - some expect people to pay to come to work in the public service - that this would solve all our problems. That is not the case. However, we need to have a significant contribution to the pathway to economic solvency from reductions in the pay bill. We have targeted a significant reduction in numbers which have been reduced to date by 28,000 from a peak. I acknowledge to Deputy Fleming that the process was started by our predecessors. We still have a way to go, however. I have indicated I wish to accelerate the pace of downsizing and that is why I have asked for a voluntary focused redundancy programme rather than a general programme.

I have asked all line Ministers, in the context of a voluntary redundancy scheme, to target staff who are surplus to needs.

The ongoing downsizing exercise will be important. The bill for gross pay peaked at €17.5 billion in 2009. It is estimated that, following the impact of the pension deduction, it will fall to €13.7 billion net in 2015. Taking account of the pension-related deduction, the estimated reduction in the pay bill in gross terms - I have indicated this on several occasions - will be €3.8 billion. Additional pension costs will be of the order of €500 million; therefore, the net reduction in the pay bill will be in the region of €3.3 billion.

It is going to be challenging. As people exit the public service - a significant number left at the beginning of this year - we must move others into place to fill the gaps that will be created in order that we will not be obliged to recruit new staff. This will involve using the full architecture of the Croke Park agreement in the context of redeployment, changing rostering arrangements and altering peak hours of work in order that staff might be rotated. This will allow us to deploy workers to areas in which the demand for them is greatest. The most obvious example of success in this area is the new Garda rosters. We discussed changing these rosters for decades, but it has finally been done. According to the Garda Commissioner, it has been possible to increase the number of gardaí on the beat, despite the fact that the number of members serving in the force has actually fallen. All of this is welcome.

I do not wish to pretend that the next phase of the process is going to be easy. I am involved in ongoing engagement with the public service unions on all of the matters to which I refer. I expect that when the new sectoral plans we have discussed with the implementation body are put in place, there will be both additional savings and further changes in work practices, on which we will be able to report to the committee as progress is made.