Brendan Howlin (Wexford, Labour) | Oireachtas source

I looked at the horizon 12 months ago and thankfully could see the State was making significant progress towards emerging from an emergency. I repeatedly said, in parliamentary replies to both Deputies Fleming and McDonald across the floor, that I wanted to make an orderly, structured and agreed unwinding process and put it into place in legislation. That is why I opened negotiations very early in regard to this. What we have set out is the first unwinding agreement. I have no doubt that as the economy improves there will be further negotiations.

I have set out the horizon, which will last for the next three years. Depending on a number of factors, as members know because we have reached a deficit of less than 3% of GDP, we are exiting the corrective arm of the Stability and Growth Pact in 2015. Next year we enter into a different economic paradigm, which is the preventative arm of the Stability and Growth Pact. The budget was cast on the basis that we would have to meet this new criteria, which was setting our medium term objective, setting our path towards achieving our medium term objective and also looking at and calculating the allowable budgetary expenditure for 2016. I believe the economy will continue, if there is no jolt to the system, to make the significant improvements and grow at the rate we have set out in the budget plan. The OECD, as well as our own projections, are for growth of the order of 6% for 2015. We will have growth hopefully of the order of 4.5% to 5% next year and at least 3.5% to 4% for the two years following that. The more capacity we have, the quicker we can unwind all the impositions, not only in public sector pay but other impositions that were put on expenditure, recruitment and so on, that characterised a collapsed economy.

As of now, this is the horizon I have negotiated with the public sector unions. The public sector unions have agreed to this new collective agreement. Of course, unions will look at the progress Ireland Inc. makes over the next few years and if they believe that the progress continues to be as sturdy as we project, they may well want a quicker restoration of pay. That will be for whatever government is in place into the future to sit down in the same open-minded way with the public sector unions to negotiate that. It should be done in a balanced and fair way, taking all matter into account, including the capacity of the State to continue to provide quality public services.

One of the discussions I had with public sector unions during the original Haddington Road agreement negotiations was on the alternative if those earning over €65,000 who were asked to take a pay cut and others on lower salaries to work longer would not agree to it. The alternative would have been to cut public services. Public servants know full well the value of the services they provide and embraced that request and agreed to this imposition. We now need to begin the unwinding of that in an orderly way. The fiscal space on the expenditure side for next year is of the order of €750 million and we devoted €300 million of that total to public sector pay. I was criticised for that but I think it was a fair determination to make at the time. How we proceed as the years pass and as, I hope, the economy stays on track will be a matter to be determined into the future. I hope it will be through collective agreement again with public sector unions.