Dáil debates

Wednesday, 4 February 2009

Stabilisation of the Public Finances: Motion (Resumed)

 

3:00 pm

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)

The great bulk of the saving will come from a new pension-related payment which will be paid by all public servants including Deputies and Senators. Those who have already made a voluntary surrender of salary, among them some Members of the Oireachtas may discontinue that surrender and continue to make their contribution through the new pension payment. For their part the members of the Government have decided to continue with their 10% voluntary surrender in addition to the pension contribution of 9%. We believe that those in positions of leadership in all parts of the country should and must lead by example. The remuneration of politically appointed advisors to the Government will also be adjusted in line with the pension contribution.

The payment will be on a graduated scale with the average payment being 7.5% of total earnings. This payment will apply to all elements of the public service pay bill with the exception of employers' PRSI, including both pensionable and non-pensionable — for example overtime — items. This payment is in recognition of the fact that public service pensions are significantly more favourable than the generality of pensions in the private sector together with the need to reduce net public service pay costs. This change will require new legislation which will be introduced as a matter of urgency. A much smaller component of the total pay-related savings will be achieved through reductions in travelling and subsistence rates and other savings.

In addition, the increases provided for under the review and transitional agreement with effect from 1 September 2009 and 1 June 2010 will not now be paid on those dates. Further discussions on these increases will be held in 2011, without prior commitment. This will save a total of €1 billion 2010.

The pay-related savings will also apply to local authority staff. To that end, it will be necessary to amend the existing legislation on the local government fund. Again, it is proposed that the necessary legislative amendments will be introduced as a matter of urgency.

Public servants paying the new pension contribution will be treated for tax purposes in the same way as those making pension contributions in the private sector. Contributions will be deducted from gross pay by employers before income tax, PRSI and health levies are calculated and as such pension contributions will be effectively relieved of tax at the marginal rate.

Flexibility in responding to changing service demands will have to be pursued determinedly. In this context I am establishing a mechanism via the Public Appointments Service and the Commission for Public Service Appointments to facilitate the redeployment of surplus staff in several areas and the matching of vacancies at all levels across the civil and public service. The redeployment of staff across different sectors of the public service organisations — for example the Civil Service, local authorities, HSE, and State agencies — gives rise to technical, legal and human resource issues that will require consultation with local management and staff unions. Discussions have already been taking place with relevant Civil Service unions about the redeployment of staff into social welfare offices.

I consider it important that the pay-related savings measures across the public service should be implemented as part of the comprehensive national effort to adjust incomes, with the aim of restoring competitiveness in national incomes generally. Let us be clear, this is not about targeting the public service. We are simply asking public servants to make the same adjustment that is taking place across the economy.

Savings will be vigorously pursued in all appropriate State payments to individuals, including fees payable to medical and legal professionals. It is possible that the need to engage in consultation with professional interests, and the delays that may ensue which will be kept to a minimum, may limit the scope for securing the full savings we would like in 2009. Here again, I appeal to all sections of our country to put their shoulders to the wheel and share in the national effort to deal with this unprecedented economic downturn.

The Government is determined that it and the Oireachtas play their part in reducing the cost of our democratic and political systems. We aim to achieve substantial savings in 2009 through a range of changes in Government and Oireachtas funding. The Houses of the Oireachtas Commission will be asked to contribute to this process and we invite the co-operation of all political parties and Independents to show clear political leadership across the political system. In this context the approach to foreign visits of Oireachtas committees, the funding of the Houses of the Oireachtas Commission and the system for expenses and allowances will be considered. The costs of the offices of Ministers and Ministers of State will also be reviewed.

The following supplementary measures are required to realise the full €2 billion. There will be a modest retrenchment on overseas development aid this year in view of our diminishing resources. This still leaves our ODA spending rate among the highest in the world. A small reduction in the early child care supplement to €1,000 per year and a lower maximum age of five years will save €75 million in a full year. A further €140 million is to be pruned from administrative and other spending on staff, advertising, travel, procurement and the like, and a reduction of €300 million across the board in spending on capital will leave our spending rate as a percentage of GNP still over 5% and among the highest in Europe.

Within this revised capital envelope, a sum of €150 million is being reallocated — half each — to labour-intensive spending on schools building projects and energy-saving measures, which is being funded from all parts of the capital programme, including education. With falling construction prices, we should be able to maintain a high output of projects even with reduced allocations. Tender prices in a variety of areas such as national roads, schools, higher education and social housing tell a consistent story. We are getting a bigger result from capital funding. Even with reduced allocations, careful and proactive management of capital allocations will enable the priority high-return projects to be delivered.

We are already well on track to complete the major inter-urban routes next year. We will continue to invest in public transport. We will continue to expand the commuter Luas network and invest in other suburban rail services such as the Cork-Midleton line, the Kildare line upgrade and phase one of the Navan line. We will continue to support the development of the smart economy and direct capital investment in science and technology, foreign investment and indigenous enterprise. The total saving comes to €2,090 million in a full year. This is in addition to the saving of €1 billion in 2010 as a result of not paying the pay deal next year. In announcing these measures, we have focused not just on short term needs, but also on the vital necessity of preparing the ground for economic recovery. We have protected the vulnerable and we have sought to maintain capital spending in real terms and redirected some of it to areas that can protect jobs. We have sought to make a firm start now to keep us off the path of high borrowing and job-destroying tax rises that would cripple us before long.

More needs to be done in a planned way in 2010 and 2011 and beyond. The Government's economic framework published before Christmas provides the guiding light to show the way. We have a competitive advantage in the knowledge and skill base of our people and in our flexibility in responding to change and to challenges. I assure the House that we will use that smart advantage to rebuild and recover under the leadership of this Government which is also actively examining measures in a special Cabinet group to search out opportunities for job creation, to encourage exports, to assist consumers and the retail sector and to promote more vigorous price competition. The fruits of this examination will be announced in the next few months and a stream of decisions will issue from the Government on all these matters. The fiscal position we take this year and next year is of fundamental importance to the future of this country. We need to stabilise and reduce the total amount of our borrowing in a substantial way in this two-year period in order to command credibility among ourselves and in the wider markets which observe us. I am convinced that we can achieve this as a people if we put our shoulders to the wheel, recognise the extent of this problem and address it.

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