Joan Burton (Dublin West, Labour)

Everybody knows there is a great and understandable amount of anger among public servants and their families. It is not that they are unwilling to share the burden but they resent being scapegoated and singled out by Fianna Fáil to share all the burden.

It is important to note that many public servants looked to Fianna Fáil as a one-nation party that considered the interests of both private and public sector employees. In terms of its policy making, it now seems set on driving a wedge between different categories of workers. In the example of a nurse married to a foreman on a building site, the nurse is the lesser being than the person in the private sector. From a social harmony perspective, that is a great mistake as we are facing into very difficult times as a country, and it is clear this Government lacks any comprehensive strategy on the economy.

The Minister for Finance is in many ways an apprentice and has been thrown in at the deep end. He does not induce confidence, particularly with the Opposition in this House. More seriously, his actions are not inducing confidence in the markets or the European Central Bank. The Minister may have talked the good talk yesterday in indicating the comments of the Commission relating to the stability pact were soft enough. They were soft enough but these are the usual comments which came from the Commission in the past regarding much larger and more powerful countries in Europe who parted from the strict guidelines set out in the Maastricht and other agreements relating to countries in the euro.

The Minister's speech today lacked conviction in proposing a coherent framework and programme that would get people back to work and money moving in the economy. By getting people back to work, keeping people in employment and getting credit flowing in order to get the economy off the ropes, we could get back to some form of hopefulness and forward thinking. Some 20% of the economy is now on the ropes and we need such action.

What the Minister has chosen as the key element of strategy is deflationary from an economic perspective. This will address part of the fiscal issue but not the key economic issues. To quote Bill Clinton, "It's the economy, stupid" and this is about job creation and credit flow. As a British politician used to say long ago, people must feel the pound in their pockets. In this case it is the euro in one's purse. People must have the confidence to do up their kitchens, paint their spare rooms or put down a new garden, when Dermot O'Neill comes on Pat Kenny's radio show talking about how to build a pergola or something like that. This money, which people should be very confident about spending, employs local people, buys goods from local shops and keeps the flow of VAT and other taxes jingling in the Government's cash registers.

The Minister's actions will not help in this regard, but instead will amount to classically deflationary economics. Perhaps the Minister and the top officials have read it already but, if not, they should read a new paperback on the Great Depression by Galbraith. It is only a short book. This Government is bound hand and foot to taking the same action as the Hoover Administration that made the Great Depression worse.

I found it ironic that in his first budget speech, the Minister for Finance quoted Roosevelt's famous dictum, which is now on the monument in Washington to him and his wife, Eleanor, that we had nothing to fear but fear itself. Fianna Fáil Members, displaying their herd instinct, jumped to their feet to applaud because, in their heart of hearts, they have a feeling Fianna Fáil is a one nation party that should be Rooseveltian. Everything in this speech and these arrangements, however, owes more to the Hoover Administration which made the Great Depression even worse.

Unfortunately, this is about deflation. I do not know if the Minister gets the chance to read the newspapers, but David McWilliams made the point in a recent article that no economy has ever deflated its wage growth and that the most important factor to bear in mind is that companies that close due to lack of demand do not re-open when times are better. The most crucial objective, therefore, must be to preserve employment.

The distinguished Irish man of letters, and great admirer and defender of Mr. Haughey, Mr. Anthony Cronin, quoted Mr. Micawber's axiom — annual income, £20, annual expenditure, £19/9/6d, result: happiness; annual income £20, annual expenditure £20/0/6d, result: misery. The Minister for Finance has a Micawberish cast of mind in the speech he has just delivered. Mr. Cronin, however, stated that shops and manufacturing businesses of all kinds were closing their doors, people were losing their jobs and some were looking forward with understandable dread to losing their homes as well. He noted that it is apparently easy to confuse fiscal problems with economic ones but by the grimmest and most cruel of ironies, the measures taken to cure the fiscal crisis may finally have the effect of killing the economy, decreasing the level of economic activity still more sharply. He continued by saying that every move that seems to offer alleviation of the one is a blow struck at the other; every euro taken out of the economy and, as in the Minister's speech, "saved" is a euro less in circulation.

This is the conundrum the Government is caught in but it is a bind of its own making. This Government inherited an economy set fair and doing well in 1997 when the rainbow coalition left office. Exports were thriving and employment was increasing at the rate of 1,000 jobs a week when Deputy Ruairí Quinn was Minister for Finance. The economy was set to grow and expand. When Fianna Fáil took over in 1997, until 2000 it broadly continued the policies of the rainbow coalition, which, in turn, owed a lot to the policies of the Fianna Fáil-Labour Government of 1992-4.

In 2000 and 2001, however, former Minister Charlie McCreevy got his head. The then Taoiseach, Deputy Bertie Ahern, decided to let him have his way while the Minister, Deputy Harney, and her former party, the Progressive Democrats, were at the height of their late blossoming before their ultimate collapse. What did they do? They caused a series of bubbles in the economy, creating the untold wealth of the bankers and exempting from taxation critical high net worth people in Irish society. They did not just want low tax, they wanted a no tax economy. So Charlie McCreevy fuelled the boom.

The irony is that when he went to Europe as our Commissioner, although he does not wear the green jersey like Pádraig Flynn, not only did he not regulate the financial markets as the storms gathered over the last three years, but he constituted a considerable barrier in Europe to the reform of regulation of derivatives and financial products. In the irony of ironies, it was unregulated trading in derivatives, of which CFDs are an important sort, that brought the troubles in the Anglo Irish Bank model to their sad conclusion, where the taxpayer is now carrying the brunt, particularly public servants, who are being asked to contribute a special €1.36 billion annually to the cost of bailing out that bank. The saying "in my end is my beginning" can be seen as Charlie McCreevy sits in Europe while the Minister reads out statistics on our likely borrowing. At a time when countries and banks across the globe are trying to borrow in international markets, we are trying to borrow with an incredibly impaired credit rating.

Where is Charlie McCreevy in this picture? Has the Commissioner regulated the credit rating agencies in any way? Has anyone heard him making a speech in which he called for regulation? The agencies, from Moody's to Standard and Poor, are those that during the last seven years of hyper-capitalism gave every kind of bank and venture involving derivatives and financial transactions that very few people could properly understand an AAA rating. Did they get it wrong? They got it wrong on almost every occasion.

Did that give Commissioner McCreevy pause to say to his fellow Commissioners that a framework should be put in place for these agencies? No. He is still a convinced apostle of total non-regulation, opposing detailed proposals from the Party of European Socialists in the European Parliament, of which the Labour Party is a member, for regulation to be put in place for markets, credit rating agencies and products such as derivatives and sub-prime lending, something the Taoiseach claims we do not have much of, although we have an awful lot of everything else. He is correct about that but we have a lot of everything else.

The National Treasury Management Agency did well when it tried to borrow some time ago because there was a fair amount of demand from the two big Irish banks to make the market. When the National Treasury Management Agency went to borrow, it got a good response but what will happen the next time it goes to borrow? What impact will these rating agencies have? They will have a very unfair negative impact on Ireland's ratings because Ireland is now a byword for a Government which is incompetent, has lost its nerve and its ability to govern and which is deflating its own economy. On every ranking, we are likely to get a very tough time from these agencies.

Now that he is in splendid exile in the Commission, does Mr. McCreevy have any sense of responsibility towards this country and the regulation of financial markets? The answer is "No". The same Mr. McCreevy, as the apostle of no regulation, is probably delighted that public servants will be asked to pay for the fiasco of this economy which Fianna Fáil has brought about and of which he and the former Taoiseach, Deputy Bertie Ahern, are the true architects. The Taoiseach must feel very sorry about his time as Minister for Finance. In fairness to him, when he came into office, the plot and the course had been set by those two captains, Deputy Bertie Ahern and Mr. McCreevy. I understand why he may feel hard done by at times.

I refer to the figures the mandarins put forward. They can try all they like to suggest that this levy is progressive but I wish to refer to a few figures. A teacher working for some time on €39,000 per year will have a loss of pay of €2,030 per year, which is 5.2% of his or her take-home pay. A civil servant on €43,000 per year — €4,000 more than the teacher — will pay a levy of only €1,711, which is 8.98% of his or her take-home pay. A civil servant on €48,000 per year will pay only €1,992, which is 4.15% of his or her pay.

Like Mr. Micawber, I do not know what is this Government's approach to misery, happiness and arithmetic. I do not understand it but in anybody's language, the civil servant on the higher income will pay the levy at a net rate of approximately 4% whereas the teacher on €39,000 will pay at least 1% more in levy in terms of his or her net take-home pay. That is unfair in anybody's language. For the Minister to fail to address that anomaly is to carry into the levy the imperfections, inequalities and inherent unfairness in our tax system.

In a fine piece of parliamentary parsing, the Minister stated further that the levy will apply to all income. The Bill states that remuneration is defined as total earnings, including allowances, overtime or any other like payment payable by or on behalf of a public service body to a public servant for his or her services as a public servant. That means all allowances, all overtime earnings and so on will be subject to the levy but, of course, very few of the overtime or other allowances public servants receive are pensionable or reckonable for pension purposes. Therefore, public servants will pay the levy, in theory, towards their pension. There is no doubt that reform is required in regard to public service pensions and that is a very serious issue. However, this levy will be charged on everything and, in effect, it is an additional tax on public servants.

The Minister stated, "I want to stress that no additional pension benefits arise from the deduction, but this decision does not alter the pensionability of these elements of pay." That is very fine phrasing and it must have taken somebody in the Department of Finance a long time to work out the wording of that paragraph. Basically, what it means is that one will pay the levy on all one's income, including allowances and overtime, but that one will get no additional pension benefits. It will not go into a fund or be set aside so that in, say, five or seven years' time, public service workers can say they are building up a fund which they loaned to the Government during the hard times but which secures their pensions for them. At least that would be reasonable and sensible. Instead, it will be used and it will be gone.

Not only that, but the Minister is obviously saying that, because overtime, etc., is levied but not pensionable, it is not an argument for making any of those payments pensionable. Given that the lower paid in the public service will pay more in terms of the impact of the levy on their take-home pay than those at the top level and that all income and allowances will be included, many public servants will rightly feel that is inherently unfair. They are right to hold that viewpoint.

I refer to the definition of total earnings, including allowances, overtime or any other like payments. Will the Minister clarify the situation for people working in the emergency services, the Garda, the fire brigade and the Defence Forces who take on special service duties in, for example, a flood or another emergency? They normally get some remuneration. Will that be levied, because that is what the Bill states?

I refer to soldiers in the Defence Forces who serve abroad and who receive additional UN payments. Is it proposed to levy the extra payments the soldiers in Chad receive arising from their UN duties? Is it intended to levy the additional payments soldiers receive for serving with the UN or other forces on peacekeeping and peace enforcement duties? They are important principles the Minister must clarify.

It is difficult, in the context of this levy, to understand how this is a proportionate response in terms of other sectors of society. Fianna Fáil Deputies, backbenchers and a couple of Green Party representatives have publicly beaten their breasts about the behaviour of bankers. Some have suggested bankers committed economic treason. The Labour Party proposed that the pay of people in the financial services sector and in institutions guaranteed by the Government's bail-out should be capped at the same level as the combined pay, emoluments, allowances and privileges of the Minister for Finance. The combined salary and expenses package of the Minister comes to around €260,000. He also has a chauffeur driven car and various other allowable expenses. If this measure were adopted the pay of bankers would be capped at around €300,000. I do not believe many bankers could picket and claim to have been reduced to poverty if their incomes were capped at a level comparable with that of the Minister for Finance. Why should they expect more?

If the Minister had a notion of social solidarity in mind he could have used this Bill as a vehicle to implement the arrangement suggested by the Labour Party. Instead we have been told that a committee consisting of the great and the good, all either Secretaries General of Departments or other eminent people, are looking at the issue of bankers' pay. Like a dog with no teeth chewing a bone, the committee has chewed on this bone for nearly three months and has not got to the meat and marrow of the issue. We have heard nothing from the committee.

The Fianna Fáil Party has become detached from reality. In my constituency some 1,200 people in SR Technics were told last week that they will lose their jobs and they do not know what sort of redundancy scheme will be in place. At the same time, some bankers have appeared in the media complaining that they will have salaries of less than €2 million this year. Fianna Fáil would like to pit public servants, including nurses and teachers, against their spouses in SR Technics; many workers in SR Technics are married to public servants. The Government is suggesting only public servants should help save the SR Technics plant and jobs along with it. If banks can be saved then the SR Technics plant can be saved.

The Government is silent on people in the financial services institutions who earn astonishing sums of money but made very bad decisions and got everything wrong. The Government's approach may be encapsulated by paraphrasing St. Augustine: "Lord we will reform the salaries of bankers at some stage, but not yet". The Government's delivery has been depressing and will deflate, rather than grow, the economy.

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