Michael Noonan (Limerick East, Fine Gael)

This Bill does not actually impose a pension levy on public servants, rather it imposes a pay levy on persons who are participants in certain State superannuation schemes. Therefore, the reference to pensions is to define the category to which the pay cut applies. It is not a pension levy as cans be seen when one reads through the Bill. These persons derive no additional pension benefit from the levy, which is imposed at levels of 3%, 6% and 10%, depending on income. The levy is on net rather than gross income and applies to all income, including overtime. This proves again that it has nothing to do with pensions because overtime is not reckonable for pension purposes.

It has all the signs of being a rushed scheme. We have heard various anecdotes from meetings of the social partners, but the internal evidence of what is presented to us looks as if it was rushed. When questioned in the Dáil, the Taoiseach stated that the levy applied to gross income. Three hours later on television, the Minister for Justice, Equality and Law Reform said it applied to net income and that seems to be the current position. This fact does not seem to have been taken into account, however, when the scheme was designed. It is claimed to be progressive in nature, with those on higher income paying more. When tax relief is allowed some persons on higher income, on the higher rate of tax, will pay less in percentage terms than persons on lower income and on the standard rate of tax. Any competent set of civil servants designing this scheme would not have fallen into that kind of trap unless they were working on the basis, in the first instance, that it applied to gross income. It appears, therefore, that those who designed the scheme meant it to apply to gross income and when this was changed to net income no amendments were made to eliminate the distorting impact of the higher tax rate on the progression of the scheme.

Further evidence that the original intention was gross income is in the calculations of savings announced by the Cabinet. There is a difference of €500 million between applying the levy on net rather than gross income. Yet the announcement claimed savings of €1.4 billion from the levy when the actual figure was €500 million less. I do not know if the change took place between the Taoiseach's answer in the Dáil and the Minister's appearance on television. It shows, however, the signs of hastiness — a dirty hurry. Things done in a dirty hurry are always inexact and inequitable.

This levy is unfair as it singles out public servants without any impositions on other persons in the community who are far wealthier than the nurses, the teachers, the gardaí, the prison officers, the local authority workers and the civil servants. I cannot understand how experienced politicians, who above all else pride themselves on their political skills, could have introduced a levy which applies to such a narrow range of hard-working people in our community while allowing others, the principal beneficiaries from the excesses of the Celtic tiger boom, to walk away scot free. The Minister for Finance has suggested that next December's budget will be harsh and taxes will be increased. The tax increases will apply to public servants the same as they will apply to the bankers and those who made exorbitant profits out of the economy when the going was good.

The public service did not cause the financial and fiscal crises in which the country is mired. Certain wealthier sections of society are largely to blame for that. In the interests of social cohesion, they must share some of the burden being imposed upon public servants. While public servants have a contribution to make to the solution of our fiscal problems, they did not cause them and they played no part in the main events that caused the economy to crash.

The levy is particularly harsh on the lower paid. Many Members on both sides of the House believe that should be amended. The word "tweak" has been used; the Bill needs a bit more than tweaking. A salary of €15,000 is too low to commence paying the levy. If the Minister were to design it again, a starting salary of €25,000 would be more appropriate. I ask the Minister of State, Deputy Noel Ahern, to use his influence to have an amendment introduced on this.

After the Long Title, there is a recital referring to the fiscal situation, the difficulties the economy is experiencing, the State's credit position, Exchequer spending and so forth. I believe this recital has been included on the Attorney General's advice to proof the Bill from a legal or constitutional challenge as it is effectively the appropriation of people's pay which would run into constitutional difficulties. One can protect oneself from such a challenge when it is put in the context of the public interest with all the dire events in the economy. While I accept the Attorney General's advice must be taken, one part of the recital states, "whereas the burden of job losses and salary reductions in the private sector has been very substantial and it is equitable that the public sector should share that burden ...". It is outrageous the Government decided to write into the Bill a provision which points to social division, playing the public sector off against the private sector. If the Minister wanted to make that debating point, he should have done so in his introductory speech not in the text of the Bill. When it goes to Committee Stage, the Minister must remove this wording. If he wants to counterpoint in society, he should counterpoint the rich against the poor, the influential against the powerful. He should not counterpoint public servants against those losing their jobs in the private sector.

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