Róisín Shortall (Dublin North West, Labour)

I wish to scotch the notion that public sector pensions are a free handout from the tax paying public. Public sector workers are among the most tax compliant members of our society because the State is their employer and, as a consequence, their tax is directly deductible from their earnings under the PAYE system. Every euro earned is tax accountable, unlike many others in this society. Any attempt to brand them as an incubus on the rest of society is wrong. They are the teachers, nurses, gardaí and civil servants on whom we all depend. Some enjoy comfortable salaries achieved after enduring a long incremental salary scale, which in the case of teachers is over 20 years, but many have very modest incomes.

Public sector workers make a considerable contribution to their pensions but rather than going into a pension fund, their contributions are used for day-to-day expenditure.

The minimum direct contribution by State employees to their pension is 5% of salary, with an additional 1.5% to cover spouse's and orphan's benefit. The majority of State employees pay a direct contribution of 6.5% towards their pension, but that is not all. Since 1995, public sector workers have been required to pay the full PRSI rate, ranging from 4% to 6% of salary. Unlike workers in the private sector, this will not give them an entitlement to a separate old age pension. The old age pension will be integrated with the defined benefit, thus reducing their occupational pension by €230 per week on current values.

There is more. The second benchmarking report of January 2008 concluded that the pensions of public service groups covered by the benchmarking exercise are significantly more valuable than those in private sector groups and are decided in an arbitrary manner, that public service pensions should be quantified as 12% of salary and that a discount of this amount should be applied when comparing remuneration in the public and the private sector and, accordingly, no increase in salary was recommended for public sector workers. It is clear that in terms of increases foregone, full PRSI contributions and direct salary deduction, public servants are paying well in excess of 20% of their possible earnings towards pension.

What is this pension? In most cases, it is calculated at one eightieth of retiring salary for each year of paid pensionable service, up to a maximum of 40 eightieths. While there are some exceptions in respect of the Army, the Garda and firemen, mainline civil servants are required to work until 65 years of age, even though they may have completed 40 years of service before that time. They will continue to pay into their superannuation scheme even though they will not obtain extra benefit for the extra contributions. There are, of course, many who will never attain 40 years' service because of late entry to the service. The proposed levy is on top of all this, ranging from 3% on a salary of €15,000 per annum to 9.6% on those earning more than €300,000, of which there are few. Most relevant is that the levy will be 6.4% on a salary of €35,000 per annum, in addition to the 1% levy already imposed.

The levy is unfair for many other reasons. It essentially treats public service pensions as a taxable benefit in kind. It would make as much sense and would be just as unfair to apply a levy to private sector workers who have company cars and phones or whose health contributions or crèche fees are paid by their employer. Why not charge Ministers for the use of the Government jet and writers-in-residence or live-in caretakers for the use of facilities?

There is also a problem with how the levy disproportionately targets low income workers. As has been pointed out to me by several of my constituents, the tax treatment of workers as their salary rises into the higher income tax bracket means that the pension levy will represent 4% of gross income for a person on a salary of €510 per week and 2.3% of gross income for a person on a salary of €550 per week. The levy will be 5% of the gross salary of a person earning €730 per week and 3.7% of the salary of a person earning €800 per week. In many cases, people on lower incomes will have more deducted from their wages than colleagues on higher wages. How is that fair?

There is a complete lack of clarity in the Bill on whether the levy will apply to temporary or fixed term contract workers in the public service or workers whose length of service is so short they are never likely to have enough contribution years to claim their pension. Has the Attorney General even been asked for his opinion on the legality of applying a pension levy to non-pensionable income? We still do not know if the levy will be applied to workers whose income is so low they will never benefit from their contributions. It would be a gross injustice if people who are already forced to pay worthless contributions are compelled to pay even more.

In the circumstances, these proposals are nothing short of outrageous. This is not an attempt to make a special case for public sector workers or to drive a wedge between public and private sector workers, many of whom have appallingly poor pension provision, it is an attempt to clearly show the injustice of these proposals which target one sixth of the workforce by the imposition of a totally unjust and inequitable levy. When this levy was announced, neither the Taoiseach nor the Minister for Finance seemed to know whether it was to be imposed on gross or net pay. The proposals had all the hallmarks of having been worked out on the back of an envelope.

There are still cloudy areas in respect of this levy. In some areas of public employment special allowances form a considerable part of total remuneration. These allowances will be liable to the levy but will not be reckonable for pension purposes. How can the Minister justify such an anomalous position? To my knowledge, most public sector workers accept that they must make a fair and reasonable contribution to their pensions. It is clear from what I have said that they are already doing so. What then is the need for this special levy on the State's employees? The point must be made that this is not a pension levy, it is a wage cut. There is no indication that any of the money deducted will go to fund pensions, rather it will be used to bail out an economy that has been bankrupted by builders, bankers and friends of Fianna Fáil who, as of yet, have not been asked to pay a penny in compensation for the damage they have caused.

On that point, it was extremely galling to hear a banker say that he expected that his compensation package would be less than €2 million this year. That is the sort of compensation that might be expected in respect of a life-threatening injury or permanent disability and is more than the lifetime earnings of a worker on the average industrial wage. This person, who will earn €2 million this year, is not being asked to pay the levy while the Government is taking a €3.5 billion bail-out from the taxes of the ordinary worker. Modern societies have evolved a system for redistributing wealth. It is called a progressive tax system. Those who are rich pay most and those who are poor receive most from the national coffers.

When the whole house of cards came tumbling down, the first response of the Government was to remove medical cards from those over 70. When this did not work and it was compelled to partially back-track and introduce a means test, the Government decided to put a further tax on its employees. It conspired with its wealthy friends to try to set worker against worker and create further division within our society, but it will not work this time. The workers in Waterford Crystal and Dell know they have more in common with the teachers, nurses and gardaí they meet every day than with the members of the golden circle who support Fianna Fáil or the wealthy tax exiles who jet in and out and rub shoulders with our leaders in exclusive hotels and private mansions. The recent survey in The Irish Times has clearly shown that the penny has finally dropped and that many decent Fianna Fáil supporters have begun to see the light.

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