Joan Burton (Dublin West, Labour)

I move amendment No. 18:

In page 7, before section 3, to insert the following new section:

"3.—Funds received from the deduction under section 2 shall be paid into a fund under this section, to be known as the Emergency National Pension Levy Fund (separate from the National Pension Reserve Fund), the principal purpose of which is to pre-fund public service pensions.".

The purpose of this amendment is again to seek to insert an element of fairness into the structure of this levy. The mechanism to which the Bill relates is referred to as a pension levy imposed in the context of financial emergency measures in the public interest. As stated earlier, the Tánaiste and Minister for Enterprise, Trade and Employment suggested on radio this morning that the difficulties relating to the public finances have been largely resolved. I do not know what brand of cornflakes she eats but they are obviously different from those consumed by everybody else in the House. It would be difficult to find too many people who would agree with the assertion that we are out of the woods financially. However, we possess the ingenuity, talent, skills and propensity towards hard work necessary to extricate ourselves from our current difficulties within a few short years.

The amendment proposes that the pension levy be paid into an emergency national pension levy fund, the money from which could be then used for Government spending. When a return to better financial circumstances occurs, this fund could be then used to pay public service pensions. The Minister will state that the National Pensions Reserve Fund is somewhat similar to what I am proposing. Some years ago, Fianna Fáil Ministers objected vociferously when the Labour Party suggested that part of the latter might be used, on the basis of clearly identified returns, to finance certain public service projects. However, one of the Minister's predecessors, Mr. McCreevy, was such an ideologue that he could not conceive of the National Pensions Reserve Fund being used other than as a way to invest either in the equities markets or in cash and Government securities. The consequence of this has been that the National Pensions Reserve fund has been obliged to pay in excess of €20 million to invest in equity markets throughout the world and, as a result, the value of the fund is now significantly lower.

The amendment is couched in general terms because if the Minister accepts the general principle behind it, his officials will redraft it in a form to give effect to what we are proposing. Public servants are realists. The Minister is calling this mechanism a pension levy. When people pay such a levy or make contributions to a pension fund, it is implied that there will be a build up of funds which will be earmarked or hypothecated for the purposes for which the levy was raised. If public servants surrender this money, they want to rest assured that it will be available for the State to meet its pension commitments. If such an assurance is not forthcoming, they will wonder, having paid out their money, whether the State will meet those commitments.

It is unlikely that Fianna Fáil will be returned to power after the next election. However, it may come back into office in approximately 14 or 15 years' time. Will it decide at that stage that it does not want to pay public service pensions? On foot of what the Minister stated earlier, public servants will probably pay this levy indefinitely and will certainly pay it for the remaining three and a half years of this Government's term of office. It is estimated that this measure will raise €1.4 million gross per annum. This means public servants will contribute approximately €5 billion in the three and a half years left in the life of the Government but will not have a claim on the Exchequer to have this money utilised when the economy recovers. I firmly believe the economy will recover for the reasons I have outlined.

If the Minister wants equity and fairness, it would be sensible to create a funded contribution and allow the proceeds of the fund to be paid out immediately for government purpose. However, the fund would, in American terms, be an earmark, in other words the Government would be required to return the money to the public service pension emergency fund as and when funds became available in the future. As a result, the fund would constitute a core funding element for public service pensions.

The proposed levy confuses two issues, namely, how and at what rate public servants should contribute to and pay for the relatively generous pension arrangements many of them enjoy. With the exception of those at the top of the public service, pension arrangements for public servants are not as generous as those available to company directors in the private sector. As the Minister is aware, the contribution to company pension funds by way of tax relief is by and large far in excess of what many public servants will earn over a five-year period.

The Labour Party seeks equity and asks the Government to give a commitment to public servants that it will guarantee, through the device set out in the amendment, that when times are better it will allocate the moneys raised from the pension levy to a fund for public service pensions. Equity would foster social solidarity as people would believe everyone is contributing.

Lower paid public servants in particular will be heavily taxed under the proposed pension levy. Many of these employees are aged between 25 years and 45 years and will have bought a house at the height of the Celtic tiger. They will have mortgages of €1,400 or €1,500 per month and may have two or three children. They were encouraged by the banks we are bailing out to have two or three credit cards. Given the financial commitments they have as a result of the debts they have incurred, they face a severe decline in income. While it may be argued that it was unwise to incur so much debt, we should bear in mind that the former Taoiseach, Deputy Bertie Ahern, called on young people to buy houses on the basis that prices were set to rise, said he would buy bank shares if he had money and advised those who talked down the economy to commit suicide. Many young public servants took their cue from the former Taoiseach who continuously advised people to borrow, spend and buy as well as invest in bank shares. Public servants are having to pay the price of this profligacy and mismanagement of the economy.

The amendment proposes to make the levy a funded contribution and would go some way towards restoring equity. The proposed measure is cost free in the context of the likelihood of strikes and the damage they will do to our international reputation. If it is accepted, it would constitute a Government promise to public servants that when times improve they will get something in return for the sacrifice they are making, namely, a higher level of pension funding. It would also help to kick-start a debate on public service pension reform, a broader, complex issue which needs to be addressed. Notwithstanding a number of Green Papers and discussion documents, the Government has failed to address this issue.

See this speech in context