Brian Lenihan Jnr (Dublin West, Fianna Fail)

There are two points. First, in response to Deputy Rabbitte, discussions are taking place with the organisations that represent public service workers. Clearly, we will continue to engage with them. The Taoiseach urged them not to engage in today's industrial action. I do not believe the public are impressed by today's industrial action. While I agree that there has been an amount of irresponsible media coverage about the public service, there has also been, I think, an amount of public anger at what is taking place, and this is reflected in media coverage. This type of action affects workers who are going about their daily business and doing their jobs, and individuals who have important transactions to perform with public servants, and it also affects the capacity to attract jobs to Ireland. It has not been possible today, for example, for some senior officers to meet people who are investing in Ireland, which is a serious matter.

This is why a group in negotiation with the Government should be reluctant to engage in such an action. I appreciate ballots were held and democratic decisions taken that must be implemented by the representative organisations. As I understand the position, there is no irrevocable commitment to further industrial action. I hope this position is reflected upon.

Regarding Deputy Sherlock's question on the distribution of public service pay in the context of interest rate rises, approximately two thirds of public servants have salaries of €50,000 or less, accounting for approximately 50% of the public service pay bill. If significant savings are to be achieved through reductions in the pay bill, this group cannot be excluded totally. Approximately 15% of public servants have salaries in excess of €60,000, accounting for 29% of the pay bill. Some 10% of public servants have salaries of more than €70,000, accounting for a little over 20% of the pay bill. Only 3% or so of public servants have salaries in excess of €100,000, accounting for approximately 9% of the pay bill. In any discussions with the relevant organisations and in any Government decisions taken with, I hope, the representative bodies or in the national interest, there must be some tiering of the degree of reduction that applies to different sectors.

Deputy Sherlock raised the question of the decline in the cost of living and the impact of interest rates. The latter have had some effect, but they are not the whole effect. I have often heard Deputy Burton speak in the House about deflation. No one wants deflation, although we have had it this year because of the decline in economic growth, but it is possible to have economic growth while the cost of living reduces, a more benign scenario. A part of the reduction in the cost of living in the past year has been due to the devaluation of sterling. Products originating in the sterling zone are cheaper in Ireland. This situation has not been caused by the Government's budgetary decisions or economic decline here. Rather, it has been caused by economic decline in our nearest neighbour, which is worth noting.

Not all of the reduction in the cost of living is accounted for by the decline in interest rates. The examples that I gave illustrated the reduction in the cost of food, rent and clothing. The basics have all seen substantial reductions, much of which owes to British products becoming cheaper or Irish products being made more cheaply to compete with British imports. These have been major factors in the reduction in the cost of living.

Interest rates played their part and introduced some of the variability that is evident upon examining the different deciles. In particular, they show how the cost of living has reduced the least for those in retirement. Interest rates are at historically low levels. The question of an exit strategy from the monetary support adopted by the European Central Bank and other banks is under discussion in Europe, but no decisions are imminent. Some pressures on domestic interest rates have come about due to poor funding practices in our banking sector. For example, some institutions had an excessive number of tracker mortgages. The effect of the European interest rate decrease has been to make those mortgages uneconomical for the institutions concerned. The overall trend in interest rates is not as apocalyptic as Deputy Sherlock suggests. We are not looking at any immediate increase.

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