Dáil debates

Friday, 10 December 2010

Financial Emergency Measures in the Public Interest (No. 2) Bill 2010: Second Stage (Resumed)


11:00 am

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)

In the light of the increasing cost of public service pensions, the Government had to reduce spending in this area. This was an extremely difficult decision for the Government to take and as I said at the start of this debate, this was not done lightly without very careful consideration being given to the consequences. However, the Government must have regard to cost and the increasing burden public service pensions place on the Exchequer and the taxpayer. The figures underline the size of the cost. Since 2006 expenditure on public service pensions has increased by 56% from €1,433 million to €2,235 million. Expenditure on pensions was approximately 3% of total gross current expenditure in 2006 and is estimated to be approximately 4% in 2010. Pensioner numbers, excluding local authorities, have risen from 76,000 in 2006 to 103,500 in 2010, an increase of 36%. By contrast, average public service numbers increased by approximately 12% during the same period. These costs will rise significantly in future. Increased life expectancy will be a major cause of the increase for public sector schemes as well as for other pension schemes.

There are also special factors which will affect the public service in Ireland. There was relatively high recruitment of public servants in the late 1970s compared with restricted levels in the late 1980s and well into the 1990s. This means that considerable numbers of civil and public servants will retire in the next five years or so, adding significantly to the pool of retirees. Of course, recent moves to reduce public service numbers have brought forward many of these retirements.

In common with all employers, the Government is very conscious of the fact that provision must be made to ensure that retirees are properly supported in retirement. Employers have a strong moral obligation to their older, former employees. When people have devoted years of service to the public as public servants, as teachers, nurses, or members of the Garda Síochána, there is a particularly strong duty on the Government to make certain that they have a reasonable level of income in retirement.

However, given the huge budgetary challenges we confront, the Government considered that it was right to ask some public service pensioners to make a contribution. There is no point in telling people that the pension reduction is avoidable if it means that the funding of the Exchequer is put at even greater risk than it is at present; avoiding the issue now could make things a lot worse in the longer run. I am glad to see that Deputies noted that the Government decided pensioners on an annual pension of €12,000 or less would be exempted and have acknowledged that the pension reduction is fair and proportionate, with those on higher pensions being asked to make the largest contribution.

Deputy Noonan asked why the Judiciary is included in the measure reducing pensions while not being subject to the pension levy and pay reduction. The Government decided to reduce judicial pensions as part of a general measure affecting all public servants on grounds that it was right to do so. All those who can afford to contribute should do so and there was no reason to exclude the Judiciary. The Constitution is very clear on this matter. Article 35(5) states: "The remuneration of a judge shall not be reduced during his continuance in office." Therefore, while the pensions of former members of the Judiciary may be affected by a widely based measure taken in the public interest such as is contained in this Bill, the pay of a judge during the continuation of office is, under the principle of separation of powers, protected from any reduction being imposed by the Government of the day.

I can assure the Deputy that what the Government has done on judicial pay and pensions is in complete accordance with the law.

The National Recovery Plan 2011-2014 presents in detail the measures that must be taken to put the public finances in order and to secure sustainable, export-led growth in the Irish economy. This week budget 2011 began the process of implementing the expenditure and taxation policies needed to meet the targets by 2014. The budget is a decisive step in this direction. The Bill now before the House implements three of the important measures announced in the plan and the budget. These measures are essential to our recovery. I commend the Bill to the House.


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