Brendan Howlin (Wexford, Labour) | Oireachtas source

I move: "That the Bill be now read a Second Time."

This Bill seeks to implement the provisions agreed in the Lansdowne Road agreement earlier this year. It does so in the context of our country’s continuing economic recovery and within this Government’s policy of prudent fiscal management. We are, therefore, in a position to allocate additional moneys to public expenditure. We may now be among the fastest growing economies in the world, but this does not mean that we can throw caution to the wind, like so many Governments of the past. The Bill is not about giving away in an irresponsible and unplanned manner, but rather giving back, to the public servants who have endured so much in past years and maintained services in the face of the fiscal discipline and reform which was required.

The dire economic situation from 2009 onwards necessitated the previous five Financial Emergency Measures in the Public Interest, FEMPI, Acts. Since that time, the cost to the Exchequer of public service pay and pensions has been reduced by approximately €3.7 billion, that is, by more than 21%. The measures imposed by the FEMPI Acts affecting current and retired public servants directly contribute to savings for the State of €2.2 billion annually.

This is the seventh consecutive year in which there have been no pay increases for public servants. In addition to pay freezes, public service workers have endured two, and in the cases of higher paid workers three, reductions in pay since the outbreak of the financial crisis.

Moreover, under the collective agreements necessitated by our need to cope with the exigencies of the past few years, they are now working 15 million additional hours and providing additional services with 10% fewer staff. Under those same agreements, they have also seen overtime and other payments reduced, while other conditions relating to pensions, sick leave and holidays have also been changed.

The policy of pay freezes and reductions is no longer sustainable; as growth returns, thank God, and private sector wages rise, it is only right that our nurses, gardaí and teachers should see modest increases in their take-home pay too. During the crisis their sacrifices allowed us to sustain our public services while at the same time cutting costs considerably. The legal position concerning the financial emergency legislation, which has underpinned the reductions to date, had to be addressed as part of putting in place sustainable pay-setting arrangements in the public service. The constitutionality of the Acts is predicated on the existence of a financial emergency, which has now been brought under control by the actions of the Government. Commencing the orderly winding down of this legislation in an agreed and sustainable process, rather than risking a successful legal challenge, is the appropriate and prudent approach. This Bill is the first step in that process.

Following the public service pay talks that concluded in May of this year, the Labour Relations Commission, as it was then known, put forward a series of proposals on the partial and phased restoration to public servants of deductions made under the five previous Financial Emergency Measures in the Public Interest, FEMPI, Acts under the heading of the Lansdowne Road agreement. These restorations are significantly weighted in favour of the lower paid. The changes to the FEMPI measures require the Government to now bring forward primary legislation to amend the existing Acts. The text and terms of the Lansdowne Road agreement were approved by Government on 3 June and the public services committee of the Irish Congress of Trade Unions accepted the text and terms of the agreement on 16 September. I firmly believe this agreement strikes the right balance between the legitimate aspirations of public servants to pay recovery and sustaining our improving public finances. The estimated additional cost of the measures agreed in the Lansdowne Road agreement is €267 million in 2016, €290 million in 2017 and €287 million in 2018. In addition, a reduction of the public service pension deduction, impacting public sector pensioners, carries a cost of €30 million for 2016, 2017 and 2018.

The public service in Ireland has changed for the better, but with the end of the emergency, any thought of returning to how things were or even staying still must be resisted; what we want is an ongoing, active rejuvenation across all of our public services. Crucially, as part of the Lansdowne Road agreement, both sides have recommitted to the pay and productivity measures introduced in the Haddington Road agreement that preceded it. The unions signalled their support for long-term and sustainable workplace reforms to underpin the delivery of a more integrated, efficient and effective public service. These include changes in the areas of performance management, work sharing, redeployment, and workforce restructuring. Active employee support for these initiatives is key, and the value of industrial relations peace and stability in this country during the crisis and in future should not be underestimated, particularly when one reflects on the scenes we have witnessed in some other European countries.

Efficient public services are essential to a modern society. When we came into office, reform of the public service was a key component of our strategy to meet the enormous challenges we faced. I am proud of the considerable improvements that we have delivered since 2011, and I again commend public servants on their effort and commitment in this regard. That process must continue, and change is now an inevitable part of working in the public service, as it is when working in any sphere of the economy. As well as being more efficient and productive, the new public service must continue to be responsive to the needs of service users and businesses and become more strategic, focusing on longer-term outcomes for society as a whole, as well as every citizen. The implementation of our Civil Service renewal plan and the wider programme of public service reform will continue to play a key role in Ireland’s recovery.

This Bill is concerned with the amendment of prior legislation, predominantly the FEMPI Acts, to give effect to what has been agreed between employers and trade unions in the Lansdowne Road agreement. As I have stated, it is the first step in the carefully managed unwinding of the FEMPI legislation necessary for the pay and pensions of public servants to be restored. As Deputies will see, the measures it introduces are proportionate and fair, with something given back to all, since all contributed, but with the lower-paid standing to receive the most relative to where they were. For the benefit of Members I will briefly outline its main provisions.

Section 3 concerns pay restoration for public servants. It amends the FEMPI (No. 2) Act 2009 to allow the reductions effected under that Act to be lessened. It is important to stress that the nature of this is progressive and measured, with lower-paid public servants standing to gain most proportionately. It is also equitable, with the rationale being that because all public servants suffered pay reductions under the previous FEMPI Acts, all should receive relief of some kind. The restoration will take place in the following way: from 1 January next, public servants earning up to €24,000 will have their salary increased by 2.5%, while those earning between €24,000 and €31,000 will receive a 1% increase. On 1 September 2017, the salary of all public servants earning less than €65,000 will be increased by €1,000. As well as these measures, this section will reverse the additional pay cuts for the higher paid from 2013, as follows. Where their annual salary is between €65,000 and €110,000, the amount by which it was reduced will be restored in two halves, first on 1 April 2017 and then on 1 January 2018. This restoration was part of the Haddington Road agreement and the Government is happy to follow through on that commitment. For public servants with an annual salary above €110,000, the amount by which it was reduced will be restored in three equal parts, on 1 April 2017, 2018 and 2019, respectively. This slower restoration of the cut in pay for this higher-paid group is proportionate and fair.

Section 4 amends the FEMPI Act 2013 to extend by a further two years the suspension of the operation of incremental pay scales with respect to any public servants who are not encompassed by a registered collective agreement as outlined in section 7 of that Act - that is, by the Haddington or Lansdowne Road agreements. This provision follows the existing structure of the 2013 Act and is now extended to accommodate the Lansdowne Road agreement.

Section 5 deals with the pension-related deduction payable by all public servants and introduces measures to reduce it, putting money back into the hands of those who have had to pay this additional levy on their wages for the past six years. To this end, it amends the first FEMPI Act of 2009 so that this year’s exemption threshold increases from €15,000 up to €17,500. This provision provides for outstanding monies due in respect of the small change effected in pension-related deduction rates under the Haddington Road agreement in January 2014, rather than in July 2013, when all other measures took effect. The cost of this is €20 million. From 1 January next year, the exemption threshold rises again, this time up to €26,083. This figure is a blended sum, which equates to the provisions agreed in the Lansdowne Road agreement, whereby the threshold is increased to €24,750 from 1 January 2016 and then again to €28,750 per annum from 1 September 2016. For administrative purposes, the two figures have been amalgamated into one, which will operate from the beginning of the year in order to achieve the reduction required over the course of the year. The full-year effect of the new rate is then set for 2017.

Sections 6 and 7 concern the public service pension reduction, PSPR, currently payable by retired public servants on their pensions. Both sections amend the FEMPI Act of 2010. There are three groups affected by the PSPR and they will all have the amount payable reduced over the next three years through incremental increases in the threshold for exemption. The three categories of retired public servants who pay the PSPR and will have their pensions partially and proportionally restored by the measures in this Bill are those with pensions in excess of €12,000 and who had the levy imposed by the 2010 FEMPI Act, those with pensions worth upwards of €32,500 who were also affected by the further levy in the 2013 FEMPI Act, and those who retired after 29 February 2012 and receive salaries in excess of €32,500, and thus were affected by the 2013 FEMPI Act only.

Sections 8 and 9 are straightforward amendments of the FEMPI Act of 2009. The changes being made reflect the very different economic context in which we operate, six years after the original Act, and the need to adjust upwards in some cases rather than solely downwards. The original FEMPI Act gave the Minister for Health, with the consent of the Minister for Finance, the power to reduce the fees paid to health professionals by the State for services rendered. This amendment allows him or her to increase these if necessary and stipulates certain considerations to be borne in mind when doing so. We are, therefore, undoing the reduction. Similarly, section 9 will allow any other Minister, with the consent of the Minister for Finance, to increase the fees paid by the State for certain services should he or she wish to do so. Section 10 is necessary to allow an exception to be made to the provision in the FEMPI (No. 2) Act of 2009, which prevents any increase in pay for public servants. The exception being allowed for is where such an increase is provided for in a registered collective agreement, such as the Haddington Road and Lansdowne Road agreements. For example, in the Haddington Road agreement it was agreed that teachers would cease to receive allowances for supervision and substitution but that from 2016 their wages would be adjusted to reflect this. This section enables that adjustment to be made by the Government, but as might be expected, that will only happen for public servants adhering to the commitments to which they have signed up.

Unlike the rest of the Bill, the last two sections deal with other Acts besides the FEMPI legislation. Section 11 comprises amendments to the Courts (Supplemental Provisions) Act of 1961 in relation to the pay of the judiciary. These are in two parts. The first is to provide that the pay of the Judiciary shall continue to be set by Government order but that such orders will no longer need to amend primary legislation. This is done on the advice of the Attorney General and, while not a significant change in itself, it ensures best legal practice is adhered to. The second is more substantive. It replaces the measures in the FEMPI (Amendment) Act of 2011 which extended the 10% pay reduction for new entrants into the public service to the Judiciary. Under the new measures, new appointees to the bench will be put on a three-point payscale so that within two years they can achieve parity with their peers. This is in keeping with the general measures put in place for new appointees and recent entrants to the public service and as such addresses an inequity in terms of the remuneration of judges.

Section 12 amends the Ministers and Secretaries (Amendment) Act 2011 to give the Minister permanent powers to deal with situations where public servants become in receipt of salaries at rates higher than those approved by the Minister or in receipt of allowances which have not been approved. The Bill ensures that any such excessive remuneration that has been given without consent shall not have contractual effect and that any unsanctioned overpayment in this regard is recoverable from the public servant.

The Financial Emergency Measures in the Public Interest Bill 2015 is a relatively short Bill but its impact is considerable. It represents an important turning of the corner in that for the first time in six years, we are in a position where, due to careful economic management on the part of this Government, a FEMPI Bill is being presented to this House which will give something back to our public servants rather than taking more away. There are some public servants who will perhaps object that we could have been more generous. To them we can only plead that we must be cautious after the recklessness of our predecessors – after all, it is our rectitude which now allows us to give some restoration — and remind them that this is simply the first step in an ongoing process. As for those on the other side who would have no relief for public servants whatever, to them I can only reiterate what I have already said regarding the emergency nature of the FEMPI legislation and the legal necessity of its being unwound. I would also add that public servants have contributed very substantially to the recovery we are now experiencing and that it is just and equitable that they be rewarded for their sacrifice in the form of a partial pay restoration.

Of course, Government must also choose the right balance between competing priorities and principles. In this case, the legitimate expectation of public servants for some form of pay recovery must be weighed against broader economic considerations, including the limits placed upon our spending by fiscal ceilings, while the ever-present need to maintain reformed and sustainable public services must also be factored in. This is a time for cool heads and careful calculations, not red-hot rhetoric or bluster. Hence the Government has provided in this Bill a measured and carefully calibrated response that recognises, but does not compromise, the significant improvement and recovery from the fiscal emergency it inherited and on which the previous FEMPI legislation was predicated, and which provides a fair and reasonable return to our nurses, doctors and gardaí, all of whom were required to make considerable sacrifices during that emergency. This is restoration done responsibly.

I look forward to hearing the views of the House on the Bill and I commend this Bill to the House.

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