Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

No, I am fine. Thank you. I thank the Acting Chairman for the opportunity to discuss the financial emergency measures in the public interest, FEMPI, legislation that, understandably and correctly, has been the subject of much discussion in recent days and weeks.

As Deputies are aware, last week on 29 June, I laid the annual review of the operation and effectiveness of the FEMPI Acts before the Oireachtas. The report confirmed the continued necessity of those Acts. I would like to start by outlining some key facts that led me to make that important decision.

Taken together, the measures under these Acts have reduced the pay and pensions bill for public services by €2.2 billion. That has played a very considerable part in the stabilisation of the public finances. For this I thank our public servants for their contribution to the economic recovery. Without their contribution through that level of financial sacrifice and their continued dedication to providing public services, we simply would not have exited the bailout programme.

However, we are not clear of all danger. The economy, though growing strongly, is still vulnerable to economic shocks, particularly international shocks such as those that could be posed by Brexit. Since the beginning of the year, only seven months ago, sterling has dropped by 14%. Last April, as part of the stability programme update, SPU, the Department of Finance completed a detailed risk and sensitivity analysis for our economic and budgetary projections. It suggested that a five percentage point depreciation in sterling could be expected to reduce gross domestic product, GDP - our national income levels - in Ireland, by one percentage point by 2018 to 2019, with attendant impacts on our public finances. However, this is only one example of the challenge our economy and our society face.

At home, our public finances, though improving, are not yet fully repaired. Although much progress has been made, we are yet to close our headline deficit, in other words, reduce the gap between spending and taxation, and we are still borrowing €13 million every day to fund our day-to-day spending. Moreover, the high level of public debt, currently estimated at €201 billion or 93.8% of GDP at the end of 2015, means that Governments will find it difficult to respond adequately if we experience another downturn due to global economic developments.

We have to comply with our requirements under the Stability and Growth Pact which are designed to limit pro-cyclicality in fiscal policy, avoid unsustainable expenditure increases during economic upturns and allow scope to increase or maintain expenditure during downturns without engaging in the steep reductions in expenditure that were necessary during the crises. I would make the point that even without the rules we are bound by as part of the eurozone, there is a continued need to ensure we manage well and spend well the resources available to us.

I have been struck by the fact that some of those who are calling for the removal of FEMPI are also the ones calling for more funding and resources for housing, more funding for health and for a range of other social issues, challenges and opportunities that our country faces. In so doing, they forget or fail to acknowledge the political choices that I, as a Minister, must make. There is not a limitless pot of money from which I or the Government can draw. Decisions must be made. Priorities must be identified. The “one for everybody in the audience” approach to politics is an irresponsible luxury that only those involved in permanent protest can afford. While the outrage of some on the Opposition benches is seemingly limitless, I want to tell them that taxpayers’ money is not.

Within the resources that are available and mindful of the risks outlined, there is a long list of demands and legitimate needs for increased Government expenditure: the recruitment of more public servants, especially those needed to work in front-line services; investment in capital infrastructure in schools, hospitals and housing; the purchase of newly developed drugs for the health service; and enhanced funding for all involved in education, but with particular reference to meeting the needs of young people with special needs and how we better fund and equip the third level sector in the future.

It is my role as the Minister for Public Expenditure and Reform to balance these competing needs with the unwinding of the FEMPI legislation. Immediate repeal of the FEMPI legislation would be simply unaffordable. Consider pay alone which would cost an additional €1.8 billion above the 2016 allocation for pay restoration. This would violate the terms of the Stability and Growth Pact and leave nothing for the other priority areas for the people we represent.

The phased approach of the Lansdowne Road agreement provides the mechanism to deliver pay restoration over the next three years at a total cost of €844 million in 2018. By the end of 2016, we will have been able to hire an estimated additional 18,000 public servants to do the work needed in communities all over the State. This is at a cost of an extra €1.1 billion - spending that is absolutely necessary - to help those people who we represent every day.

It must be remembered that this agreement is less than a year old. The public service committee of the Irish Congress of Trade Unions only adopted the agreement nine months ago and the Teachers Union of Ireland voted to accept the agreement in May. The agreement has the support of the vast majority of public servants. In total, over 280,000 public servants and 23 unions are now working within the agreement.

The agreement provides a negotiated and agreed pathway to pay restoration. It gives real pay restoration to individuals progressively and fairly weighted to those who are on lower pay. Public servants whose annualised salary is below €24,001 benefited with an increase in gross pay of 2.5% from 1 January 2016. For those on annualised salaries between €24,001 and €31,000, they benefited from an increase in gross pay of 1% from 1 January 2016. For public servants who are on annualised salaries up to €65,000 there will be a flat rate increase in gross pay of €1,000 from 1 September 2017.

Additionally, all public servants will benefit from the pension related deduction, PRD. These measures contained in the Lansdowne Road agreement will benefit all affected public servants by up to €733 in 2016 and €1,000 in 2017. Crucially, through the operation of the tax code, lower paid public servants will benefit proportionately more from these PRD measures. The combined impact of these measures, for example, on a public servant on a salary of €25,000 will be an additional €1,875 over the duration of the agreement. This is an increase of 7.5%.

The agreement is also flexible enough to allow for the concerns of recent recruits to the public service to be addressed in a negotiated way and in return for workplace reform to drive greater productivity in the public service. Already this has been the framework agreed with representative bodies of one group of public servants representing fire fighters. Officials of my Department and the Department of Education and Skills agreed in recent days with the INTO and TUI - both unions which are inside the agreement - to have engagement later this month to begin to fully scope out all the issues involved regarding pay arrangements for newly qualified teachers. I urge those unions and representative associations who remain outside the agreement to reconsider their positions and to avail of the demonstrated flexibility afforded by the agreement to address their remaining concerns.

Looking to the future, the programme for Government commits to the establishment of a public service pay commission to examine pay levels across the public service including any issues relating to new entrants’ pay. The precise structure of such a commission and the technical aspects as to how it will operate have yet to be decided upon and will require broad consultation, including engagement with staff representatives as was committed to in the Lansdowne Road agreement.

I fully appreciate the impact of the pay reductions on individual public servants, but now is not the time to jeopardise our economic progress with the premature, and unaffordable, immediate repeal of the FEMPI legislation. This Government remains committed to the implementation of the Lansdowne Road agreement which has commenced the sustainable unwinding of the FEMPI legislation. I look forward to using this framework to further prioritise investment in our public services and our people.

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