Enda Kenny (Mayo, Fine Gael)
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Question 5: To ask the Taoiseach if he will report on the negotiations on the social partnership agreement; and if he will make a statement on the matter. [29456/08]

Enda Kenny (Mayo, Fine Gael)
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Question 6: To ask the Taoiseach when he will next meet with the social partners; and if he will make a statement on the matter. [29457/08]

Enda Kenny (Mayo, Fine Gael)
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Question 7: To ask the Taoiseach if he will report on the recent activities of the National Implementation Body; and if he will make a statement on the matter. [29459/08]

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 8: To ask the Taoiseach if he will report on his participation in discussions to agree a successor to the Towards 2016 agreement since Dáil Éireann rose for its summer 2008 recess; and if he will make a statement on the matter. [29528/08]

Eamon Gilmore (Dún Laoghaire, Labour)
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Question 9: To ask the Taoiseach when he next plans to meet with the social partners. [29614/08]

Eamon Gilmore (Dún Laoghaire, Labour)
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Question 10: To ask the Taoiseach if he will make a statement on the future of social partnership. [29615/08]

Leo Varadkar (Dublin West, Fine Gael)
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Question 11: To ask the Taoiseach the extent to which the interests of taxpayers and consumers were taken into account in the recent pay talks; and if he will make a statement on the matter. [30965/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 5 to 11, inclusive, together.

The Government and the social partners recently finalised the formal review of Towards 2016 as provided for under the agreement. This report has now been published and is available on my Department's website. Copies have also been laid before both Houses of the Oireachtas. Given that the terms of the pay agreement for the private sector expired from March, the review process included negotiations on a new pay round.

The agenda for the talks was broad in scope and complex in terms of the specific issues up for discussion. Grappling with this extensive and complex agenda required many hours to be set aside for negotiations. Following a lengthy talks process, in the early hours of the morning on Saturday, 2 August the social partners agreed to adjourn their discussions on a new pay agreement. Contacts at official level continued over the summer with a view to establishing whether the potential existed to conclude an agreement.

On Friday, 5 September, I held a series of discussions with the social partners during which I underlined the changed context in which the pay talks were taking place in terms of the evolving economic situation. The parties affirmed to me their commitment to engaging in further discussions aimed at establishing if an agreement on a new pay deal would be possible.

An intensive round of negotiations resumed on Monday, 8 September, within a tight deadline. Throughout this process I monitored developments closely and in the course of the final overnight session of negotiations I held a series of meetings with the parties with a view to facilitating a meeting of minds on the key issues on the agenda. As Deputies will be aware, negotiations reached a successful conclusion on the morning of Wednesday, 17 September, when an agreement was reached on a successor to the first module of Towards 2016.

The agreement provides for pay increases to be paid to workers over a period of 21 months, with pay pauses of three months and 11 months agreed for the private and public sectors, respectively. The agreement reached between the parties also covers a range of non-pay and employment law related initiatives, including those related to agency workers, employee representation and victimisation, pensions, procurement, managing change and innovation, upskilling and public sector modernisation.

There is consensus among the social partners that the pay agreement provides an important transitional framework for meeting the economic and social challenges which Ireland currently faces. Indeed, the proposals have been widely recognised as representing the best terms that could be achieved. The pay agreement also provides a welcome boost for investors and workers alike by providing certainty in pay determination, safeguarding employment and helping to preserve the industrial peace which has been a hallmark of social partnership and which has benefited our economy significantly over the last 21 years. The terms of the draft agreement are now being considered by the social partners with a view to ratification over the coming weeks.

In parallel to the pay negotiations, the Government and social partners reviewed progress under the wider economic and social provisions of Towards 2016. To inform the review, a detailed progress report was prepared on progress since the commencement of the agreement under each commitment. Each social partner pillar was also invited to make its own submission with its assessment of progress during the first phase of the agreement and these provided the basis for discussion.

Social partnership is a responsive and evolving process, an important aspect of which is ensuring wide and appropriate involvement. During the negotiations, the interests of taxpayers and consumers are represented by the Government. The Government and the social partners have agreed an assessment of progress over the first two and a half years of Towards 2016 and the economic challenges facing the country in the short and medium term. Using this shared understanding, the Government and the social partners intend to work together through the current period of economic transition and uncertainty to ensure that the vision and goals set down in Towards 2016 can still be achieved.

They have accepted that economic conditions require a re-prioritisation of public expenditure while recognising the need to seek to protect the most vulnerable. They have also identified a small number of priority issues on which they will work together as social partners over the next phase of the agreement. Social partnership has served us well in the past and, by reaching agreement at this point of economic difficulty, the process has demonstrated a capacity to contribute to managing more challenging times.

I met with representatives of ICTU last Friday. They conveyed to me their concern that the effect of the income levy announced in the budget, the overall progressive effect of which they welcomed, could be seen as being at odds with one of the important features of the draft pay agreement, namely, its focus on those on low incomes. While the Government believes that it is not unreasonable that everyone should make a contribution, however modest, in accordance with their income in these difficult times, it is prepared, in the context of the importance we attach to social partnership and to the draft agreement, to provide in the Finance Bill that the levy will not apply to incomes up to the level of the national minimum wage.

The National Implementation Body, NIB, which has been in existence since the start of 2001, continues to meet as necessary to oversee delivery of the industrial peace and stability provisions of Towards 2016. The NIB has met on a number of occasions recently to assist in the resolution of industrial disputes. Over the past six months, the NIB has considered such issues as the implementation of the 37.5 hour working week for nurses, the extension of flexi-bands in the Department of Social and Family Affairs, pensions issues at RTÉ and the introduction of an incident command system in the fire services. Meetings of the NIB also provide opportunities for informal discussions on some broader issues relating to the social partnership process and the industrial relations climate generally.

Enda Kenny (Mayo, Fine Gael)
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I did not welcome the introduction of what is known as the Lenihan levy but I appreciate the statement made by the Taoiseach that this will not apply to those earning up to minimum wage. What numbers are excluded as a consequence and at what level will the minimum wage be next year? As a result of the changes, how does the Government propose to make up for the savings it had budgeted for when the levy applied to those on the minimum wage and will there be changes at the upper level?

In view of the rapidly deteriorating state of the public finances, is it the view of the Taoiseach that the public sector pay increases negotiated can be paid next year?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Regarding the first question, it is out of our respect for and in view of the importance of assisting the social partnership process that the Government is indicating that it is prepared to provide that the levy will not apply to incomes up to the level of the national minimum wage. I do not have the figures in front of me but approximately 850,000 workers are outside the tax net, some 36% of the workforce. In the context of the Finance Bill, the Minister for Finance will be ensuring that revenue is in line with the contribution this would make towards the social partnership process.

Enda Kenny (Mayo, Fine Gael)
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Social partnership, which has been hanging by a thread, was weakened considerably to the point that ICTU stated last week that the agreement would not be passed if the Taoiseach persisted with the Lenihan levy in the form in which it was proposed. Is it not obvious that the Budget Statement has now become a discussion document? It is negotiable at all turns. On this issue, because of the fear of the collapse of social partnership, the Cabinet decided this morning that the Lenihan levy would not apply——

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Minister for Finance must be referred to as the Minister for Finance.

Enda Kenny (Mayo, Fine Gael)
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Sorry, Ceann Comhairle.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Deputy Kenny knows that well — he has long experience in the House.

Enda Kenny (Mayo, Fine Gael)
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Just slightly longer than the Ceann Comhairle.

The Cabinet decided the levy of the Minister for Finance should not apply to those below the minimum wage. Obviously, that is one issue that has been negotiated. Controversy arose from the fiasco of the withdrawal of the automatic right to medical cards for those aged over 70. That was another issue decided upon by the Government. Now it clearly sees the folly of its ways and the decision is being changed——

John O'Donoghue (Kerry South, Ceann Comhairle)
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I do not see what this has to do with social partnership.

Enda Kenny (Mayo, Fine Gael)
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It has to do with social partnership.

John O'Donoghue (Kerry South, Ceann Comhairle)
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It is another point.

Enda Kenny (Mayo, Fine Gael)
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The budget, as announced in this Chamber last week, is no longer the budget. It will be changed utterly and we will have the same situation with regard to class sizes——

John O'Donoghue (Kerry South, Ceann Comhairle)
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We are talking about social partnership. There will be Leaders' Questions later.

Enda Kenny (Mayo, Fine Gael)
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My point about the budget is that it is now merely a discussion document.

John O'Donoghue (Kerry South, Ceann Comhairle)
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We are not talking about the budget now.

Enda Kenny (Mayo, Fine Gael)
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What is the position of the Government regarding public service reform? The Minister for Finance, Deputy Lenihan, has suggested that the taxpayer might now be employed to remove from the public service persons whom the Government says should not have been employed in the first place. With regard to the Health Service Executive, Professor Drumm says there will be 1,000 persons removed from that section of the public service. What is the situation? Will it apply only to the HSE or will it apply to the public sector in general? What is the extent of borrowing required to deal with the matter and how will it be targeted? From his experience, the Taoiseach is well aware that, as in previous times, persons at the higher levels may well leave, creating a very serious problem. What is the position regarding public sector reform and regarding performance as it relates to pay? What is the story from Government in respect of a targeted redundancy scheme and how much will borrowing for that cost?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Deputy Kenny raised a number of matters. First, the Minister for Finance outlined in the Budget Statement his intention to move on public sector reform. As I said, there is a task force which will provide the implementation plan in coming weeks. This will implement and sequence the OECD report on reform of the public service and how to integrate public services in order that we can improve those services. The plan will improve opportunities for those who work in our public services to provide an integrated, co-ordinated and citizen-centred approach. It will seek to ensure that the very considerable resources provided by taxpayers are used to the best possible effect in terms of the administrative structures we devise and that there is ability to move beyond departmental and agency boundaries and to work in a co-ordinated fashion to get the best possible output for taxpayers.

Second, on the response I gave Deputy Kenny about the public service, the pay increase and how we will deal with that issue, the draft pay agreement provides for a pay pause of 11 months in the case of the public service, which is a very significant saving. The Government has decided that special provision will not be made for the cost of that increase in the Estimates for 2009. In other words, the cost must be found within the existing allocations for Departments and agencies which already reflected a 3% reduction in payroll costs for 2009 over 2008 outturn levels. The net effect is a reduction of 4%, which will require significant restructuring and productivity gains. The framework by which this will be achieved, including a comprehensive review of staffing levels and deployment of personnel, will be announced by the Minister for Finance and me in a major package of public service reform measures in coming weeks.

Regarding the budget, this contribution will ensure that social partnership continues to be a part of the operation of Government. Our commitment to social partnership is an effort on our part to ensure that we get a good outcome. Deputy Kenny described the budget as a discussion document. The budget will be implemented and the deficits in the macro-economic indicators that we set ourselves are those to which we will work during the coming year. The Fine Gael Party finance spokesman put forward an alternative budget which seeks a deficit of 5.5% without tax increases. That would require a further €4 billion in expenditure cuts in either the capital programme or in current expenditure. That is a non-discussion document.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Is the Taoiseach aware that Aer Lingus, the former national airline which the Government privatised, has effectively torn up all notions of social partnership by indicating recently that some 1,500 workers will be let go and their work outsourced through agencies? The company proposes to bring in workers at what can only be described as yellow pack pay and conditions. Does the Taoiseach agree this is an outrage? Did he note that one of the workers involved stated the measures would tear out the heart and soul of the company and that we were witnessing Irish Ferries mark two? What steps will he take to have this disgraceful situation stopped? Surely the future of the economy will not be a continual trend of long held and hard won pay and conditions for Irish workers being frittered away by people whose motive is clearly suspect.

I listened to the Taoiseach's comments on the income levy measures announced in last week's budget. He will have noted the decision in the new partnership agreement to compensate low paid workers with an extra 0.5% on their meagre wages. This further compensation measure would amount to no more than 5 cent for somebody earning as little as €10 per hour.

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy is imparting information instead of seeking it.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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I am seeking information on social partnership. How, in heaven's name, can the Taoiseach stand over the proposal in last week's budget to impose a 1% levy on all workers, having given to the lowest paid workers a miserly 0.5% increase which, under the terms of social partnership, will not kick in for a further 18 months? Given the Taoiseach's experience as Minister for Finance and in other portfolios, this defies understanding.

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy may not engage in a monologue.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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I am asking for an explanation. While the Ceann Comhairle has probably been provided with all the information, it is not available to me. I cannot understand how the Taoiseach and other Ministers, with their collective experience, could have stood over a budget proposition last week which clearly fritters away all semblance of fairness and the meagre elements——

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy may not make a speech on the budget when the House is discussing questions on social partnership.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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I am talking about social partnership——

John O'Donoghue (Kerry South, Ceann Comhairle)
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If that is the case, it has escaped me.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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——and the meagre measures in the agreement being frittered away by the measures announced last week during the grandstand performance we witnessed in the House.

John O'Donoghue (Kerry South, Ceann Comhairle)
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I will ask the Taoiseach to reply.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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I ask the Taoiseach to explain how this could be the case.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Allow the Taoiseach to answer, please.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I will make a few points in reply to the Deputy's comments. We live in exceptional economic circumstances. The income levy is a progressive effort to ensure those on high incomes pay proportionately. The progressive nature of the levy, which applies to gross income, would not have been possible to achieve if one had used the tax rates, given the availability of shelters and allowances.

The Deputy is correct that an additional 0.5%, to be paid in the third phase, was negotiated by the unions in respect of low and modest pay. It is important to point out that this differential remains. On the basis that a 1% levy will apply to people on low pay and a 2% levy will apply to those earning more than €100,00 per annum, the differential between these groups will be 1.5%. If the Deputy's argument is that the differential must be maintained, that is already being achieved.

If the Deputy's subsequent question is about the extent to which we can protect incomes at the lower level, as I indicated, the Government is prepared to contribute to that objective by ensuring levy does not apply at or below the minimum wage. At the time of the signing of the agreement, the inflation forecast was 3% for 2009, whereas the inflation now forecast for next year is 2.5%. In fact the problem next year will not be inflation, but deflation — we are seeing inflation going down as a result of reduced activity and the flattening out of export markets in terms of activity as well. That differential is being retained and the 0.5% in terms of the protection of living standards will now be available next year to a greater extent, in addition to what was already negotiated.

When one looks at this in the continuum, the fact is that we have achieved an enormous amount during the good times, in terms of taking people out of the tax net altogether. Some 500,000 people on low and modest incomes who had previously paid tax were taken out of the tax net, as a result of the Government's policies. There is also the point that the average industrial wage has increased by €15,000 in that period as well, yet the amount of per capita tax paid is €1,000 less. That is a very important fact. In 1983 the average industrial wage was €18,000 and now it is around €35,000. As regards those on low pay as well, there is the question of increasing the family income supplement, FIS, eligibility arrangements for working families with children. This ensures that a family on FIS in receipt of €20,000 in wages, now gets an additional €726, if there are two children. These are important "other mechanisms", when one looks at how the taxation impacts on take home pay, along with the fact that so many people have been taken out of the tax net, when in the past — before the Fianna Fáil-led Administration came back into office in 1997 — after pretty meagre allowances, people were paying a standard rate of 26%.

There is, therefore, an indication of a very concentrated effort when times were good to lighten the load of workers and the tax take of the average industrial wage was reduced from 27% to 15% as a result. We now face exceptional times, and an income levy was introduced which maintained the differential. The fact that there will be lower inflation next year than at the time of its negotiation is a further indication as to why people should have a positive disposition towards having the pay agreement ratified. I hope all of these issues and information can be taken into the mix, as well as the fact that we are living in exceptional times. It is important in terms of participatory democracy that people are in a position to pay according to their means, recognising the weight we give to social partnership. As I said, I was in a position to announce today that it would not apply to those on the minimum wage or lower.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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On the——

John O'Donoghue (Kerry South, Ceann Comhairle)
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I am calling Deputy Gilmore. We have very little time and Deputy Barrett is offering as well.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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The Taoiseach did not answer my question about Aer Lingus.

John O'Donoghue (Kerry South, Ceann Comhairle)
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No, the Deputy has had a good run. Please allow Deputy Gilmore to speak.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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The Taoiseach did not answer the specific questions I posed about Aer Lingus. The Ceann Comhairle says I have had a good run, but while I do not wish to cut across Deputy Gilmore, we are normally entitled to a second supplementary.

John O'Donoghue (Kerry South, Ceann Comhairle)
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It is 3.15 p.m. and time and tide wait for no man.

Eamon Gilmore (Dún Laoghaire, Labour)
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I welcome the fact that the Government appears to be making some movement on the income tax levy and is offering some response to the position that was put to it by the Irish Congress of Trade Unions. However, I would like to know more about what it intends to do here. What will be the cost of the decision to now exempt earnings at or below the national minimum wage from the income levy? In the context of the budgetary arithmetic, where is it proposed that this will come from?

How will this work? Will incomes at or under the national minimum wage be exempt from the levy or will employees whose income is at or under the minimum wage be exempt? What is the position of somebody earning just over the national minimum, say, €1 weekly or €100 more per annum? Will he or she be liable for the levy on his or her entire income or on the portion of his or her income over the national minimum wage? What is the position of somebody on the national minimum wage who does a bit of overtime? Will he or she be liable for the levy on the full amount of the income or just on the portion of overtime he or she does? What is the position of somebody who has two part-time jobs, one on the national minimum wage and one above it? Will he or she pay the levy on the totality of his or her income or only on the job which is above the national minimum wage?

Seán Barrett (Dún Laoghaire, Fine Gael)
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Does the Taoiseach regret having entered into this recent pay agreement under social partnership given that any increases will be taken away by increases in taxation? Does he agree it makes a total farce of the situation that in order to meet the targets set, he must reduce services other than pay? Cutting services to the public will make more public servants redundant because they will not be available, or needed, to provide the services. The whole situation is contradictory.

Does the Taoiseach agree that the sensible thing to do is to ask for a two year pay freeze rather than have this ongoing situation of increasing taxation to make up for the pay increases and of cutting services which makes more public servants redundant?

Brian Cowen (Laois-Offaly, Fianna Fail)
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To answer Deputy Gilmore's question, as he knows, this is a levy on gross income and, therefore, in respect of anything above that, the levy is applied on the full amount. That is the way it operates. A person on €18,000 a year, beyond the minimum wage, will be asked for a contribution of €180 for the year, or €3.50 tax. In the past, Deputy Gilmore was a member of a Government which probably charged them 26% tax on practically all that income. The person has one twenty-sixth of the burden he or she had in 1997 when Deputy Gilmore was Minister of State in the Department of the Marine.

That is the way the levy system works. It was the way it worked when it was introduced in 1992-93 under a Fianna Fáil-Labour Party Administration. It was also a temporary levy at that time. From memory, it applied to people on half the industrial wage which at that time was only €9,000. We are a long way beyond that now thanks to successful policies implemented in the interim.

On Deputy Barrett's question, under this agreement, we have a three month pay pause in the private sector and an 11 month pay pause in the public sector which should not be ignored and which is a good contribution by workers in an effort to contribute to stability. There are also inability to pay clauses available to employers who are not in a position to assist.

It is not correct to say nothing is being asked of the public sector in respect of payroll costs. We have indicated the necessity for a reduction of 4% on payroll costs in the coming year as a contribution.

Seán Barrett (Dún Laoghaire, Fine Gael)
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That is different.

Brian Cowen (Laois-Offaly, Fianna Fail)
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It is not. A reduction in payroll costs provides for getting a 4% reduction over 2008 outturn levels in 2009. It provides management with the necessary flexibility to deal with that matter rather than a more blunt instrument like an embargo where many exceptions are sought and catered for in respect of emergency workers, etc.

In respect of that way of doing things, even this year the Minister for Finance pointed out that the savings he sought from July, when he made his initial announcement of measures for savings, will be exceeded under that heading during 2008 by reason of applying it in that way and by giving management the flexibility to deal with these issues in a sensible way that does not impact adversely on service provision which it would otherwise do if it was a blunt instrument.

I apologise to Deputy Ó Caoláin but on the point he raised, the board of Aer Lingus directed management to engage with the trade union group to see how it can come forward with the necessary savings in what is currently a competitive and difficult aviation sector.