Richard Bruton (Dublin North Central, Fine Gael)
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Question 4: To ask the Minister for Finance if he plans to contain the growth of the public service pay bill; and if he will make a statement on the matter. [39083/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am keeping the public service pay bill under continuous review and I have already taken steps to contain its growth. The draft pay agreement, Review and Transitional Agreement 2008-2009, provides for a pay pause of 11 months in the public service. The private sector pay pause is to last for three months. Furthermore, public service employers are required to achieve a 3% cut in payroll costs in 2009 and no specific additional provision has been made for the cost in 2009 of the increase provided for in the new draft pay agreement. The cost of this increase must be met from within the approved allocations.

Payroll costs are a function of staff numbers. As I indicated in the Budget Statement, we must do more with less in regard to public service pay and numbers. Where there are clear staff surpluses in certain areas, or where policy priorities change, staff numbers must be correspondingly reduced or re-assigned.

The Government has already decided that a targeted voluntary early retirement scheme will be introduced for the HSE. Discussions are under way on the development of such a scheme. It is essential to extend such schemes, in a targeted manner, to other areas of the public service where surplus staff are identified. In this context, the Government has decided to conduct a focused review of public sector numbers in all branches of Government to assess whether the resources are being fully deployed in an efficient and effective manner and what economies can be made. This decision will be implemented when the report of the task force on the public service is received later this month.

Public service pay levels can only increase at a rate that is consistent with budgetary discipline and national competitiveness. I am satisfied the measures put in place support this stance. As I have mentioned, we are keeping public service pay, along with other major expenditure categories, under ongoing review. Should further corrective action be necessary, it will be taken.

Richard Bruton (Dublin North Central, Fine Gael)
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I am seriously alarmed at the approach being taken by the Government on public sector pay. In the past three months the Minister has committed to €2 billion extra pay, to be paid by taxpayers, between the September payment just ten weeks ago and the commitments to be made in the next two years. Can the Minister afford to make that payment? Does he believe the public finances can afford that payment? Surely if we learned anything from benchmarking it was that one has to put a reform agenda on the table before one makes pay commitments rather than afterwards. Why has the Minister made those commitments and is only now talking about a review within the public service and of the proposed reform and new policy agendas to get better efficiency? Surely he should have taken the reverse approach and brought forward before the budget a radical reform agenda, which would see the restructuring of very expensive administrative overheads in many State agencies.

Does the Minister not think it is lunacy to preside over a situation whereby when the HSE is short of money it closes beds and leaves staff to whom we are paying top dollar sitting around doing very little when patients are turned away? What sort of public pay policy is it that results in that situation?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Based on current staffing and numbers it is estimated that the cumulative costs of implementing the pay increases provided for in the draft agreement, Review and Transitional Agreement 2008-2009, will be approximately €260 million in 2009. Those figures are subject——

Richard Bruton (Dublin North Central, Fine Gael)
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What will be the cost in 2010?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In 2010 the figure will be €990 million.

Richard Bruton (Dublin North Central, Fine Gael)
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What will be the cost of the agreement reached eight weeks ago on 1 September?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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These are the figures on foot of the agreement.

Richard Bruton (Dublin North Central, Fine Gael)
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Can the Minister add the three elements together?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The agreement was the result of negotiations with the social partners, which did have regard to the difficult economic environment. It is accepted by all the parties involved that the talks were among the most challenging and complex yet faced. No specific additional provision has been made for the costs in 2009 of the increase provided for in the new draft pay agreement and those costs must be made from within the approved allocations.

Early last July when I announced a round of savings throughout Departments, payroll and administrative expenses, as referred to by Deputy Bruton, were addressed. The savings then targeted were achieved. Likewise, in this budget right across the range of Departments, further payroll savings are required and will be achieved. Public service reform is easy to discuss in the abstract but it requires hard, difficult decisions to be made on the ground.

Richard Bruton (Dublin North Central, Fine Gael)
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Does the Minister not agree that it is a parlous situation when 40% of our borrowing this year is going on day-to-day public spending? If the European Union's projection is correct, and the Minister does not make €5 billion in savings next year, which he has not specified, we will be spending 60% of our borrowing just to keep day-to-day services going. Are we not on a highly dangerous trajectory, and do we not need to address as a matter of urgency how we run the shop more effectively to ensure we do not waste money in administration and we protect front line services? Where is the thrust for that in the budget? What decisions were made in the budget that will deliver that? I do not see them.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Bruton's summary of the borrowing position for current purposes is not correct. The bulk of the borrowing this year is to fund investment in the public capital programme. That is where the bulk of the borrowing is concerned.

Richard Bruton (Dublin North Central, Fine Gael)
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I said 40%. The Minister should look at his own figures.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is a deliberate statistical mistake.

Richard Bruton (Dublin North Central, Fine Gael)
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That is not a deliberate statistical mistake. The Minister should look at his own figures.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Bruton is only arriving at that conclusion on the basis that the public capital programme is being funded by the taxpayer and not by borrowing. I agree with much of what Deputy Bruton said about the gravity of our position but the realistic way to look at the matter is to accept we are borrowing this year to fund approximately 10% of all our current expenditure. I agree that is unacceptable. It amounts in total to a borrowing of €4.7 billion, which will have to be paid for in future.

Richard Bruton (Dublin North Central, Fine Gael)
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Which is 40%.

Kieran O'Donnell (Limerick East, Fine Gael)
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That is 40% of the Exchequer balance.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputies will have to check their figures again.

Richard Bruton (Dublin North Central, Fine Gael)
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They are the Minister's own figures.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The figures in respect of the capital programme are in excess of €8 billion so the Deputies' percentages do not add up.

Kieran O'Donnell (Limerick East, Fine Gael)
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Does the Minister want a calculator?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It is essential that we eliminate the current budget deficit in the years ahead. It is unacceptable but, given the rapid deterioration that has occurred this year, it is unavoidable. We must take firm steps to eliminate it that will involve public sector reform in addition to taxation.