Tuesday, 15 December 2009
I move: "That the Bill be now read a Second Time."
The Bill gives effect to the decision of the Government to reduce the pay of public servants to achieve a saving of approximately €1 billion in the public service pay bill in 2010. All of us in this House, in both our professional and our personal lives, have experienced the excellence and dedication of public servants. We all know, for example, the difference a good teacher can make not just to the lives of our children, but also to the morale of an entire parish or community. We know how gardaí have put their own safety and their lives at risk to protect the communities they serve. We know how medical staff in our hospitals and in our communities work long hours and, by definition, in stressful circumstances.
It is not just providers of these essential services who typify public service at its best. All of us in this House are familiar with the invaluable work carried out by civil servants with the highest integrity. Over the past 18 months, I have been repeatedly struck by the manner in which officials in my Department, other Departments and in this House have worked night and day and over weekends to serve the common good. As their employer, it is with great displeasure that the Government must now bring forward the first Bill to reduce the salaries of public servants since 1933. Like the Government of that time, we face enormous challenges and our options are limited.
In my budget speech last week, I set out the Government's strongly held conviction that the only way to reduce the deficit and continue on the road to economic recovery was to reduce Government spending. The cost of providing public services has to be reduced to bring it in line with sustainable revenue levels. Without any correction, day-to-day spending next year would be approximately €58 billion, an increase of €2 billion over this year. This is not sustainable.
The public service pay bill accounts for more than a third of all current spending and is the largest component in the cost of providing public services. In these circumstances, this Government has no option but to reduce public service salaries. I assure the House, as I am sure all Members understand, that this was a very difficult decision. We are well aware that most public servants are not on very high salaries. We know that, like others, they have mortgages to pay and families to support. They have entered into commitments on the basis of certain salaries which they have already seen reduced by the pension levy. I understand the burden all of this places on individual public servants. However, the only way to get out of our current difficulties and return to economic growth is to bring the cost of public services back in line with available revenues which have now gone back to 2003 levels. A reduction in the pay of public servants is a painful but necessary step in the right direction for the future of the country.
As I announced in the budget, the pay cuts will be progressive. Public servants on the highest salaries, including members of the Government, will bear the highest reduction in their pay. Last Friday, I published Report No. 44 of the Review Body on Higher Remuneration in the Public Sector which examined top level rates of pay in the light of the changed budgetary and economic circumstances and benchmarked them against rates for similar posts in other countries of comparable scale, particularly in the eurozone. Following its examination, the review body recommended reductions in pay varying from 8% to 15% and 20% in the case of the Taoiseach.
Due to the time constraints under which it did its work, the review body confined its examination to a sample of grades but recommended that the reductions be extrapolated for other relevant groups. Tables 1 and 2 of section 2 of the Bill set out the extended range of pay reductions as follows: 8% for persons with salaries above €125,000 to less than €165,000; 12% for persons earning from €165,000 to less than €200,000; and 15% to salaries of €200,000 or more. These reductions will take effect from 1 January next. The section provides that the Minister may intervene to address any anomalies that might result from applying straight pay cuts for persons whose pay is just above the cut off point for each band. As recommended by the review body, these permanent cuts in pay will replace the temporary waivers of pay made by some individuals including all members of the Government and Secretaries General of Departments. In some cases individuals have volunteered to take a pay cut over and above that recommended by the review body. Ministers of State and the Leas-Cheann Comhairle, for example, would have been due to take a pay reduction of 8% but they have agreed to take a permanent reduction of 10% and I will propose an amendment to the Bill to make that change tomorrow.
The distinction between a permanent reduction and a temporary waiver seems to be lost on the Deputy.
In the case of Secretaries General, level 1, that is the Secretaries General of the Departments of the Taoiseach and the Department of Finance, a reduction of 15% was recommended by the review body. Both the Secretaries General concerned have volunteered to accept a reduction of 20%.
-----is brought into line with that of the Taoiseach.
The Government has also decided that from 1 July next year, a new reduced pay rate will be introduced for Secretaries General, level 2, to align it with the salary of a Minister. In order to provide an appropriate pay differential-----
While hospital consultants were not among the grades examined by the review body, the Government has decided that reductions should be applied to them on the same basis as other groups at similar salary levels and on their current salary.
While the review body concluded it was constitutionally precluded from recommending a reduction in judicial pay, it pointed out that were it not so precluded it would have considered a downward adjustment. As I told the House last week, the Chief Justice and the presidents of the courts have urged all judges to pay the pension levy and I will make provision in the finance Bill to facilitate these payments.
In the light of the findings of the review body, we have decided there will be no increase in judges' pay during the lifetime of the Government. As I said last week, future Governments may choose, as in the past, to continue this course of action.
The Government has accepted the review body's recommendation that there be no increases in the pay of the higher public service groups, including any adjustments that might otherwise arise under national agreements, before the end of 2012. The Government has also accepted the recommendation that performance-related award schemes in the public service should be suspended. The body remains in favour of moderate performance-related awards when economic circumstances permit.
Table 3 of section 2 of the Bill sets out the rate of reduction to public servants who do not earn more than €125,000. They will have their salaries reduced with effect from 1 January 2010 as follows: a reduction of 5% on the first €30,000 of salary; a reduction of 7.5% on the next €40,000 of salary; and a reduction of 10% on the next €55,000 of salary. The effect of this approach is to provide overall reductions ranging from 5% to just under 8% for the higher paid in that group. The salaries of Oireachtas Members will be reduced in accordance with the recommendations.
Taxable allowances which are related to basic salary, such as overtime, will be cut in line with the relevant salary reductions. Fixed taxable allowances will be reduced by 5% for those with salaries of up to €125,000, and 8% above that. Any allowance or payment which is a reimbursement of an expense will not be reduced.
Section 2 also provides that these reductions will have effect notwithstanding any provision to the contrary under any other legislation, instrument or contract. Practical arrangements are now being made to issue new salary scales to implement the pay reductions in the new year.
It has been suggested that the first €30,000 of pay should be exempt. That would reduce the projected savings on the public service pay bill by approximately a half, some €500 million. As most public servants earn less than €50,000, a progressive reduction must be applied to all public servants' pay if the required savings are to be achieved and no group could be exempted.
I shall outline the main features of the other sections of the Bill. Section 1 defines terms used in the Bill, including the terms "public servant" and "Public Service body". Office holders or employees of the Civil Service, the Garda Síochána, the Permanent Defence Force, local authorities, the Health Service Executive, vocational educational committees, primary and secondary schools, third level institutions and the non-commercial semi-State bodies will be subject to the reductions. In order to avoid any doubt, certain bodies are specifically excluded in the Schedule because of their commercial status or the nature of their mandate which means that public service pay rates do not apply to them. I intend to introduce some amendments to this section tomorrow to ensure it covers the appropriate public service bodies, including the Central Bank and the Financial Services Authority, following a decision by the board of the Central Bank to take account of the proposed general adjustment to public service pay rates in determining remuneration levels.
Given the recent public discussion about pay rates in commercial State-sponsored bodies, I will clarify their position. Pay cuts in commercial State-sponsored bodies such as Bord Gáis and the ESB will have no impact on the public service pay bill because the pay of those bodies is funded through their own commercial efforts. With the exception of chief executives, the Minister for Finance does not control the pay of staff of these bodies. They have not been covered by the public service element of pay rounds in the past and have taken an independent approach to controlling their pay bills, as happened in RTE, where voluntary reductions were agreed by the staff, or in the ESB, where there have been a number of voluntary redundancy schemes. While these companies must be allowed to act commercially and in accordance with the normal industrial relations process, the Government is of the view that pay restraint in these companies fulfils a long-term national interest - namely, ensuring competitive pricing for energy and other goods. However, the market and the regulators will impose such discipline on those bodies.
I remain concerned about pay at the top levels across the economy. In this Bill we are addressing the pay of top public service posts. I propose to bring proposals to Government at an early date to review the arrangements governing the pay of chief executives of the commercial State-sponsored bodies.
I have already outlined the main content of section 2, which provides for reductions in pay rates by amendment of all provisions - including statutory provisions, circulars, instruments and contractual arrangements - which currently fix the remuneration rates of public servants. Section 3 enables the reductions in salary rates to be disregarded for the purpose of calculating pension entitlements for those public servants who have retired or will retire in the period from 1 January 2010 to 31 December 2010. Having considered the potential legal, superannuation and personnel management issues and their impact on the public service, the Minister may extend this period beyond the specified date. A managed retirement rate for older and more experienced public servants over the course of next year, and beyond if necessary, will help avoid disruption of service delivery.
Section 4 affirms that, other than as provided for in the Bill, any purported amendment of a provision fixing the remuneration of a public servant which would increase the remuneration of a public servant has no effect unless it is by a future Act of the Oireachtas or is necessary to reflect a legal entitlement of the public servant or servants in question - for example, because of an equal pay claim under European law. Under Section 5 a public servant has no entitlement to receive a higher rate than that provided for under the legislation, and the employing public service body has no entitlement to pay a higher rate. Any overpayment should be recovered by the public service body concerned; otherwise, the overpayment amount may be withheld from any funding provided to the body concerned.
Section 6 provides a limited power to the Minister of Finance to exempt or vary the reduction in pay rates provided for in the Bill in respect of a public servant or group or class of public servants where exceptional circumstances exist relating to a condition or aspect of employment and a substantial inequity would arise as a consequence or because of an arbitration award that the Government would normally be required to implement. A similar power was provided for in respect of the pension levy. It is intended to exercise this power sparingly and only when just and equitable.
Section 7 requires the provision of an annual report to each House of the Oireachtas reviewing the operation, effectiveness and impact of the legislation and considering whether any or all of the provisions of the Act continue to be necessary, having regard to its purposes, State revenues and the public service pay and pensions bill. The first such report must be submitted by June 2011 at the latest. Section 8 is a standard regulatory power. Section 9 permits disputes as to whether any public servant is affected by the reduction provided for under the Act to be finally determined by the Minister. Section 10 states the Short Title of the Act and provides for its commencement.
The Government's decision to reduce the public service pay bill is no slight of the quality of our public servants, who work hard every day to provide the essential services that underpin our daily lives. Some parts of the public service work better than others, and some sectors need to update their way of working and of dealing with their customers. Not all civil and public servants reach the high standard that is, by and large, the norm. As in all human endeavour, there is always room for improvement.
However, the tone of some recent commentary in the media about the public service has been grossly unfair. It is part of a gladiatorial tendency that serves no useful purpose. It is right that high standards be demanded of public servants and it is to be expected that their job security would come into public focus at a time of recession. However, no good will come from setting sections of the State against each other in this time of difficulty for us all.
There have been some threats of industrial action. I would appeal for a period of reflection rather than reaction and for dialogue rather than recriminations. I do not believe threats of industrial action and refusal to deal with change to our public services will win public support. Nor do I believe it will help us find a basis for agreement on managing the cost of public service pay in this unprecedented economic crisis.
It must be remembered that the Government and the public service unions agreed that the public service pay bill would need to make a significant and proportionate contribution to the necessary adjustment in the public finances in 2010 and subsequent years. We had agreed about the need for a radical transformation of the way in which public services are delivered. Some weeks ago, the Government entered discussions with the trade unions, represented by the public services committee of the ICTU, in response to its proposal that the necessary adjustment could be found by means other than cuts in rates of pay. Parallel discussions took place with the representative bodies of the Garda Síochána and the Defence Forces. I have already acknowledged in the House the efforts made by both sides to reach agreement. Both sides were very open and honest with each other about the basis on which they entered discussions.
During the course of those discussions, the Government acknowledged that public servants have already made a substantial contribution to the necessary reduction in public expenditure in 2010 through the decision of the Government not to implement pay increases under the 2008 transitional agreement, the pension-related deduction of nearly 7% on average, and the effect of the moratorium on recruitment and promotions and the incentivised early retirement and career break schemes. Unfortunately, more was required.
The unions' proposal was based on pursuing payroll reductions through the accelerated implementation of an agenda for change and transformation of the public service. Savings were to arise over time from a more flexible and integrated public service, with easier redeployment, changed work practices and the facilitation of further reductions in numbers through increased productivity. Given that such changes would take some time to put in place, the staff side suggested that an interim approach be taken by deducting 12 days' salary in 2010 on the basis that staff would be required to take 12 days of compulsory unpaid leave in 2010 and later years, with the minimum impact on service delivery. The Government estimated that this could save up to 4.6% of the payroll, or about €750 million, in 2010. The unions estimated a slightly greater saving, although not the figure of nearly €1 billion that is sometimes quoted.
Unfortunately, those proposals did not provide an acceptable alternative. The Government was clear that a basis for agreement would only exist if the scale of the reduction in the public service pay bill was sufficient, and it was not. The reduction needed to be permanent in character, but the compulsory leave proposal was for 2010 only. In addition, the Government made it clear that any transitional arrangements could not have a negative effect on services to the public; but under the unions' proposal, even with close management, some impact on services would inevitably occur. Therefore, the Government was unable to agree to the terms proposed by the unions and took the decision to reduce public service pay. However, I will not apologise for entering into discussions with the public service unions. Any responsible employer would have done the same.
I emphasise that the Government wants to continue its dialogue with the public service unions to deliver the change that all sides know is needed. Public services are about the people that use them. What the public wants is proper delivery of services and for high-quality service delivery to be central to the work of public servants at all levels. To achieve that, we need a public service that is highly productive, applies world-class technology and adapts constantly and with flexibility to underpin the smart economy and sustain full employment and high living standards across the whole community. The performance of organisations and individuals will be better managed and there will be greater accountability, especially for managers. In the public service of the future, public bodies and individual public servants must work across sectoral, organisational and professional boundaries when designing and delivering services and move across those boundaries when need arises. That is the only way we can continue to deliver the necessary services to the people over the next few years when resources will be constrained, even as the economy starts to recover.
We in the Government know that managing public servants' concerns about adapting to change can best be done through constructive engagement, consultation and dialogue. I would hope that the public service unions will re-engage with the Government and public service management so that, together, we can address the issues of how to manage the cost of public service in 2011, and beyond. That way we can achieve the best result for hard-working public servants.
The Government's approach to the transformation of the public service has always been one of consultation and agreement. The Government has a long record of investment in the national partnership structure and, despite the considerable difficulties that we face, we continue to favour a process of dialogue where possible. I hope that, on reflection, the unions will recognise that the Government had to take action to stabilise the public finances and, as an essential element of this, make reduction in the public service pay bill.
I commend the Bill to the House.
As a stand-alone initiative, this set of proposals is indefensible. When the Minister first started to talk about the need for savings of €4 billion, his first thoughts were about an adjustment of €2.5 billion on the spending side. He rightly recognised that this was too little and the implication of a further €1.5 billion coming from tax was not a tenable position.
Has he not travelled dramatically, however, from ending up in a position where the only cut of any substance is in the public service pay bill? We were led to believe the McCarthy report was driving the whole efficiency agenda. Every Department, we were told, was going to have to eliminate waste or find efficiencies equivalent to the McCarthy report's recommendations or more, namely, €5.5 billion in savings, excluding pay. This was the agenda that was to drive the Minister's reform programme. He was taking a fundamentally new approach and we were going to see for the first time a serious attempt to rationalise delivery systems and the whole efficiency agenda being taken on. We were going to see more done with less. This was a radical programme, which we were led to believe was being embarked upon, so that there would be a smaller leaner public service, with the Minister making provision for a scaled reduction of 17,000.
That was a challenging agenda, one that could invite a response to the effect that here at last was a Government that had learned the lessons of its foolishness in previous years and taken on the difficult task of reforming the way we deliver our public services. Is it not extraordinary that, having set out his stall and brought in Professor McCarthy and many estimable people to support it and put his key staff to the task, the Minister ignored the entire agenda that was set out for him, and turned instead to the soft targets, those on welfare and on the public service payroll? Effectively, in what the Minister had billed as one of the most difficult budgets to be put together, 75% paid nothing towards the adjustment. It was all confined to the other 25%.
Worse than that, he asked those on the lowest incomes to take proportionately the biggest cut in their take-home pay. Those on the lowest wage are to have a full 5% reduction in their take-home pay, persons on €125,000 will have a 4% cut while those in the middle will be cut by 3%. Given all the wisdom assembled around the Cabinet table and the myriads of people behind each Minister why was it decided that those on the lowest wage should be asked to take the highest cut? It defies logic and fairness. People looking in, whether public or private sector, cannot fathom why the Minister would decide that those on lowest incomes should proportionately lose most. A cleaner in this House, on a salary of €21,000, is being asked to take the full brunt of this cut, whereas it does not apply with the same degree of severity as one goes up the income scale. There is neither justice nor fairness in that.
Then, once again, we find judges are left out. How can we countenance such a situation out? Why should those who are among some of the highest paid people in the land and who sit in judgment on the rest, be outside this? Deputy Alan Shatter has offered to frame a constitutional change, and we will be having such an initiative next year for children. Why not deal with this and let us not have some privileged group, on the outside, not experiencing the same cuts?
I am sure the Minister and I share similar experiences at political clinic level, with low-paid and middle grade public servants attending, telling of their ambitions to pay their mortgages and car loans and put their children through college. They are facing not one, but two cuts, even those on very modest pay. Why does the Minister believe such people should bear the full brunt of the cuts? Why has he not graded contributions, in the way our party proposed, as regards dealing with the finances? I cannot understand the fairness of the Minister's approach. I have come across many such cases, as I am sure the Minister will, when he gets time to attend his advice centres, and he will see that these are genuine people. They were sucked along in the "sustainable economy" that the Minister's predecessors talked about, the property bubble, and they paid appalling prices for houses. They are now being screwed to the wall.
This is very tough and the way the budget has been put together bears all the hallmarks, not of a genuine attempt to find a way that is fair, getting the broadest shoulders to take the greatest adjustment, but rather of something that was cobbled together at the last minute. Having failed with regard to the more ambitious programme of reform he wanted to deliver, the Minister had to fall back on this, and it bears all the hallmarks of that.
I believe the Minister will be forced to back down with regard to the hit being imposed on those at the lowest income levels. As he was forced to back down on the pensions levy, he will be forced to back down on this, although perhaps not today or tomorrow, since he might have his numbers in a row to get him through this. However, over time as he tries to sit down, as he says he wants to, with the representatives of those employed in the public service to address the challenge of reform, getting more with less, he will not be able to sell this as an element. It defies belief why he has included it. Perhaps he has some type of Machiavellian plan to the effect that this is about a bargaining chip he could take off the table. It is unfair and unjust and it puts a great many people through heartache. It cannot be defended as a measure that reflects the Minister's previous pronouncements with regard to expecting those with the broadest shoulders to take the burden and trying to protect the vulnerable. These were the terms being used by the Minister and his colleagues, and this was the thinking we were led to believe was informing the budget. All that language and commitment was thrown out as the Minister cobbled together this proposal.
The Minister talked here about the importance and commitment of the public service, and the ethic that inspires it. However, his Government has, single-handedly, undermined that ethic. It did it through benchmarking, by paying out money without reform. Now, with our backs to the wall, he is once again taking back money, again without reform. This was done with decentralisation when for political reasons it was decided that people could be moved around, like pawns on a board, to satisfy short-term political needs. This destroyed some of the skills base of the public service which would now stand us in good stead as we try to reform delivery mechanisms. Those people were abandoned and let disappear into the woodwork because Fianna Fáil wanted to fulfil a political goal of delivering 10,000 jobs to marginal constituencies. That was an abuse of the public service.
The Government then introduced its reforms of the HSE and refused to do what clearly needed to be done. If there is to be a super command and control bureaucracy, some of the middle management structures must be taken out in order to achieve savings. The Government refused to accept that, so how can it now convince the public that it wants to champion professional standards in the public service? It has been consistently telling people in the public service that it does care about professional standards, or the quality of leadership within Departments. It was content to scatter people to the four winds to meet political needs. Rather than caring about performance and reform, it was content to throw away money without asking for reform to be delivered.
This is the background to what has us in this hole. It explains why it is so appalling when the political leadership created the problem in our public service, that the Minister turns to the lowest paid to carry the biggest burden to correct it. That is what people find so appalling. It is not just the injustice of it, but also the inactivity and negligence of the Government by the Minister's party that put us in this hole we are now trying to address. McCarthy was an encouraging sign. We were to have 43 major-----
Yes, we were to have 43 major rationalisations, but how many did the Minister adopt? None. We were to have a major assault on the administrative budgets of Departments. What has the Minister done? He has taken 1% out of the departmental administrative budgets. We were to have an efficiency agenda that was to deliver close to €3 billion in cuts, but what did the Minister do? He abandoned 85% of that. Where were the 15 absent members working to deliver a smarter system, so that they could eliminate the waste and inefficiency in their areas and start to give us something better? They just funked it. They ran for the hills and opted instead for the simple thing of hitting public pay. That is what people find hard to believe.
Maybe it is this broader agenda of competitiveness that the Minister has, and I note that he said he is now going to review the pay of commercial semi-State bodies. It is about time. The chief executive of Coillte is on €475,000 - how can the Minister justify that? If he wants people to accept that the Government is taking competitiveness seriously, where is his assault on the utility prices presented by monopolies which are way out of line internationally? Where is the assault on commercial rents that are killing businesses? Where is the assault on the cost of credit? Last week, the banks told us that despite NAMA and the taxpayer shouldering all of this, it will not come down one whit as a result of the effort we are making. Where is the confrontation on the rip-off we see every day in our shops? The Minister can see the price comparisons as well as I can. A bottle of whiskey in Northern Ireland costs less than half the price of a bottle down here. That is not explained by tax because there are many other factors.
People would be convinced that the Government was trying to deal with rip-offs and unfair advantage being taken of them if they had cheaper college registration fees and rents, as well as lower prices across the board. If the Minister was leading a campaign to bring down costs, people would say: "Well, at least, I can see what he is driving at. This is about making our economy more effective right across the board. We are all going to be in this together." There is none of that, however. It is solely targeted at one group and the Minister is not delivering the competitiveness agenda.
Despite the National Competitiveness Council setting out an annual agenda for what needs to be done, the Government has never produced an action plan for competitiveness. It has failed again this year. It is supposed to be a theme underlying the budget, but as far as the Minister is concerned, only one group is undermining our competitiveness, which is public service workers. That is not the truth, however. If the Minister wants to see everyone putting their shoulder to the wheel and confronting the economic problems, he cannot have a budget that so blatantly singles out one group, pretending that it is at the heart of the problem. The Minister says it is damaging to have banter between the public and private sectors, and he blames the media for creating it. However, he is fuelling it by not having a balanced budget and not recognising that we must confront costs everywhere if we are to get out of this hole. The Government is unwilling to do things smarter by making efficiency the key. This is not all about cutting pay; it must also be about doing things more cleverly so that we do not have to cut the pay or entitlements of those working on the front line. That is what I find depressing about the budget.
The Minister found €1 billion in welfare cuts and more when one sees what are masquerading as health cuts. He found over €1 billion from pay cuts, but when he tried to squeeze something out of the top-heavy bureaucracy, he only got €500 million. That was not balanced and was clearly not what was intended. We need to confront that issue.
The Minister has introduced changes in pensions, but people deserve to see the colour of the Minister's thinking on this matter. Taking someone at the bottom end of the scale, actuarially, the value of a cleaner's pension is probably 8% or a maximum of 10%. The Minister has already hit them with a 6% pension levy, and he is now hitting them with 7% on top of that. He says he will remove the indexation arrangements they had in the past, which he claims will cut the cost of pensions by 20%. If he is whittling away at some of the benefits, is there not a significant category of worker which is paying the pension levy without having a commensurate benefit?
What does the Minister say about new recruits? We are told that anyone who joins the public service now will be on a new regime. Will they have to pay the pension levy or not? The Minister has raised the pension issue, so we need to have a much more detailed debate than he is offering. People deserve to see what is happening. Given the way the Minister is eroding the State's contribution to public service pensions, he is whittling away the benefits while at the same time asking them to-----
Yes, that needs to be addressed. We need to see that up front. Not only has the Minister hit people immediately, but he has also created the fear that he will now dramatically change the terms under which they get pensions. At a time when they are still smarting from the payment of a pension levy, it seems less than fair that the Minister would not address this wider agenda.
We need to have a good debate about this on Committee Stage. This is a time of great risk to our community and the challenge to employment in this State is enormous. We have already lost one eighth of our private sector jobs and many people have been affected as a result. We run the risk of doing untold damage to our economy. I can understand - indeed, I accept - that public pay was going to be part of an adjustment factor. However, the way in which the Minister has pitched this does not illustrate to people that the success of this economy is when the public and private sectors are working together to a common purpose. It is vital to have that sense of an economic plan that we can all get behind, but such a plan has been singularly absent from the Minister's thinking.
As far as I can gather from those I have met in the trade union movement, the greatest frustration for them is that the Minister does not have a vigorous employment strategy to get us out of here. Many people, including trade union leaders, were willing to accept pain if it was in the service of a greater purpose. The Minister has let that opportunity slip through his fingers, however. We needed to have that greater purpose at the core of this budgetary adjustment. The Minister should have said: "Yes, we have fiscal constraints, but we have a plan which is about creating a strong, export-driven economy." The Government destroyed that by allowing a property bubble to get pumped up.
The core of his strategy should have been to examine how a strong, export-growth economy could be rebuilt. Within that, adjustment of public service pay was one brick in a foundation of many other elements. It was reduced to one element, however, solely for political reasons. The Minister found the reform agenda too broad to push through, so it was easier to reduce it to one group who were being asked to take the pain. That was a major mistake. Everyone must have a sense that we are under siege and that we are fighting for our economic independence. We are also fighting to keep young people employed at home, rather than taking the emigrant boat. We must obtain a broad-based strategy to address this problem.
The Minister bottled the reform agenda and failed to deliver fairness. I defy anyone on the Government backbenches to say his structure of pay cuts is fair. The after-tax impact of this is greater on the lowest paid than on the highest paid and that is not fair. The Minister has damaged the sense of cohesion we need in this community to address our problems. He should have taken the harder road of more reform. I agree he should cut some public service pay, but there should be a greater contribution from wealthy people in the private sector. Taking more from these people is not about chasing the economy down with higher taxes. The problem last year was the Minister looked for taxes from everyone, even from those on the lowest levels of pay. There are people who could have taken more pain, but the Minister did not ask them to do that. He squandered the chance to get the community working behind a programme people felt was worth the effort. This is what has gone wrong. The Minister has left us with a situation where many in the public service are furious, angry and pained and not in a mood to contribute to the adjustment.
We will have to persuade people that change is important and that change can prevent us from being back in the same hole next year and having to hit people at the front line in regard to their entitlements. We need to get people back into negotiations, but the Minister has jeopardised that. This was a foolish mistake that came about as a result of not enough thinking going into the budget. It was all a last minute, midnight effort and that is what undermines it.
I look forward to the debate and, hopefully, the Minister will be willing to accept changes on Committee Stage. Those changes are needed to put this proposal back into a context of fairness. Fine Gael will put forward proposals that will be cost neutral and that will achieve an exemption for those on a salary of less than €30,000.
I move amendment No. 1:
To delete all words after "That" and substitute the following:
"Dáil Éireann declines to give a second reading to the Financial Emergency Measures in the Public Interest (No. 2) Bill 2009 having regard to the decision of the Government to collapse talks with the public service unions that could have delivered major public service reforms and the savings required in the public sector wage bill and the unfair nature of the wage cuts provided for in the Bill, particularly for low paid workers.".
Fianna Fáil, backed by the Green Party and Independents, has brought forward this Bill, to reduce the pay of every employee of the State. The Labour Party opposes it because it is unfair, unjust and unwise. The Bill is unfair because those on the lowest levels of pay – the workers who are paid less than €600 per week – will see their income cut by 5%, while the same budget took little or nothing from those earning more than €6,000 a week. It is unfair because this is the second time in a year that the same public sector workers are being hit with a special pay cut, on top of the income levies and cuts being experienced by everyone else. It is unfair also because, as we heard from the Minister, Deputy Lenihan, at the weekend, Fianna Fáil intends to come back for more pay cuts next year and pension cuts after that.
This Bill is unjust because it will enable Fianna Fáil to loot the incomes of public servants in order to pay for the mess it has made of our good economy. Fianna Fáil is raiding the pockets of nurses, gardaí and hospital cleaners to pay for the crisis in which its favoured treatment of property developers and greedy bankers has landed us. It is unjust too because these cuts are the culmination of a nasty, Fianna Fáil-inspired campaign which has divided our country against itself. Fianna Fáil sowed the poisonous seeds of division, and turned a crisis of its making – in the construction and banking sectors – into a crisis in public spending where it could justify cutting public sector pay.
This Bill is unwise because the public sector pay bill could have been reduced in a better way, a way which would have delivered not just pay savings, but the long-term and permanent reform of the public service itself. This Government is too short-sighted to look beyond the next headline. That long-term, permanent reform of public services was on offer from the trade unions representing public sector workers, but it was rejected by a stupid Government which reneged on the reforms it had already agreed because it chose to look tough rather than get results. Cutting public servants' pay is the easy option. It avoids the need for a forensic examination of Government waste, duplication of services, and overarching patronage in the past 12 years. It means there will be no drive to reform.
Let us be clear about why we are here tonight. We are here because Fianna Fáil colluded with big developer donors and its elite friends in the banks to fuel an unsustainable property bubble. It did nothing to moderate the house prices and commercial rents that made it more expensive to live in Ireland than in almost any other country in the world.
Wages, both in the public and the private sectors, inevitably raced to catch up with mortgages.
I agree, there was a lot of money being made in those years, but it was not being made by the young couples, including many young teachers and civil servants, who took out enormous mortgages to pay for modest houses. Now that the bubble has burst, those homeowners are trapped in negative equity and many have lost their jobs or taken a pay cut. The people who profited at their expense are laughing all the way to the taxpayer guaranteed banks. No multimillionaire developer will lose his luxury home in this recession. No banker, pensioned off for millions after dragging our banking system into the gutter, will struggle to pay for Christmas at the end of the month. However, public servants, who have already taken an average 13% cut in pay in the past 12 months, on top of new income tax levies and cuts in child care payments and benefit, will struggle. The decision by this Fianna Fáil-Green Government to inflict an across the board public service pay cut, from the cleaner who starts work at 4 a.m. to the university head whose office she cleans, is not only extremely unjust, but extremely unwise, short-sighted and ill-judged.
Consider what the Government had won in the negotiations. It had consensus on the need for a €1.3 billion reduction in the public service pay bill, not just from the public sector unions, but also from the main Opposition parties. It had sector by sector agreements that would have delivered far-reaching reforms of how the public sector is organised, and public services delivered. For example, a working day in the health sector would have run from 8 a.m. to 8 p.m., with overtime being paid only outside of these hours. We know from an bord snip that up to €575 million in HSE staffing efficiencies could be achieved, between reformed working practices, redeployment and other efficiencies. All in all, the Government and the public sector unions had agreed permanent savings of hundreds of million euro a year.
However, despite this unprecedented level of agreement on public sector reform and reductions in the public sector pay bill, the Government chose to move the goalposts and deliberately collapse the talks. Political expediency won out over political vision. The Government did this to court political popularity and to serve the agenda to drive down pay levels, not just in the public sector, but in the private sector as well. Instead of having the bottle to drive a programme of reform in the public service that would have delivered permanent savings and better services, it took the easy option of imposing a harsh pay cut on all public servants, from the bottom up. In doing so, it lost an invaluable opportunity to improve public service delivery for less money. Our public services need to be reformed and no-one knows this better than public servants themselves who have to deal with bureaucratic inefficiencies, restrictive work practices and a promotion structure that favours hierarchy over hard work and talent.
The Labour Party has been proposing public service reforms for a number of years, but these proposals have been ignored by Fianna Fáil. We have suggested more efficient ways of scrutinising public expenditure so that doubling up of quangos or costly mistakes like e-voting can be avoided. We have proposed more flexible redeployment across the public sector so that public servants can be used where they are needed most. We have proposed opening up recruitment to allow talent to circulate more freely within and between the public and private sectors.
There has been no shortage of reports detailing what reforms are needed in the public sector, most recently, the OECD report on public services and the Government document, Transforming Public Services, which was published last November. What has been in short supply is the political will to implement the necessary reforms. For the past decade, Fianna Fáil took the advice of Charlie McCreevy and partied on with taxpayers' money. It papered over the cracks with booming Exchequer returns built on the shifting sands of the property market, throwing money at the symptoms of problems rather than addressing their root cause. Again and again, Fianna Fáil chose the easy option of increasing the public pay bill rather than reforming the services. Now we have arrived at the flip side of that misguided policy; cut the pay of public servants, instead of reforming the services. No doubt that will please those hard-line commentators, many of them the paid lackeys of the banks, who have been calling for pain to be inflicted on nurses, gardaí and local authority workers. At times the invective against public servants has been so harsh that one would be forgiven for believing it was the nurses from accident and emergency departments who borrowed all the money to speculate on development land, that it was the local authority librarians who lent them the money and not the bankers and that it must have been the gardaí who were running the banks.
The Bill before the House will unilaterally change the contracts of employment of approximately 350,000 employees of the State. The Labour Party has been consistent in opposing unilateral, across-the-board pay cuts and in its argument that the pay bill can be better reduced by negotiation and reform. The party has been criticised for that. It is suggested that our defence of public services and of people's contracts of employment is because we have a soft spot for the public service unions.
Let me be clear that the Labour Party is beholden to no special interest, trade union or other body. As I stated at a recent SIPTU conference, a Labour Party Government would not be a trade union Government but a Government of all the people. I make no apology for standing up for the fire fighters and gardaí who risk their safety so we can all be safer, for the teachers who devote their energies to ensuring our children can learn better, for the nurses and health care workers who look after our sick, and for the council workers who grit the road on a frosty winter's morning or who stay up all night to help people save their flooded homes. The Labour Party believes in, and values, public services. It believes health, education, transport and infrastructure should be publicly provided.
The divide between the public and private sectors is a false one. A civilised society depends on good public services and every democracy depends on an efficient civil service. An enterprising economy needs the support of an efficient public sector to educate its workforce, support research and innovation in universities, build an efficient, joined-up transport infrastructure, regulate markets, protect consumers and build relationships with trading partners abroad. There are those who disagree and who argue for a circumscribed public sector, a weaker State, small-scale government and light regulation. However, the role of public services is to look after the public interest, that is, the interest of every single citizen in this State, however exalted or however humble his or her circumstances. We diminish, shrink and relinquish control of them at our peril.
We need an effective and efficient public service that is capable of protecting the public interest, be it in respect of education, the environment or the regulation of banks. However, one will never get this from staff who are under-valued, publicly maligned and demoralised. One will get it by respecting those who deliver our services, by valuing and encouraging what they do and, it is true, by obtaining better value for taxpayers' money. We need a motivated, fairly rewarded public service that will be always able to attract the most competent and public-spirited of its generation.
Many of those who belittle and demean public servants do not believe in public services in the first place. Some of them are motivated by self-interest in that a diminished public service opens up business opportunities for them. We need look no further than the hotel-quality super-private clinics built on public land a few hundred yards from chaotic and crowded public accident and emergency departments.
Fianna Fáil has firmly joined with those who are hostile to public service. It has turned its back on public servants, many of whom stayed loyal to that party down the decades, through Taca and the tribunals. It has done so because it has been persuaded that the electoral pickings are richer among those who do not value public services and who do not respect public servants. Instead of making the argument for better public services from which every man, woman and child can benefit and instead of obtaining better value for money in those services, it chooses to pursue its own political advantage and drive a wedge between public sector and private sector workers. This is a divisive and dangerous strategy which has no regard for our long-term economic recovery.
Our country is in an economic mess, a mess of Fianna Fáil's making. To get out of it, we must all pull together and not pull ourselves apart. We do not need to add to our own suffering through the conflict that is now being whipped up by a cynical, out-of-touch, short-sighted Fianna Fáil Government.
The Labour Party has been calling for a national recovery plan for a number of months. The Government has the opportunity tonight to abandon the unfair, divisive course it has taken and reopen negotiations with public sector employees and their unions. For the sake of national unity, the agenda must include a coherent jobs plan to get people back to work, or into quality education or training; a home guarantee, with statutory backing so people facing difficulties in meeting mortgage repayments will not be put out of their homes for the period of the recession; a fair and progressive approach to fixing the public finances; a negotiated deal to reduce the public sector pay bill and to ensure permanent efficiencies and better delivery in the public services; and a guarantee of industrial peace from the trade unions. What our country needs is solutions, not civil disorder and strife.
It is time to stop scapegoating public servants and to get on with the urgent business of establishing a sustainable path of recovery for our public finances and our economy. It is time to put the long-term public interest ahead of short-term political gain.
When the Minister spoke about the Judiciary, I wondered whether he seriously expects a garda or other public servant attending a public court to take the kinds of cuts provided for in this Bill while the judge presiding over that court has an option in respect of cuts. There could not be a more dispiriting example of a lack of moral authority. Judges presiding over courts, most of whom are on highly attractive salaries, usually following very successful and lucrative careers at the bar, and who enjoy speeded up pension provisions that acknowledge their position as judges, have a choice as to whether to accept a pay cut, while gardaí, court officers and other court staff must accept fairly swinging cuts that are not optional but directed. Bearing in mind that Mr. Éamon de Valera once declared that no man was worth more than €1,000 per year and employed this principle ruthlessly, the Minister ought to think about some of the founders and example-setters of his party.
Several judges commented that there is nothing to prevent the Minister from introducing legislation on the Judiciary. If the Judiciary wishes to challenge it, let it do so. The Constitution seeks to protect the Judiciary where a judge makes a ruling on which the ruling Government disagrees or where that Government tries to take revenge on a judge because he or she is acting in an independent judicial capacity.
The Labour Party put forward an alternative proposal. It was fair and tough in terms of public service reform. I do not understand and have not heard the Minister explain why many of the necessary public service reforms, be they those identified in the McCarthy report or those identified by Ministers at different times in speeches to this House, appear to have been parked. The deal that was to be struck between the public service unions and the Government put great emphasis on delivering real public service reform. Many of the reforms that were indicated for delivery during the time of "Boomtime Bertie" and "When I have it, I spend it Charlie" were parked. I just do not understand the Taoiseach's approach.
According to the Revenue figures for 2007, nine out of every 20 people working in the public service earn less than €30,000. A part-time cleaner in the public service earning less than €10,000 per year will suffer from the same 5% cut as a clerical officer earning €30,000 per year. Deputy Brian Lenihan, as Minister for Finance, will appreciate that while this Bill refers to cuts in gross pay, the impact on net take-home pay will be critical. The marginal rate of tax for somebody earning €10,000 per year is 0% because he or she does not pay tax. Such individuals usually do not pay PRSI because their employers takes care of that. Their gross cut will be also their net cut whereas every other public servant earning from €30,000 to €300,000, including the Taoiseach and senior secretaries general, will only have a net cut as was the same with the pension levy. At least in the pension levy the Minister for Finance exempted the first tranche of income, taking out those on the lowest levels. It is deeply regrettable he did not follow that example with these cuts. Instead, the part-time cleaner on €10,000 a year will pay a full gross and net 5% back to the Government in a salary deduction.
The average salary of employees at the National Treasury Management Agency, from what I have been able to glean, is €120,000. While I accept the agency's staff do good work for the State, they will not be hit at all because it and several other institutions have been exempted in the legislation. Our failed financial sector - the banks- and the public bodies such as the Central Bank and the Financial Regulator which failed to regulate them are also exempted from this legislation.
In the report of the higher level review body, published on Friday, salaries of €300,000 are attributed to Secretaries General who will take a 15% cut. In the Schedule, they are offering 20% which is net of the 20% reduction that they apparently already offered up. The gardaí and the nurses will be offering up a real 7% while some higher civil servants will be simply offering an additional net, falling well below the reduction to be borne by the former. The arithmetic is not set out clearly. However, I assume the Minister will give us these amendments to examine.
Why is the National Treasury Management Agency exempt from this legislation? While it works hard on behalf of the people, it was reported its chief executive's salary has a compensation package that may total €1 million. According to figures supplied to the Labour Party, the managing director of Coillte, a public body with an annual turnover of €250 million, has a salary package of €489,000 but will also be exempt from this legislation. It is grotesquely unfair that the Minister asks the part-time cleaner in the public service to take a 5% net hit while not asking those in the upper echelons to do so.
Anglo Irish Bank is one of the reasons the gardaí, the nurses and the teachers are taking hits in their income. It is a fully nationalised institution but yet it appears on the list of exempted bodies. I do not know whether the Minister cares to nod in agreement with my interpretation of this provision.
Definitions covered by the Bill have been extended to include people working for any body that is wholly or partly funded or indirectly out of moneys provided by the Oireachtas, the Central Fund or the growing produce of that fund. Section 39 of the 2004 health Act provides for payments to home helps. According to the legal advice available to the Labour Party, this Bill will apply to home helps who will be affected by this extension of the definition. Does the Minister intend to cut the salaries of home helps when many of them are already having their hours cut?
Many care homes run by a voluntary body, religious order or a charity may have their beds subvented from public funds. How will this legislation affect those working in this sector? How will it affect those employed by partnerships, community development programmes and family resource centres, all funded by various Departments? While many of them are paid through public funds, they do not get the benefit of a public service pension as they pay PRSI or contribute to their own pension scheme. Is the Minister seriously telling us that these pay reduction measures will not apply to employees of Anglo Irish Bank but will apply to publicly funded home helps and those working in nursing homes and family resource centres?
The public service unions worked out a formula for the proposal of 12 days of unpaid leave to be spread over several years, a sort of carry-over. It was unacceptable to everyone that this proposal would involve the closure of schools or other public facilities, hence this carry-over provision. However, as the Minister for Finance will be aware, under our tax laws Anglo Irish Bank's golden circle can carry forward their losses on the putative investment made on their behalf, running to about €450 million, not for six years but indefinitely.
Under the de minimus rule, which the Taoiseach introduced when he was Minister for Finance after a long campaign by myself, an individual can bring one's tax payment up to the 20% rate - next year the Minister said in the budget it will be 30%. However, if that individual foregoes any tax reliefs, he or she can carry them forward not for six years but indefinitely. When I raised the issue of tax losses for the banks with the Minister during the debate on the NAMA legislation, he claimed he would restrict them for a period. However, he later wrote into the legislation that the tax losses could be recovered in not one or six years but indefinitely. Perhaps the public sector trade union leaders have been and are so involved in the top echelons of government that they have been told about this spread out system whereby if one has tax allowances one can carry them forward and use them forever. Perhaps that is from where they got the idea. This notion of carry forward and pay back over a long period is absolutely central to large elements of the tax code. Perhaps the public service unions were confused because they had already seen this principle applied by Government to their friends in the banks.
I understand - perhaps the Minister will state on the record if this is correct - that the new regulator of the Financial Services Regulatory Authority, to be included in the new Central Bank structure, whom I am told is a fine individual and will bring many skills to the post, is to be paid a package in the region of €100,000 to €150,000 more than the previous incumbent, Mr. Neary. I have tabled a number of parliamentary questions in this regard to the Minister. I understand, informally, that that is the case. How can the Minister square the possibility of the Financial Regulator getting a significant salary increase - the Minister does not appear to be denying this and it was defended by the Governor of the Central Bank in his speech as being necessary - with the real and serious cuts to be imposed on the pay of nurses, garda and teachers from 1 January? The Minister also defended a salary of €500,000 as being necessary in respect of top bankers.
The Taoiseach has stated before that we are all in this together. While some of us are in it, the golden circle of Fianna Fáil, the developers, their tax breaks and tax entitlements, remain untouched by this legislation. The Government has kept the golden circle and their entitlements in tact in this legislation.
Billy Kelleher (Minister of State with special responsibility for Trade and Commerce, Department of Enterprise, Trade and Employment; Cork North Central, Fianna Fail)
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I welcome the opportunity to speak on the Financial Measures in the Public Interest (No. 2) Bill 2009. I do not have much time and would like to refer to some of the issues raised by Deputy Burton in the context of her contribution.
Having listened to the debate in the context of preparations for budget 2010 and the discussions that went on outside this Chamber in the context of divisions between the private and public sectors and the accusation that this was orchestrated, as a Member of this House and previously a Member of the Seanad, I have worked with civil servants and the public sector in general and found them to be courteous, professional and of the highest integrity. Insinuations that Fianna Fáil was trying to diminish the role of the public sector or Civil Service in terms of the carrying out of their duties is dishonest and unfair.
The Government has since 1997 supported social partnership and the trade union movement in their discussions with the employers and in the context of Government. Unfortunately, this time around we were unable to come to a conclusion to address what is a serious situation, one that could not be allowed to continue in terms of the deficit that was appearing in the public finances. We, in this House, must be honest and acknowledge that the public finances going forward without adjustment were not sustainable. We have taken difficult decisions in previous budgets with the introduction of the pension levy and in respect of public expenditure cuts. This must also be acknowledged regarding the preparations for budget 2010. We have already had substantial financial adjustments to the public expenditure figures.
It is disingenuous of people to say that we could have done this without pain or by means which would have ensured people did not notice a reduction in their salaries or social welfare payments. In my humble opinion, that is disingenuous and dishonest. The Government took a difficult decision, one that does not rest lightly on the shoulders of the Minister for Finance, Government or any Member of Fianna Fáil, the Green Party or Independents who are supporting this budget. We are fully aware of the contribution of the public sector and Civil Service in the provision of services to the people of Ireland. We would be doing ourselves a disservice if we did not point out that we could not continue to sustain the level of payments in the context of social welfare and public sector pay. The Minister has brought forward this particular Bill which in time will ensure our finances are sustainable not alone to protect services but to protect our not being in a position to pay people, which is a reality.
The vast majority of public sector workers earn less than €50,000 per annum. It is not possible to make savings or adjustments, as suggested by some people opposite, by imposing all the reductions at the higher level. That simply would not have achieved the savings we required in the context of €1 billion from the public sector pay purse. We have a progressive tax system in this country. Whether Members opposite accept it or not, those who earn most pay most. They are the facts and that is the reality. In terms of the public sector pension levy, those who earn more pay most as is clearly evident in this Bill. We are asking people in all sectors of the public sector to carry their fair share. These decisions are never easy for a Government, in particular a Government that has been supportive of and invested hugely in the public sector, not alone in terms of industrial relations and remuneration but in the provision of public services across the spectrum, including in education, health, social welfare and infrastructure. We have invested huge sums of money in this area and all of this money is handled by the Civil Service and the public sector or spent on the public through the public sector. For people to waltz into this House and cast the aspersion that this Government has no feeling or understanding of the difficulties facing people is unfair. I am sure all Members know somebody, a relative, friend, neighbour or family member, who works in the public sector or Civil Service. The Government is acutely aware of the difficulties they are facing, in particular those in receipt of low pay. Given their demographics and age profile these are often people who have mortgages and family commitments. Those people who say there is an easier way of doing this are not doing this debate or those listening outside a service. They are being disingenuous and, at the very least, dishonest.
The usual allegations with regard to the policies pursued by previous Governments since 1997 have been thrown across the floor. Everybody acknowledges that huge strides have been made in the provision of public services. There has been investment across all areas, including in infrastructure in terms of the development of motorways and railways and in educational and hospital expansion. Also, the number of people employed in the provision of those services has increased dramatically in recent years. I remind Deputies opposite that Fianna Fáil in coalition with others during the past 12 years has been responsible for expanding the public services beyond our wildest imagination. We are in a changed dynamic. Those people who suggest that it was the internal decisions of Government since 1997 that brought about the difficulties in our public finances are not living in the real world. If that is the case Fianna Fáil could be accused of bringing down Lehman Bros and of undermining the economies of the European Union and across the world. It is just not credible to suggest that all of this is the result of internal difficulties in Ireland. We lost competitiveness during the boom. I accept there was an over-reliance on the bubble that developed in property market. Equally, however, many people were employed for many years in the property and construction area. I never heard any Members opposite suggesting we should have done something differently to dampen the property market, which was a huge generator of employment and opportunities for many people. Members opposite are crying crocodile tears, which beggars belief to a certain extent.
It is important that we are honest and understand that many families are experiencing difficulties in terms of redundancy and job losses. For a large number of people this budget gives only a glimmer of hope. They hope it will re-balance the public finances, stimulate growth and provide opportunities in the context of job creation. More than 400,000 people have lost jobs and are currently unemployed.