Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I move: "That the Bill be now read a Second Time."

The Financial Emergency Measures in the Public Interest (No 2) Bill 2010 gives legislative effect to a number of the important measures decided on by the Government and announced in the national recovery plan and budget 2011. These are difficult but necessary measures which Ireland must take to secure the budgetary position and promote national recovery.

In summary, this Bill reduces some public service pensions by 4% on average to save €100 million in 2011; applies a further substantial reduction to the pay of the Taoiseach, the Tánaiste and Ministers; and amends the National Minimum Wage Act 2000 to allow the Minister for Enterprise, Trade and Innovation to set a new national minimum wage and give effect to the Government's decision to reduce the minimum hourly rate from €8.65 to €7.65 an hour.

These measures are an essential part of the strategy decided on by the Government, a strategy which we must begin to implement immediately if we are to bring order to the public finances and restore the competitiveness of the economy. I assure the House that the Government has not decided to reduce pensions or the minimum wage lightly. All of us wish that Ireland was not in this position and that our society did not have to face such difficult choices but the Government must act in the public interest and, in view of the severe constraints now confronting the economy, we have decided that the wider public interest requires that these measures be introduced. Since the House passed the two Financial Emergency Measures in the Public Interest Acts last year our economic position has become more difficult. Ireland is now in a position where we have had to seek external assistance from the IMF and the EU. Without any correction, the level of public expenditure on pensions is simply not sustainable. Either this House acts now to deal with the problem or the necessary actions will be imposed at some stage in the future.

It is important to stress that the Government is also sharing the burden. In asking others to accept income reductions, this Bill shows that the Taoiseach, Tánaiste and Ministers are accepting significant reductions in their own incomes. Ministerial pensions will also be reduced as part of the measures being introduced for the entire public service.

Considerable controversy arose today regarding the payment of bank bonuses by AIB. The legislation introduced on foot of the State guarantee prohibits the payment of performance bonuses to senior executives and this continues to be the case. Certain bonuses have been paid to a range of bank employees for performance in previous years where pre-existing contractual rights have been built up and legal action was taken by employees to enforce their rights. The schemes where such rights were accrued have been withdrawn since State support was given to the banks. I made it clear yesterday and I repeat today that no bonus has been paid to senior bankers for 2009 and 2010.

The AIB executive chairman, David Hodgkinson, has indicated that 2,400 workers will receive an average bonus of €16,700 in respect of moneys owed for duties performed prior to 2008. I welcome that he has clarified that the payments relate to a culture in AIB which he believes belongs to the past and will not relate to the future of the bank. He noted that the issues faced by the bank means that it currently relies on the support of the Government and taxpayers and he is working to ensure that in future the bank's pay and benefit policy is more reflective of its responsibilities, performance and the economic climate in general. I welcome the statement by the chairman of AIB.

The measures contained in this Bill point to the future. They are prospective rather than retrospective. They deal with the future and not the past.

Lest there be a lingering doubt in any mind about the position of the Government on this, I have made it clear that no bonuses have been paid to senior bankers in 2009 and 2010 and, as far as the future is concerned, I propose to introduce an amendment to the Finance Bill to put this matter beyond any doubt and provide a 90% rate of charge on any banker's bonus. That should copperfasten this matter and put it beyond any doubt whatsoever.

It is the Government's strongly held conviction that the primary means by which we must reduce the deficit and continue on the road to economic recovery is to reduce Government spending. The cost of providing public services has to be reduced to bring it in line with sustainable revenue levels. That is why this legislation has been introduced.

The Bill reduces some public service pensions by about 4% on average, a step which will save some €100 million in 2011. It is not often recognised that many public service pensions are very low. Data for the Civil Service show that about 25% of pensioners have pensions of €5,000 a year or less, while 40% of pensioners have a pension of €10,000 a year or less. It is the case, of course, that many of these pensioners had short service, others may be survivors or dependants of retired civil servants, and some may be also entitled to a state pension. No matter what the causes may be, the fact remains that the pension being paid to these older people after their working lives is small. There is every reason to think a similar pattern is repeated throughout the public service.

We have to protect the many public servants and their survivors and dependants who rely on low pensions. Pensioners do not have easy ways of finding new sources of income or reducing their expenditure and, since their incomes are already low, it is entirely appropriate to protect those on public service pensions broadly equivalent to the state pension.

Accordingly, the Government has decided that the first €12,000 of pension will be entirely exempt from the reduction. All public service pensions which are equal to or less than this amount - an amount broadly equivalent to the state pension - will not be reduced. Above this level of €12,000 a year, public service pensions will be reduced in accordance with the income bands and rates in section 2 of the Bill. This tiered approach ensures that those with higher public service pensions make a greater contribution than those receiving lower pensions. The rates and bands are set out in section 2 with a 0% reduction on the first €12,000, 6% on the next €12,000, 9% on the next €36,000 and 12% on the remainder of pension income.

The Government is satisfied that this is a progressive and proportionate approach, taking account of the need to protect pensioners on low incomes as much as possible. For example, a public service pension of €15,000 a year will be reduced by €180 or just more than 1% annually. A pension of €25,000 a year will be reduced by €810 or 3.2%. On the other hand, a person with a pension of €80,000 will see a reduction of €6,360 or 8% a year in that pension. It is right that those with larger pension income will see the largest reductions. Former public servants in receipt of higher rates of superannuation benefit, including former members of the Government and the Oireachtas and other office holders, including the Judiciary, will bear the largest reductions.

I want to make clear to the House that this Bill does not alter the terms of public service pension schemes in that the reduction will be applied after the pension has been determined in the standard way. The reduction applies only to the pension and does not affect lump sums in any way. The reduction applies to public service occupational pensions only. It will not affect the state pension a person may receive from the Department of Social Protection. The calculation of the reduction in public service pension does not take account of the state pension that may be payable to retired public servants who were members of co-ordinated pension schemes.

I also ask Deputies to note that, in the case of those public servants retiring up to the end of February 2012, the measure will apply to pensions calculated by reference to the pre-1 January 2010 arrangements, that is, higher or pre-cut pay rates. This is what has been called the grace period protection of pension provided for under the Financial Emergency Measures in the Public Interest (No 2) Act 2009. I will make an order using the powers of section 3 of that Act to extend the grace period from 31 December 2011 to the end of February 2012.

The Bill provides that the pension reduction will not apply to anyone who retires or whose preserved benefits come into effect after the end of February 2012 when the grace period ends. Instead, their pensions will be calculated on the basis of salaries which have been reduced by an average pay cut of some 7%, as the 1 January 2010 pay reduction will apply to the calculation of their pensionable pay.

In short, the pensions of public servants retiring before the end of the grace period at the end of February 2012 will be reduced by about 4% on average and the pensions of those who retire after that date will be reduced by about 7% on average, in line with the reduction in pay following the measures of January 2010.

The proposed extension in the grace period to the end of February 2012 is to avoid the effect of a spike in pension lump sums costs in 2011 caused by public servants bringing forward their decision to retire. The extension will help to spread this cost over 2011 and 2012. It may be argued that someone who has worked in the public service for many years and has paid for his or her pension should not be affected by the financial emergency. However, in a pay-as-you-go pension system, the fact is that an active member's contributions typically pay the pensions of those who have already retired. There is no continuing fund on which the member relies on in retirement. This is the essence of a pension scheme of this type. There is a widening gap between the burden being borne by those in public service employment and retired public service pensioners. Account must be taken of the fact that the pension-related deduction and the pay adjustment have not yet affected those in retirement, leading to, at least, a 10% to 15% difference between a public servant on a pre-cut pay level of about €40,000 and a former public servant on a pension of the same amount.

The proposed reduction in public service pensions must be also seen against the background of the general reduction in prices. Prices have fallen and the CPI is now at 2007 levels. On the other hand, public service pensioners received general round increases of 2% in June 2007, 2.5% in March 2008 and 2.5% in September 2008, which is an increase of around 7%. These changes have conferred very significant real increases in income on public service pensions of which the Government had to take account in framing a budget which was fair for all sections of our community.

In contrast to the position in the public service, the majority of private sector workers have no occupational pension and, for those who do have some provision, the prospects are not good as many pension funds are in deficit. For those pension scheme members who have defined contribution arrangements or personal retirement savings accounts - PRSAs - negative market returns will have seriously undermined their pension savings. Many who have accrued defined benefits face the prospect of not receiving all they have been promised.

Above all, the Government has to consider the longer-term sustainability of the Exchequer and the public service pension system. While the public service pay bill has been reduced since 2009, public service pension costs are increasing significantly. Pensions now account for almost 15% of the total public service pay and pension bill. The cost of public service pensions paid by the Exchequer has increased from €l,433 million in 2006 to more than €2,235 million, an increase of 56%. In fact, the rate of increase in pension costs has been more marked since 2008 and this is mainly attributable to an increase in retirements in 2009.

Faced with cost increases on this scale, costs which are clearly going to rise with the ageing of the public service and the additional number of retirements now in prospect, the Government has to act in the public interest. We must be clear that a pension regime which is not sustainable in the long run is of benefit to no-one, either existing or future pensioners or the Irish economy.

The Bill makes further reductions in the pay of the Taoiseach, the Tánaiste and Ministers. At the beginning of this year, like all public servants, the Taoiseach, the Tánaiste and other members of the Government accepted a substantial reduction in their rates of pay. The reductions applied were in accordance with the recommendations of the review body on higher remuneration in the public sector, which was established in the 1960s to make recommendations to Government on the levels of remuneration appropriate to senior public service posts. For the purposes of this new exercise, it benchmarked the rates of pay of the Taoiseach and Ministers against their equivalents in a number of countries and recommended reductions of 20% in the case of the Taoiseach and 15% in the case of Ministers. These reductions, which were the highest applied in the public service, were accepted and implemented in full by this Government. The reductions reflected the fact that, in good times, pay rates in the public service had jumped ahead of what we can now afford. The reductions to public service pay generally which were introduced in the budget of 2010 brought pay levels back to a more reasonable and affordable level. By accepting a higher level of reduction, the Taoiseach and Ministers showed they were fully prepared to shoulder an additional burden.

There seems to be the view abroad in this country, promoted in some - but not all - sections of the print and electronic media, that no public servant, including office holders, should be paid a salary that reflects the burdens of their offices. This is often linked to the very short-sighted view that talented people should somehow take up the responsibilities of public office on a voluntary basis. Let me be clear. Governing this country, as we all know in this House, is a difficult and complex job, both in good times and in the very bad times we are experiencing now. Those who carry out these tasks in the public interest should have an appropriate payment for it.

Why then has the Government decided to reduce their own pay again? Quite simply, it is the strong view of the Government that they should take a further reduction in their pay because we are asking so much of others in this budget. It is the strong view of the Government that they should take a further reduction in their pay because we are asking so much of others in this budget. Under section 7 of the Bill the Taoiseach's gross pay will, therefore, be reduced again by over €14,000, the Tánaiste's by more than €11,000 and Ministers by more than €10,000. The announcement has been greeted with a deal of begrudgery and I cannot allow this to go unchallenged. Those who choose to criticise the Government cannot simply ignore the significant pay reductions that have gone before. The fact is that with the changes being introduced in the Bill, the overall reduction in the pay of the Taoiseach since 2008 is now 25% in gross pay or over €90,000 when the pension levy is included. It is 19.5% in the case of Ministers or over €60,000 when taking account of the pension levy. There can hardly be any clearer or better evidence to show that the Government has taken an appropriate adjustment that reflects the reduced circumstances of the country. The combined changes reflected in the Bill, which amends section 2 of the Financial Emergency Measures in the Public Interest (No. 2) Act 2009, by substituting the increased reduction for those applied on 1 January this year. The reduced pay rates will have effect from 1 January 2011.

I wish to put it on the record of the House that those Secretaries General, whose salary would otherwise have exceeded the Taoiseach's, have volunteered to take an additional reduction in their salaries to bring them in line with the reduced salary of the Taoiseach. I have agreed to this and I am sure Deputies will join with me in acknowledging this significant, public-spirited contribution.

The Bill also changes the national minimum wage. Given the serious economic challenges Ireland now confronts, it is essential that obstacles to growth and employment creation are removed. In view of the high levels of unemployment within the economy, job creation must be the main focus of Government policy. We must move to maintain existing jobs and the policy action that the Government has taken over the past two years has allowed us to regain much of the competitiveness which will provide an essential basis for future growth. I am glad to say there is now clear evidence that wage and other costs are adjusting throughout the economy. The fall in the live register in each of the last three months is a welcome sign that these changes are bearing fruit. The Government, however, has decided that we must do more to widen and deepen this process of adjustment, in particular, by ensuring that the labour market works as efficiently as possible

Where a national minimum wage is imposed at an excessively high level, unemployment will be higher than it need be. This is especially so in the case of younger persons who can be denied the opportunity to work by the existence of a high national minimum wage. Independent research on the employment effects of minimum wage rates, cited in a recent Forfás report, found that a majority of international studies clearly showed up their negative effect on employment. The conclusion was that, in certain cases, there was evidence that a 10% increase in the minimum wage could reduce employment by up to 5%.

While it is the case that 20 EU member states have legislation setting a statutory minimum wage, it is very striking that Ireland's minimum wage is the second highest in absolute terms and the sixth highest when expressed in purchasing power terms. These facts alone tell us a lot about the loss of competitiveness that must now be recovered.

Since our national minimum wage is high by international standards there is a risk, as the OECD economic survey observed last year, that it can restrict employment opportunities for low-skilled workers as wages fall. The OECD recommended that the national minimum wage be reduced in line with falling pay. While the large fall in domestic consumer demand which has affected the Irish economy has played a role in reducing employment levels, it is also striking that the sectors and occupations where the greatest job losses have occurred are generally those most affected by wage-setting legislation. Ireland's minimum wage has been increased six times since its introduction in 2000 and is currently 55% higher than its original level. By contrast, it is forecast that the consumer price index will have increased by approximately 28% since 2001. The national minimum wage was introduced during a period where we lost sight of the need to maintain competitiveness. The changed circumstances of the Irish economy make it imperative that we take immediate steps to repair the damage done and secure more soundly based economic growth.

The Government has, therefore, decided that a reduction in the minimum wage is needed from €8.65 an hour to €7.65 to remove any possible barriers to job creation. Section 13 of this Bill gives the Minister for Enterprise, Trade and Innovation the powers required to make this very necessary change. I understand the Minister will deal with this aspect of the legislation as it proceeds through the House.

I want to challenge the idea that persons already employed on the minimum wage will see their income drop automatically. Anyone already working under a contract of employment that sets wages at or above the national minimum wage is entitled to continue to be paid those wages unless otherwise agreed between both the employer and the employee concerned. The Government decided that the pay of the Taoiseach and Ministers should be cut again. When combined with the changes in taxation and PRSI in the budget, their pay will drop by an equivalent percentage amount, although by a vast or greater sum in cash figures, to the reduction applied to the minimum wage.

Ireland needs growth and the jobs such growth can provide. For this to happen, all parts of the economy must be competitive. In particular, sectors such as wholesale and retail, hotels and restaurants, and other services which have real potential for employment creation, must be put in a position to expand employment. The Government's action to reduce the national minimum wage is complemented by the action it is taking under the national recovery plan to review the wider framework of statutory sectoral minima within a period of three months. I am confident that the steps the Government is taking on the minimum wage will remove many of the barriers which now prevent this from happening.

I will outline the main provisions of the Bill. It is important that the House notes that the Bill has a preamble and recitals similar to those used in the Financial Emergency Measures in the Public Interest Acts 2009. These introductory parts of the Bill explain the policy background to the Government's decisions and place each of the measures very clearly in the context of the severe economic and fiscal crisis affecting the State. I will not speak in detail here but I ask Deputies to examine them very carefully before they make their final assessment of the measures in the Bill. The preamble and recitals not only make clear beyond any doubt the nature and scale of the budgetary problems Ireland must now confront, but they also record the fact that the Government has taken account of the generally favourable pension terms available in the public service and of the pay reductions imposed on serving staff.

Section 1 defines a "pensioner" as a person who is entitled to a public service pension payable under a public service pension scheme, or has a preserved benefit in a public service pension scheme in respect of which the preserved pension age of the person falls on or before the relevant date. "Public service body" means the Civil Service, the Garda Síochána, the Permanent Defence Force, local authorities, the National Treasury Management Agency, the Health Service Executive, the Central Bank of Ireland, vocational educational committees, the Economic and Social Research Institute, the Institute of Public Administration, primary and secondary schools, third level institutions and the non-commercial semi-state bodies where a public service pension scheme exists or may be made. The term "officeholder" includes the President, members of the Judiciary, Members of either House of the Oireachtas, members of the European Parliament and qualifying officeholders such as Ministers, the Attorney-General, the chairman and deputy chairmanof the Dáil and Ministers of State. "Public servants" are defined as officeholders or employees of public service bodies.

Section 2 deals with rates of pension reduction. This section requires a reduction be made to the annualised public service pension payable to a pensioner or someone who becomes a pensioner before the relevant date.

Section 3 deals with the calculation of public service pensions not affected. The section provides that the calculation of the public service pension is not affected by the reduction measure, which was applied after the pension is calculated in the normal way.

Sections 4 and 5 are technical provisions. Section 6 gives the Minister power of discretion where inequities arise. Section 7 contains the reduction in the pay of the Taoiseach, the Tánaiste and Ministers. Section 8 deals with preserved pensions. Section 9 restricts the scope of ministerial direction. Sections 10 to 12, inclusive, deal with an annual review of the operation of the measures, powers to make regulation and the removal of doubts. Section 13 deals with changes to the National Minimum Wage Act 2000.

The budget I announced on Tuesday began the process of implementing the national recovery plan with a wide range of taxation and expenditure measures designed to secure the budgetary position and to put the economy on course to recovery. The preamble and recitals to the Bill show the scale of the difficulties Ireland faces. The future of the country is at stake and we must move at once to put in place the necessary policy response. This is why the Government decided to introduce this legislation to the House immediately. We do not have time to delay. The changes to the national minimum wage show that we are determined to support employment creation and to restore competitiveness to our economy.

It is entirely reasonable that some retired public service pensioners make a fair and proportionate contribution to the required adjustments in light of the generally favourable terms of public service pensions and the fact that, up to now, no adjustment of any kind has been made to those pensions. This was not an easy decision. No one changes the retirement provision for thousands of retired pensioners and their survivors and dependants, including Members of this House and former Members of the Oireachtas and their survivors, without the most careful debate and consideration. With the pay reductions in this Bill, the Government has shown yet again it is prepared to shoulder the burden and demonstrate that it will lead by example.

I referred to the discussion which took place today about banking bonuses. I reiterate that it is intended in the finance legislation to ensure that bonuses will be taxable at 90% in any guaranteed institution.

The Government cannot and will not ask those in public service employment to bear a significant additional burden or to ask the community as a whole to accept tax increases or expenditure reductions while nothing is asked of those pensioners who can afford to do so to make a reasonable contribution.

The measures in the Bill are a central, vital part of the Government's response to the economic crisis and I commend them to the House.

Michael Noonan (Limerick East, Fine Gael)
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I move amendment No. 2:

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 2010 having regard to the proposal to cut the national minimum wage by €1 to €7.65.".

There are three main issues in the Bill as the Minister outlined, first the proposed levies on the pension of public servants who have already retired. The levy is significant and will reduce the pension of retired public servants quite substantially. There is some consistency of approach by the Government and it could be regarded as anomalous that, while the pay of serving public servants attracted the pension levy, the pensions of public servants who had retired did not attract the levy. It is also, I suppose, anomalous that one set of civil servants would retire with a pension calculated on the historical maximum pension and a new set of civil servants would retire with pensions calculated on reduced pensions.

I welcome that pensions of €12,000 per annum are exempt from the levy and that while the levy applies at escalating levels from 6% through 9% to 12%, the Minister did not introduce a flat-rate levy. The average levy overall is an imposition of approximately 4% on people's pensions at the highest level, which is a significant imposition. When taken together with the universal social charge and the income tax changes announced in the budget, public servants on pensions will be significantly worse off than they are today. However, so will everybody else except the super rich in society who pay their tax on a different schedule from the rest of us, proprietary directors of companies and self-employed professionals who are having their emoluments enhanced significantly as a result of the provisions of the budget.

The scope of the levy seems to include all relevant retired public servants including members of the Judiciary. I would be grateful if the Minister would explain the variation in the advice he received on this occasion as opposed to the advice he received in the past that it was not possible to cut the pay of judges. I thought the same would apply to levying the pay of judges to reduce their pay. I understand the position, as the Minister advised us, was that one could appeal to the judges' better nature to voluntarily yield up some of their salaries, but that an imposition could not be imposed because of the separation of powers. I ask the Minister to clarify that matter when replying at the end of Second Stage.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The continuation in office is the constitutional phrase. The reduction can take place only during their continuation in office, not on their retirement.

Michael Noonan (Limerick East, Fine Gael)
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The Minister might explain that more fully later.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I will.

Michael Noonan (Limerick East, Fine Gael)
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I am a bit slow on legal issues.

The second issue in the Bill is the proposed reduction in the salaries of the Taoiseach, Tánaiste and other officeholders. Fine Gael agrees with the intent of the proposal but reserves the right to further reduce the salaries if we are in office. We believe the proposals in the budget will reduce the income of so many people, including the poorest in society, and that this has left the Government with little enough moral authority. Given the reduction in payments to a variety of social welfare classes, it would have none if Ministers did not take a significant pay cut themselves. No Government would have moral authority after reducing the payments to blind persons, the carer's allowance, widows' pensions and allowances to the disabled if they had not touched their own pay.

Following the budget there was a view - I believe it was the Minister's fault - that Deputies' pay was left alone. I understand that Deputies' pay was cut by 28% in the past two years. However, it is not correct - as the public seem to believe because the Minister did not include it in his budget speech - that Deputies are unaffected by the budget. A new PRSI rate of 4% will apply to the pay of all Deputies and when this is taken with the decision already made to abolish increments to those Deputies who qualified for them, the loss will be approximately €10,000. Some Deputies, if elected to the next Dáil, will receive €10,000 less than they are receiving at present after the cuts. There are issues here as well and I wonder what the future generation of Deputies will do. At present take-home pay seems to be approximately €4,000 per month for Deputies, depending on their tax. If another €10,000 per annum is taken out in March or April after the general election they will be taking home €3,200 or €3,300 per month, which seems tight enough for Deputies with families at the expensive ages in secondary school and for whom they will need to pay fees in university. I am not beating my own drum - thank God, my adult children are now self-sufficient and are off the payroll for the time being at least. However, I know many of my colleagues have very heavy personal expenses.

It is amazing what the public perception is about the manner in which we are paid and the amounts we are paid. Last week one of my colleagues told me he had to meet approximately 300 pensioners at a meeting of the elderly. He was challenged on a number of occasions about his pay and why he would not take a reduction in pay, which they believed would balance the budget. He produced a payslip from his pocket and they were absolutely amazed that a gross salary of approximately €8,000 ended up being slightly less than €4,000 in his case. There was no more argument when he showed it around. He advised a group of us that we should never go out without a payslip in our pockets. He said all argument died once they saw it.

Fine Gael believes the reduction of €1 per hour in the minimum wage is a bad decision given that the minimum wage applies to less than 4% of the labour force. Many of those on the minimum wage are young and many are also immigrants, including young immigrants. A €1 per hour reduction on the pay of those workers on a 40-hour week results in a reduction of €2,080 on small income, which is a big whack of money. In addition the universal social charge also applies to those on the minimum wage and of course child benefit reductions apply. After this budget, a mother on the minimum wage with three children is down by €2,600. On budget day the Minister announced that one of the purposes of his budget was that those who could best afford it would pay, but he did not carry that through. A mother on the minimum wage with three children is down by €2,600 on a gross income - including child benefit - of less than €18,000, which is a major imposition and is very unfair. We will not wear that and will move amendments on Committee Stage to oppose that.

I return to a point I made earlier today. I am not sure if the Minister is aware that in his calculation of the universal social charge, while he put the income and health levies together, he stopped the levies at 7%. Proprietary directors of companies and self-employed professionals were paying 11% previously on incomes in excess of €200,000. The Minister has cut the PRSI by 1% for those persons, but they still have an advantage of 3%.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We have increased it by 1%.

Michael Noonan (Limerick East, Fine Gael)
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I know. The Minister has taken away the 4% completely and by increasing the PRSI by 1% they still have an advantage of 3%. The calculation is simple. They are paying more up to €200,000 or maybe slightly above, but for every €1 after that they have a 3% advantage. So a tribunal lawyer on €1 million per annum will be €24,000 better off next year. While there are not many people on €1 million, there are many people on €300,000, who will be €3,000 better off in take home pay next year than they are this year and that is taking into account everything in the budget.

There are no other downsides that I have not taken into account. For a person on €500,000 - which is the kind of money a number of barristers and propriety directors would be on - the advantage of 3% on the interval between points 2 and 5 is three times €3,000 which works out at €9,000. Such a person would take home €9,000 more in 2011 while a woman on the minimum wage with three children would take home €2,600 less. That cannot be right. It belies the principle of the Minister's budget. He can argue that this category of taxpayer had a very high marginal wage and if times were good and we were in the midst of the Celtic tiger era, we would say that it is a very high marginal wage; he might be able to argue the principle of this, but I draw attention to this in circumstances where everything that moves is being examined to see if a tax can be imposed on it. I note the Minister is shaking his head.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The restriction on pension relief will have a huge impact on the categories the Deputy mentioned.

Michael Noonan (Limerick East, Fine Gael)
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Perhaps the Minister is able to justify it, but I have had the best of tax layers contact me today explaining this in detail.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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If the Deputy submits an appropriate proposal, I will examine it for the Finance Bill.

Michael Noonan (Limerick East, Fine Gael)
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We will leave it for the Finance Bill.

The Fine Gael proposal to abolish the 8.5% of employers PRSI was a better proposal than the abolition of the minimum wage. We capped that at around the total minimum wage and it would mean €30 to an employer taking on somebody. That is a more just incentive than reducing the minimum wage. The employer is worried about the cost of the job and if an employer's PRSI commitment can be reduced by €30 that gets him or her very close to what he or she would gain by a reduction of €1 in the minimum wage. That would be more progressive and it would protect the more vulnerable people in society. To put it bluntly, the Minister's proposals on the minimum wage are a savage imposition on the poorest and most vulnerable people in our society, many of whom have very little protection or rights at work. They have to work and that is their income. It would be easy for some of them to drift back into welfare, but they are people with a work ethic who want to work, they are earning low pay and the Minister is hitting them very hard.

A issue that has arisen today, which the Minister addressed in his contribution, is the payment of bonuses to certain employees of the covered institutions. That should be levied. We will table amendments on Committee Stage to allow the Minister an opportunity to examine this and to impose a levy to remove it, unless this was done with the Minister's permission. The Central Bank has raised serious doubts about it in a statement it issued this afternoon. I would be quite concerned about what is happening. My colleague, Deputy English, will deal with the Central Bank's statement later in the debate.

Joan Burton (Dublin West, Labour)
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I wish to share my time with Deputies Penrose, Sherlock and Ferris.

Brendan Howlin (Wexford, Labour)
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That is agreed.

Joan Burton (Dublin West, Labour)
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I want to move a Labour Party amendment to Second Stage of the Bill.

Brendan Howlin (Wexford, Labour)
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I advise the Deputy that while she can refer to the amendment she cannot move it as there is an amendment already before the House.

Joan Burton (Dublin West, Labour)
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Yes, but I can read it into the record.

Brendan Howlin (Wexford, Labour)
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Of course.

Joan Burton (Dublin West, Labour)
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The amendment states:

Dail Éireann declines to give a second reading to the Financial Emergency Measures in the Public Interest (No. 2) Bill, 2010 having regard to:

1) the decision to cut the national minimum wage by one euro to €7.65; the hardship that this will cause for workers earning at the lowest levels; the fact that this cut will do nothing to promote job creation and will make no difference whatsoever to the State's budgetary position; and the decision to abrogate the long-established consultation process for determining the appropriate level for the national minimum wage;

2) the manner in which the reduction in public service pension is being applied which will see retired public sector workers on pensions of as little as €230 per week being subject to a cut of 6% in their income.

We have endured many days of shame and national humiliation brought about by Fianna Fáil's mishandling of our economy and its failure to safeguard the vital interests of the public, as compared to its safeguarding the vital interests of its cronies and friends in the banking, development and construction industry.

Restoring financial stability means restoring trust to this economy but restoring financial stability to this economy, as far as Fianna Fáil is concerned, means making the poor and the most vulnerable pay and causing people facing into Christmas and hoping to have a happy time with their families and their friends to fear the kind of cuts to be imposed on them.

It is shameful that the Minister for Finance, Deputy Brian Lenihan, has launched this Bill, this attack on people who have a public service pension, particularly on people who earn the minimum wage, on a day when he has the gall to come into this House and stand over the reports that high level employees in Allied Irish Bank are to receive a payout of some €40 million in bonuses. That is a testament to the bonus culture that has destroyed our banking system, cost many people in business their businesses and many workers their jobs. It has meant that if people on the minimum wage, ranging from blind people to carers to retired public servants on modest wages to people who are flipping hamburgers in McDonald's or in other fast food outlets, change their jobs, the next time they take up work their wage will be cut by no less than €1 an hour, and if they work for 40 hours a week, they will lose €40. At the same time, this Government will levy them with a new tax introduced in the budget, namely, the universal social charge.

The Minister has been economical with the truth in all of his previous budgets and in his six different statements on budget and financial emergency measures. His boast that people on the minimum wage would not be brought into the tax net was rendered hollow by the introduction of the universal social charge. It is important to put on the record of this House that section 2, dealing with the universal social charge in Resolution No. 13 introduced on budget night, specifically states: "THAT, with effect from 1 January 2011, there shall be charged, levied and paid, in accordance with the provision of this Resolution, a tax to be known as the "universal social charge" in respect of the incomes specified ... ". With the exception of social welfare payments and pensions, all income over €4,000 a year, that is over €80 a week, is to be subject to this new tax. So much for Fianna Fáil's vainglorious boast that people on the minimum wage were not being brought into the tax net. It is typical of this Government to bluster, prevaricate and when the facts are undeniable then to pretend to change the facts.

The bonus of €40 million announced for Allied Irish Bank executives today comes after a bonus last year of €54 million. This amounts to a total of €94 million in bonuses for executives in Allied Irish Bank over the past two years since the bank guarantee was brought in. The current Stock Exchange value of the bank is not much over €500 million. Although it goes up and down very slightly, the value is currently approximately €540 million. The bonus amounts given out in respect of this bank are just under 20% of the bank's value.

We know that last week the people negotiating with the IMF, ECB and European Commission did not do a good deal for Ireland but where were the brains of the Brians on the night they ran to negotiate the guarantee? There was no conditionality on the banks which brought this country to its knees to stipulate that the culture of bonuses - which drove our banks to destruction and has led to many ordinary people in this country losing their business, job or pension - should be changed. There was nothing to say that although we might assist the banks or bail them out, the culture of bonuses and greed that bankers and their buddies in construction exemplified would be brought to an end. There was no insight and intelligence to protect the public interest.

A retired civil servant may have a modest Civil Service pension. We should bear in mind that according to statistics from the Central Statistics Office, there are approximately 126,000 public service pensioners, with 35,000 earning under €12,000. I am thankful they will not be affected. Some 40,000 retired civil servants have a pension of between €12,000 and €24,000, with 50,000 on a pension of between €24,000 and €60,000. These are the people who will take the principal hit. Only 1,000 retired civil servants receive a pension above €60,000.

I have received correspondence from people who seem to be practically crying in writing e-mails to me. People are losing three times in this budget. Retired pensioners from the Civil Service on more than €12,000 per year are affected, as credits and tax bands are being decreased; there is a reduction in the pensions I outlined; and there is also a universal social charge. The health contribution exempted people on a medical card but the new universal social charge does not exempt such people. Somebody who left a job - either in the public service or another sector - on a modest pension because of a disability used to be exempt from the health contribution but will now have to pay it.

Parents with a disabled child, where one parent is working and one is acting as a carer, will find the person who provides the care will lose €8 per week in what is a typical scenario. The working parent will pay a higher levy, whereas he or she would have been exempt from the health contribution. What this Government has done is unbelievable, and it is all for the banks. It was not to save the banks or credit in the country because all it has done is make the banking position progressively worse. In 2011, this country will spend €5.1 billion paying interest, so the €6 billion in the budget will basically go to pay interest on the debt that has been accrued on our behalf by the bankers.

Willie Penrose (Longford-Westmeath, Labour)
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As the Labour Party spokesperson on enterprise, trade and innovation, I wish to make a contribution on behalf of the Labour Party relating specifically to section 13 of the Financial Emergency Measures in the Public Interest (No. 2) Bill 2010, which proposes to reduce the minimum wage by €1 from €8.65 to €7.65 and thereby amend section 11 of the National Minimum Wage Act 2000.

As most people know I have been privileged to serve as chairman of the Oireachtas Joint Committee on Enterprise, Trade and Innovation for the past three years and in that period I have facilitated various interest groups in making presentations to the committee, including representatives of the various industry sectors, such as services, hotels, restaurants and others. In this context, whereas the various groups have referenced the minimum wage, it was never elevated in my opinion to the level of it being of absolute and crucial importance that it be reduced.

The greater import in many submissions was that the joint labour committees, registered employment agreements and employment regulation orders should be addressed and modernised, especially to protect conditions where Sunday work may be part of the weekly commitment and might not attract premium payments in current circumstances. That is a completely different concept from what prevailed when these agreements were negotiated and people did not normally work on a Sunday.

There are areas which can be updated and modified to take account of current circumstances but the proposed cut is a Government decision. For a while it tried to offload the blame for this decision to the shoulders of Mr. Rehn and Mr. Chopra but that indication was untrue. The proposal to cut the minimum wage by up to 12% is proof positive that the least well off and most vulnerable are fair game as far as this Government is concerned.

I am worried about the part of the Bill indicating "Whereas the State is availing of financial assistance programmes provided by the European Financial Stabilisation Mechanism and the European Financial Stability Facility and the International Monetary Fund and it is necessary to take the measures in this Act as part of a range of measures provided for in those programmes to address the economic crisis in the State", which appears to indicate this measure forms part of the agreement with the IMF, EU and other parties. I would like clarification on this as the text implies that the measure had to be taken as part of the agreement. My understanding is it was not proposed by those gentlemen as part of the negotiations. The Government has indicated that a future Government would not be in a poor position and would not be circumscribed; the text implies the opposite.

Cutting the minimum wage makes no sense at any level and undermines the social floor, where people are already struggling to survive. The hardship that such a cut would impose would be very significant for the households relying on minimum wage employment and would clearly act as a disincentive to work. There is no evidence that such a cut would create a single job but there is ample evidence that it will increase poverty and hardship for many families.

Adding the universal social charge, which the Labour Party leader, Deputy Gilmore, referred to this morning, means that in some cases people at work are worse off than people who lost their jobs. This will accelerate a call for further cuts in social welfare and a deeper impoverishment of very large sections of our community. This presages a race to the bottom.

Just 52,000 people are earning at or close to the minimum wage. Some people earn less because there are exemptions for those under 18 and others. To argue that the cut will significantly add to our competitiveness does not stand up to any objective scrutiny. The measure will not reduce the fiscal deficit by a cent but it is clearly part of a neoliberal orthodoxy that should be anathema to all fair-minded people. On 24 November, after the Government's four year plan was published, the Labour Party stated unambiguously that it would oppose this miserly proposal tooth and nail. I reiterate unequivocally the Labour Party position: we would not countenance any reduction in the minimum wage and we will not implement such a measure if part of a future Government.

A full-time employee working 40 hours per week on the minimum wage earns €346 per week or €18,092 per year, which is a low income. As I stated, there are reductions for those under 18 or in their first job, so their wages are even lower. Among EU states the wage ranks 12th when measured as a percentage of average monthly wages and ninth in terms of purchasing power parity. Reducing the rate by €1 per hour, €40 per week or €2,080 per year reduces the annual wage income to €16,012, or €306 per week. We should remember there has been no increase in the minimum wage since July 2007, some three and a half years ago.

We are already aware and deeply concerned about 116,000 workers living below the poverty line, with the working poor making up 24% or almost one in four of all those in poverty, or 40% of all households in poverty. We are also aware that the minimum wage is especially relied upon for protection by women, with almost six from ten women in the work force relying on the minimum wage. It is therefore critical. Migrants and other vulnerable workers, some of whom we met today protesting outside the gates of Leinster House, are also affected. We also acknowledge the importance of the role of the statutory minimum wage in protecting against unfair competitive advantage by unscrupulous employers who exploit their workers. The minimum wage is extremely important from this perspective and as a means of establishing a social floor.

Under section 41 of the National Minimum Wage Act 2000, an employer in financial difficulty may apply to the Labour Court citing inability to pay if the minimum wage has caused extreme difficulties. Despite the Government's position, as set out in the legislation, this facility has never been invoked by an employer.

A decent minimum wage backed by statute is a statement of core values which provides a threshold of decency under which society agrees that workers' wages should not fall. The proposed reduction signals the start of a race to the bottom in which low wage workers, public and private sector employees, social welfare claimants and pensioners will suffer. What argument has been advanced to support the Government's logic that poverty wages will create more jobs and that welfare rates must be below the poverty wages? If one follows this logic to its conclusion, further reductions in social welfare payments will be required to maintain the race to the bottom.

Was a cost-benefit analysis carried out in respect of the proposed reduction given that a lower minimum wage will increase demands for secondary benefits, for example, family income supplement and medical cards? The result will be greater expenditure by the Exchequer. While the Government may have the numbers to pass this legislation, my party will fight it tooth and nail.

According to the Bill, the proposed reduction will not affect current contracts. An amendment should be introduced to provide that section 13 does not affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act to ensure that people will not exploit the legislation, if passed.

It is peculiar that section 10, which provides that before 30 June 2012 and every year thereafter a review will be undertaken of every provision of the legislation, excludes section 13 from the scope of such reviews. Why will the minimum wage not be the subject of review? In addition, the Labour Court's role in this matter has been removed and transferred to the Minister.

This is a fundamental issue which requires proper debate and careful assessment rather than rushed legislation. A reduction in the minimum wage will not contribute to competitiveness or job creation. It is a major mistake which the Labour Party in government will not be party to implementing.

Seán Sherlock (Cork East, Labour)
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I wish to share time with Deputy Ferris.

Brendan Howlin (Wexford, Labour)
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Deputy Sherlock has seven minutes and Deputy Ferris three.

Seán Sherlock (Cork East, Labour)
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I will share time equally with the Deputy.

If I understood the Minister correctly, bank bonuses will be taxed at a rate of 90%. I have not been informed as to the number of employees who will benefit from bonuses. If, however, 90 employees of the banks which come under the guarantee were to benefit from a bonus of €40 million, each of them would receive €444,444. If a tax rate of 90% was applied to this figure, they would each receive a net payment of approximately €44,400. Any type of spin which seeks to dissipate the effect of paying these bonuses will not work because the beneficiaries will still receive significant sums of taxpayers' money. An underhand approach has been taken and the legislation needs to be revisited in this regard.

It is immoral that bonuses should be paid to fat cats when those on the minimum wage are countenancing a cut in their income. Some 6,000 signatures of people opposing the cut were gathered in the past 24 hours by the Migrants Centre of Ireland whose members campaigned outside the gates of the House today. The payment of bonuses to bankers is an affront when juxtaposed against cuts in the incomes of people who are barely surviving on the minimum wage. It is an insult and certainly not how the country should do its business.

The introduction of the new universal social charge will bring those on the minimum wage into the tax net. The Minister misled the House last night when he stated those on the minimum wage would not be subject to taxation. The universal social charge is a tax, as explicitly stated in Financial Resolution No. 13. The Minister stated: "In the measures I am presenting today, those on the new reduced minimum wage will not be brought into the tax net." Is he suggesting that those on the minimum wage will not be subjected to the universal social charge? It is as clear as the nose on my face that if one earns more than €4,004, one will be subject to the charge at a rate of 2% up to €10,000. There is a question mark over whether one can claim back the charge for the first €4,004. This matter should be clarified. The bottom line, however, is that the Government is not only reducing the minimum wage but removing the exemptions enjoyed by those on the minimum wage and subjecting them to a new tax.

This measure is woefully inadequate and inequitable. If one subscribes to the notion that everyone must share the pain proportionately, one must accept that the proposal requires people on the minimum wage to pay a disproportionate amount. The measure must be opposed. I am proud to oppose any proposal that seeks to reduce the pay of those who are on marginal incomes.

Martin Ferris (Kerry North, Sinn Fein)
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I thank Deputy Sherlock and the Labour Party for allowing me an opportunity to speak on this issue. Of all the cynical, nasty things thrown at ordinary people as part of this budget and the so-called road to recovery, cutting the minimum wage surely stands out as the most malicious. It is malicious in so far as people who are dependent on the minimum wage to make ends meet will find their incomes cut by 12%. This is a disgraceful proposal.

Earlier, outside the gates of Leinster House, I and other Deputies stood in solidarity and support with the victims of this Government's vindictiveness. For those of us on a higher income, a cut in salary of 12% would perhaps mean having to forgo certain luxuries. A single person earning €306 per week - €304.27 after the universal social charge is applied - will have to make stark choices every day of the week regarding food, rent, the cost of heating and the cost of travel to and from work. This is before he or she enjoys any sort of social life in the community.

Cutting the minimum wage has been presented as a means of stimulating the economy. How in the name of God can anybody sit on the benches opposite and tell us that taking €42 per week from people on the minimum wage will stimulate the economy when every cent received by people on that wage is spent in the local economy? It is spent to keep small shopkeepers going and on every other local concern. It is mind-boggling that Government Deputies can sit there and make such an assertion. Taking money out of the local economy does not stimulate the economy but has the opposite effect.

The logic employed by this Government makes it believe that taking billions from the spending power of Irish citizens for the so-called bailout, which will be thrown into a black hole in the banks, will create growth. It will have absolutely the opposite effect. By the same logic this Government criticised my party and others for proposing that the National Pensions Reserve Fund be used as a stimulant and then turned around and placed the entire pension fund as collateral for the banking debt. It took that money to bail out the banks - it is as simple as that. We need to stop and think how we can bring this anti-national, anti-citizen Government to book. If it does not go quietly by January, perhaps we should honour the 92nd anniversary of the first meeting of Dáil Éireann with a national day of protest. Irish working people and all who are angered and ashamed by the surrender to the IMF and the banks need to make their feelings crystal clear, especially given speculation that the Government may pull a sleight of hand measure and ensure its term goes beyond the timeframe demanded by the Green Party.

We cannot afford this Government any further time because it may use that time to sell off State assets to its friends. This came to light recently. I refer to speculation about Coillte and our forestry, some 7% of the land of this country, and the ESB. I call on all those Members of this House who are outraged by this nasty manoeuvre, including some from the Government parties, to vote against the decision to cut the minimum wage and vote against this budget because of what it has done to the people of this State.

My party will also vote against the cuts to be imposed on low and middle income public service pensioners. If, as Sinn Féin proposed, the Government had capped salaries of higher public servants at €100,000 some €350 million per year would have been saved for the State. That represents most of what has been cut from social welfare rates for people of working age and is nearly half of what is being cut from the health budget. In regard to the rates of pay of Government officeholders my party has made its position clear by calling for greater cuts than are proposed in the budget. We sat and listened to the budget speech. Not one penny was taken from the salaries of Deputies or Ministers of State but the Government took 12% from people on the minimum wage. It defies logic and is an absolute disgrace. It shows what this Government stands for, namely, the developers and the banks, cronyism and its friends. It does not stand for the citizens of this State but abuses their rights to service both its own political ends and its friends in the Galway tent.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

I shall begin by considering issues raised in regard to the minimum wage. The minimum wage was introduced in 2000 at the beginning of a period of sustained economic growth and subsequent rapid wage increases across the economy. However, in the past three years our circumstances have changed dramatically. Price levels have reduced and earnings have adjusted downwards to help to preserve jobs. Although I appreciate the genuine concerns of all Deputies regarding the impact of the proposed cut it is important to point out some background. When the minimum wage was introduced in April 2000, it stood at IR£4.40, the equivalent of €5.59. The wage has increased six times since its introduction and is now 55% higher than its original level. In contrast, at the end of 2010 the consumer price index is forecast to have increased by approximately 28% since 2001. A wage rate of €7.65 per hour, as proposed, or the 2005 rate, will still be substantially higher in real terms than when first introduced.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

When a minimum wage is at a high level and unable to respond to downward pressure in the labour market unemployment is more likely to persist. As has been pointed out to every Deputy in the House over the years, there are many workers who would be willing to work for a wage lower than the national minimum but their employers are restricted from providing these job opportunities. A high minimum wage can also act as a barrier for younger and less skilled workers to enter the labour force and take up jobs and can also prevent small and medium enterprises from adjusting wage costs downward in order to maintain viability and improve competitiveness. The minimum wage section of this Bill is designed with these aims in mind.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

Recent research published by Forfás and advice following from that indicate that a reduction in the national minimum wage can result in an increase in employment in the medium term. It is expected that there will be a benefit to the Exchequer in terms of savings from reduced transfer payments and increased taxation that may accrue from the increased employment arising from a more flexible labour market.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

I have consistently stated in this House and in other fora that we need to ensure that labour costs and wage fixing mechanisms do not have a negative impact on economic performance and employment levels. It is within this context that the Government has decided that a formal review of our statutory wage setting mechanisms, employment regulations orders, EROs, and registered employment agreements, REAs, should be undertaken within a short timeframe. The terms of reference are being finalised for that review which will allow Members of the Oireachtas to make their proposals known. I hope to publish them shortly.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

It is important to point out, in reference to the speech by the Minister for Finance, Deputy Lenihan, earlier today that the ministerial order will set out that where an employee is already working under a contract of employment that sets wages at or above the national minimum wage, the employee is entitled under his or her contract of employment to continue to be paid those wages unless otherwise agreed between both the employer and the employee concerned, or unless the contract stipulates that the employer pays only the national minimum wage hourly rate. An existing employee will be under no obligation to accept a rate of pay reduced by the employer on a unilateral basis as an employer cannot arbitrarily impose a new rate of pay that would contractually bind an existing employee. If the employer proceeds unilaterally to make a change in agreed rates of pay the employee would have grounds for a complaint under the Payment of Wages Act or for breach of contract in common law.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

In that context it is important to note that within the existing minimum wage legislation and even in the context of the downturn of the past three years, with the pressures being experienced by many employers in the sector that this mechanism has not been initiated. This would suggest that the vast majority of such employers would not seek to impose wage reductions unilaterally on existing employees.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

This decision is part of a series of attempts to facilitate job creation and foster an environment that seeks and promotes a return to sustainable employment. In this regard it is important to point out that the reduction in the minimum wage is only one element of the labour market reforms outlined in the national recovery plan. which will also include a review of sectoral agreements, new labour market activation policies and a review of our welfare policy.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

The package of measures reflects our determination to stimulate growth and create jobs. Getting people back to work is the number one priority of every Deputy. It is the driving force behind everything that we do. In this regard, the budget shows that we will continue to spend significant sums on investment to sustain employment and growth. Over €1 billion will be invested in my Department's capital programmes in 2011, to support almost 10,000 jobs. It will give the labour-intensive construction industry a much needed boost through the introduction of tax incentives for retrofit schemes and by reforming the relevant contracts in tax regimes, in particular, in withholding tax. There are a number of other measures including the revamping of the usiness expansion scheme, the extension of the employer job PRSI incentive scheme, the extension of the tax exemption scheme for start-ups and the extension of accelerated capital allowance scheme for energy. In addition, there is an additional programme of activation measures to keep the unemployed close to the work force. This means that they will be in a position to take up jobs which arise as the economy recovers. Five thousand additional places will be provided in the private sector under the skills development and internship programme, which the Minister, Deputy O'Keeffe has discussed in detail with the business community in recent months and which will offer substantial opportunities for graduates. Another 5,000 places will be provided in the public service under the work placement programme and a further 5,000 places will be provided in the community and voluntary sector under the community work placement scheme.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

In spite of what many will say, the national recovery plan and the accompanying budget are designed to foster jobs, growth and stability. Although it is difficult this Bill is another important step in this regard and I commend it to the House. The Bill before us today, while difficult, is another important step and I commend it to the House.

Damien English (Meath West, Fine Gael)
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I wish to share time with Deputies Deasy and O'Donnell.

Brendan Howlin (Wexford, Labour)
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Is that agreed? Agreed.

Damien English (Meath West, Fine Gael)
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The main issue I wish to address is the minimum wage but I will come back to it later. Before the Minister for Finance ran out the door, he mentioned taxing bank bonuses at a rate of 90%. Fine Gael has put forward an amendment for tomorrow to tax the AIB bonuses being discussed today at 99%. We could take that amendment tomorrow, which would solve the Minister's problem. I want the Minister to clarify whether he means retrospective bonuses or future bonuses under existing contracts. It is a very important issue. There is nothing more sickening than to read in the newspapers that staff in the banks are still being paid massive bonuses, and for what results?

It is worse to read that staff in the HSE are paid bonuses as well, when the results are just as bad, although that is a different area. This culture of bonuses needs to be examined. In the banks it encourages bad practice and should be dealt with for that reason. However, in other areas such as the HSE and the public service, bonuses are paid simply for their own sake and for staff looking after each other. Both cultures are wrong and both can be changed by Government, although they have not been. The issue must be tackled. I hope the Minister will clarify his vision of the 90% tax rate on bonuses and when he intends to introduce it.

The Minister was less than clear in his budget speech as to how he will reduce the wages and pay structure for CEOs of State bodies. He talked of hopefully reducing the wage to €250,000 and putting a cap on it but he was not very clear that he really intends to do this. It is easy for him to write it into the budget because he is going out the gate in a few weeks anyway and will not have to do it. There is no point in him saying it if he cannot do it. Will he introduce changes to tax CEOs' pay above €250,000 at 99%, which would solve the problem? If he cannot legally change the wages, he can tax them. He should name those involved, one by one, and bring in the tax rate to deal with this. It can be done within the law. If it can be done for bank bonuses, the Minister can do it with regard to high wages in State bodies. The Minister should put his money where his mouth is. He should do it, not just talk about it.

Before leaving the issue of bank bonuses, the Central Bank issued a report last week on the pay structures and pay systems of the banks. I cannot believe that two and a half years since the scandal broke as to what went on in the banks, nothing has changed. The Minister practically owns most of the banks and has a fair say in the ones he does not own, yet nothing has changed when it comes to the system of payment to the top executives - I am not talking about the workers who have to take all the hassle at the front desk. The top executives are still getting away with murder.

The report stated that the pay structures are less than transparent in many situations. We own the banks and the pay structures should be clear. The staff are practically public servants at this stage. The report states that the situation is open to abuse and risk, that bonuses are still encouraged and that the culture and the method of payment is still wrong. The worst point in the report is that the banks are still open to the abuses that caused the difficulty in the first place. I cannot believe the risk still exists years after the disaster that has crippled this country and which is half the reason we are here discussing a draconian budget. The Minister needs to cop on and start doing his job with regard to the banks. He needs to once and for all put manners on those at the top levels.

The Minister referred to how he reached the figure of 4% for the reduction on the pensions. He calculates this by factoring in the first €12,000 at 0%, the next €12,000 at 6%, then 9% and then 12%. Is this same method used to calculate the interest rate of 5.8% for the bailout fund? Is the money Ireland is putting into the fund being charged at 0% and then the rest of the money at other percentages, which brings the real rate down to 5.8%? The Minister has been less than clear to the House what contributes to the 5.8% rate. If this is how he reaches the 4% rate in this case, I presume it is how he reaches the 5.8% rate for the bailout fund. He might take the opportunity to clarify this point. If we are factoring in our own money at 0%, it means the bailout money is much dearer than 5.8%. People have a right to know what they are paying for that money. We know the IMF money comes at a rate of between 4% and 4.5% so somebody is charging us a lot of money for the use of their money. This needs to be transparent. The interest rate is too high for one section of the bailout and the matter needs to be clarified.

Dara Calleary (Mayo, Fianna Fail)
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The Deputy will have a chance to ask on this point on Wednesday next.

Damien English (Meath West, Fine Gael)
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I should not have to ask. If the country is taking a bailout of €85 billion, it should be clear to everybody who is getting what out of it.

The cut to the minimum wage is the most disgraceful thing this Government has ever done. The Minister of State sat at our committee meetings - I see the Chairman is present - where we asked those who were promoting this notion to prove it to us. The Minister of State quoted a Forfás report but that does not actually suggest reducing the minimum wage will increase jobs. Instead, it states a 10% increase in the minimum wage could reduce employment by up to 5% - it does not state the opposite and it does not recommend it be reduced. Those who came to the committee tried to claim this had to be done but none of them came back to us with proof they were right. If we thought people were missing out on jobs due to the minimum wage, we would agree to consider this. No one has given us that proof. It is unfair to say it and it is unfair to do it.

If a person is on minimum wage, due to the lack of public transport in this country, in most cases the person will have to have a car to get to work. There are costs to employment in that one has to have suits, a uniform or other clothes to go to work, as well as lunch and so on. It is hardly worth a person's while to go out and work for the new minimum wage. It was very tight on the old rate but this is disgraceful. The Minister said he wanted to challenge the idea that persons already employed on the minimum wage will see their income drop automatically. Of course they will. The Minister claims such people will have a contract. We know what will happen. The contract will be ended and somebody else will get the job at the lower rate, or the gun will be put to their head to take the lower rate. The Minister should not say people will be protected because they will not be. They know the Government does not protect them. It cuts them at every opportunity it gets.

It is wrong that Ministers' pay is as high as it is. Ministers should not clap themselves on the back for taking a small cut. There is no need, when a Deputy becomes a Minister of State or Minister, for an increase of €80,000 or €90,000. Ministers get such an increase of staff, a car and everything else that they do not need double the wages on top of that. A Minister's job is probably easier than a Deputy's and they should not be paid twice the money.

John Deasy (Waterford, Fine Gael)
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Last night in this House, a Member, in regard to the corporation tax rate, referred to Ireland as "a semi-fraudulent tax haven for major international companies dodging paying their legitimate taxes in their own countries". It reminded me of former Deputy Joe Higgins, the socialist MEP, who said on Waterford local radio some weeks ago that he advocated doubling the corporation tax rate of 12.5%. As I said at the time, the effect would be that multinational companies like GSK and Genzyme in Waterford would not be long in re-evaluating their position in Ireland. A couple of recent comments from executives caught my attention, including one from Hewlett Packard which suggested that if the tax rate increased, it would be re-looking at its investment in Ireland, and, in regard to Pfizer, it was reported "Giant US multinationals may stop investing in Ireland or pull out completely if our 12.5 per cent corporation tax rate is hiked as part of the bailout".

It is worth repeating a few statistics. For the first 11 months of 2010, there was a surplus of €589 million in corporation tax. In November alone, companies paid more than €1 billion in tax, which was one fifth of our total tax take, effectively making up for the drop in income tax. These companies employ 240,000 people, account for 70% of Ireland's export market and are probably the most important ingredient in any export-led economic recovery. We know all this, as it has been repeated before.

Perhaps some of the left-leaning politicians will explain how we will pay social welfare if these multinationals leave this country.

It is fair to say our corporation tax rate is not the only reason multinationals are in Ireland. Some believe our rate is the lowest in the world but it is not. There are many reasons multinationals come here. It is not wise to become fixated on this element alone. An executive from a major pharmaceutical company was in my office yesterday and he talked about the standards in science and in schools and about corporation tax. He talked about standards in universities and State aid for research and development, etc. However, there is a growing body of opinion in this country to the effect that we have become slightly complacent about our corporation tax rate and almost fixated upon it as if it were the only relevant issue. While doing this, other countries are thinking about it and acting to make their own tax codes more competitive and, more important, more attractive than our own.

An example concerns a Labour Party idea adopted by the Conservatives recently, which in itself says something. It was announced that corporation tax in the United Kingdom will be reduced from 28% to 24% over the next four years. What caught my eye was the patent box concept. By April 2013, a tax rate of only 10% will be applicable to profits from patents in the United Kingdom. This will be very attractive to the pharmaceuticals industry.

In Britain, HM Treasury spokespeople are talking about making the UK tax code far more competitive. Should we be concerned about the UK plans with regard to patents? Our four year plan considers closing down income tax shelters from patent earnings. This recommendation was made by the Committee on Taxation. There is now a debate taking place on whether steps have been taken recently that would compensate for that.

Let me quote a pharmaceutical executive on the UK patent box tax rate of 10%, which he believes has the potential to transform the way Britain is viewed by investors:

For too long, while great inventions and discoveries have been made in this country, downstream economic activity in development and manufacturing, and associated employment, have been attracted to other countries that had more favourable corporation tax regimes. In one stroke, the introduction of the UK patent box will help to change this dynamic [completely].

This is relevant for me because the same company has announced it is investing £500 million sterling in the United Kingdom due to the announcement of the patent box reforms. This company employs 800 people in my constituency.

While we have been concentrating on the corporation tax rate, our competitors have moved on and are thinking ahead. They are being innovative. It is on innovation that we need to focus. We need more innovation in our tax code so as to attract more investment. We must not become fixated on what we have.

The hard left is getting a little giddy about the electoral gains it might make in the next election. It sees the collapse of Fianna Fáil as its ticket to the socialist republic. I have one thing in common with the Member who said in the House last night that Ireland is a "semi-fraudulent tax haven for major international companies dodging paying their legitimate taxes in their own countries". This morning Citibank announced 250 jobs for my constituency and in the constituency of the Member in question. Jobs, rather than a failed ideology, are all that matter and that are of importance. It is a question of jobs and enterprise, not about socialism.

Kieran O'Donnell (Limerick East, Fine Gael)
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I was looking at last year's Budget Statement by the Minister for Finance, Deputy Brian Lenihan, and found the two last lines interesting: "Our plan is working. We have turned the corner". I find this ironic because neither of these statements has come true.

With regard to section 2, are the adjustments being made to pensions being made by way of a levy or cut?

Dara Calleary (Mayo, Fianna Fail)
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It is a cut, a reduction.

Kieran O'Donnell (Limerick East, Fine Gael)
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It is a cut rather than a levy. Will the Minister of State outline whether the Government considered a levy rather than a cut?

Let me deal with the minimum wage. While we all believe the country should be competitive, we must strike a balance. The Taoiseach's salary was €228,187 and is being reduced by €14,000, bringing it down to €214,187. This is a reduction of roughly 6%, yet the minimum wage has decreased from €8.65 to €7.65, representing a reduction of 12%, almost double that applicable to the Taoiseach.

Dara Calleary (Mayo, Fianna Fail)
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What about the reduction over three years?

Kieran O'Donnell (Limerick East, Fine Gael)
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When one is considering measures that have moral authority, one must note the reduction in the minimum wage is double the reduction proposed for the Taoiseach. A salary of €214,187 does not compare with the minimum wage of €15,912. The Taoiseach's salary is approximately 13 times the minimum wage.

The annual minimum wage currently amounts to €17,992 if one works a 40-hour week. It is proposed to reduce the hourly rate from €8.65 to €7.65, a reduction of 12%, bringing the annual wage to €15,912. This amounts to a reduction of approximately €40 per week, which is significant to the individuals concerned.

A person on the minimum wage currently pays an income levy but no health contribution or PRSI because of the exemption. The income levy amounts to approximately €360. Recipients of the reduced minimum wage, when brought into effect, will pay an extra €115 per year, resulting in a total of €435.76. It strikes me as illogical that, although one's income is decreasing, one is paying a higher tax. This is because of the universal social charge. The charge should be called the "universal tax charge" because that is all it is. A social charge normally implies a charge for some social service. I would like to know exactly where the money accruing from the so-called universal social charge will go. It is no more than a tax.

Let me make a comparison. Under the current system, a full-time employee on the minimum wage will more than likely not qualify for rent supplement and would have extreme difficulty qualifying for a medical card. Under the proposed system, with its reduced minimum wage, recipients will be earning just under €40 less per week, which amounts to just over €2,000 per annum. There is no incentive for people to work. While the economy must become more competitive, a balance must be struck. The proposal we put forward was more to do with reducing the overall cost to the employer by exempting the lower rate of PRSI for three years to reduce the cost on the employer by approximately €30 on or around the minimum wage.

I would like to hear the Minister's views on it. I hope he will review it. I hope also the Government will see that this measure is draconian and does not make sense. It is illogical because it is reducing the minimum wage while increasing the tax. It is not progressive. Under the universal social charge system, someone earning over €200,000 a year, for example, a proprietary director or someone who is self-employed, is gaining from this budget. That is inconsistent. We must have a progressive tax system. This measure is draconian and regressive and it will put people deeper into the poverty trap.

Kieran O'Donnell (Limerick East, Fine Gael)
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Obviously, the Deputy is pally with him.

Andrew Doyle (Wicklow, Fine Gael)
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I thought the Deputy meant Clara Lara.

Willie Penrose (Longford-Westmeath, Labour)
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I want to invite the Deputy to Mullingar to visit Belvedere House. He would love it.

Dara Calleary (Mayo, Fianna Fail)
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Senator Cassidy would entertain him as well.

Kieran O'Donnell (Limerick East, Fine Gael)
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On a point of order-----

Kieran O'Donnell (Limerick East, Fine Gael)
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Many of the people on the minimum wage are in casual labour. They are working with an employer-----

Brian O'Shea (Waterford, Labour)
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That is not a point of order.

Kieran O'Donnell (Limerick East, Fine Gael)
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It is a point of information. They could find themselves moving to two or three new employments in a year. If they move from one employment they will certainly be on the lower wage.

Brian O'Shea (Waterford, Labour)
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Deputy Gogarty, without further interruption.

Kieran O'Donnell (Limerick East, Fine Gael)
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Tell that to someone on the minimum wage.

Kieran O'Donnell (Limerick East, Fine Gael)
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I would hope so.

Andrew Doyle (Wicklow, Fine Gael)
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Do they need a medal for caring for their children?

Brian O'Shea (Waterford, Labour)
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Can we have one voice, please?

Kieran O'Donnell (Limerick East, Fine Gael)
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Those involve JLC rates.

Andrew Doyle (Wicklow, Fine Gael)
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Which is €11.45 an hour.

Brian O'Shea (Waterford, Labour)
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Five minutes.

Kieran O'Donnell (Limerick East, Fine Gael)
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What does that say about Deputy Gogarty?

Joe McHugh (Donegal North East, Fine Gael)
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I wish to share time with Deputy Andrew Doyle.

Brian O'Shea (Waterford, Labour)
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Is that agreed? Agreed.

Joe McHugh (Donegal North East, Fine Gael)
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How much time do we have?

Brian O'Shea (Waterford, Labour)
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The Deputies have 20 minutes in total.

Joe McHugh (Donegal North East, Fine Gael)
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It is not longer than that?

Brian O'Shea (Waterford, Labour)
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No.

Joe McHugh (Donegal North East, Fine Gael)
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Is the debate not continuing until 8 p.m.?

Brian O'Shea (Waterford, Labour)
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Yes, but this slot is 20 minutes.

Joe McHugh (Donegal North East, Fine Gael)
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I am glad to have this opportunity to speak. I will highlight one comment made by the Minister, Deputy Brian Lenihan, prior to the budget which was that he committed to ensuring that no sector would avoid a cut. In fairness, he has achieved this; not one sector has been left out of the budget.

The question of leadership, or a lack thereof, is raised. We have a petrified paralysed Government more afraid to make decisions than to think about positive action and proactivity. This is at a time when there is anger, disillusionment and apathy in the country. I believe apathy is far more dangerous than anger and it has entered this stage, which the Minister of State knows from travelling the length and breadth of the country.

We have a crisis. The budget was an attempt by the Government to get the country back on track towards recovery. This certainly will not be the case. We have had two years of nervous anticipation and expectation of cuts and more cuts. As John Maynard Keynes pointed out, it is the expectation of cuts rather than cuts themselves that can be more dangerous to an economy. I spoke to a small shopkeeper in Letterkenny who was able to point out to me that his sales in the three weeks prior to the budget were down 20%. It is this type of nervousness in the economy, the issue of leadership and the paralysis surrounding and associated with the Government that has left the country in a perilous state.

While accepting that we have to make hard decisions, we must also accept that we have to make changes including to the type of governance employed in the country. I do not think the budget has done so in any way. It is very big on theory but the specifics have been left out. Cuts of more than €742 million will be made in health but we have not been given specific information on them. Last year, €90 million was allocated to the National Treatment Purchase Fund, NTPF; this has been reduced by €5 million to €85 million. While €5 million is a lot of money, we are still spending €85 million on getting rid of gridlock and queues in our health services and on accommodating people who cannot otherwise avail of hospital services.

I have just received a note with clarification on the slot. I believe it will run until 8 p.m.

Brian O'Shea (Waterford, Labour)
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No, it is a 20 minute slot. If Deputy McHugh wishes to use all of that time it is open to him to do so.

Joe McHugh (Donegal North East, Fine Gael)
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Yes, I will use all of the time.

The NTPF represents acceptance by the Government that health service provision is not working. More than 2,600 patients have been referred from Letterkenny General Hospital to other hospitals, many of them to Ballykelly hospital, a private hospital in Northern Ireland. This raises an issue. If we want to keep money in the State and are trying to create economies and to use Government money in a worthwhile fashion why are we abdicating responsibility for performing operations? Consultants in Letterkenny General Hospital are being paid but they are idle as they do not receive the services to carry out orthopaedic surgery. In this day and age, why are we sending patients across the Border to Ballykelly hospital? While Ballykelly hospital and the surgeons there provide an excellent service, and the patients who have gone there speak very highly of it, why are we not considering a model whereby we do not have to send them there? We have beds-----

Martin Mansergh (Tipperary South, Fianna Fail)
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On a point of order, does this have any relevance to the Bill? We seem to be discussing hospitals and health. Have I come into the wrong debate?

Brian O'Shea (Waterford, Labour)
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I take the point. I ask the Deputy to stay on the thrust of the Bill and what is contained in it.

Joe McHugh (Donegal North East, Fine Gael)
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I am speaking about proper leadership and the budget yesterday which, as far as I am concerned, missed the point completely in terms of challenging how the country is governed. It is a missed opportunity. I speak to people in my constituency who, no matter what industry or business they are in, are strangled by red tape. Business, potential business and expansion of business are choked because people cannot carry out their business activity on a day-to-day basis. The people of the country are in a maxed out state in terms of surviving on a day-to-day basis never mind a week-to-week basis. The budget was a missed opportunity.

The country needs to evaluate where it is in terms of debt, negative equity, people not in a position to pay back their mortgages or loans or to pay their rent and get by on a day-to-day basis. This is the problem with the level of anger that has moved on to apathy, and the level of apathy that has moved on to disillusionment. Yesterday, people wanted some form of leadership that would have proven the Government was willing to make hard decisions but it did not happen.

Deputy Acting Chairman( Brian O'Shea:

As Deputy McHugh has not used the full time allocation, I will now call on Deputy Doyle. Deputy Lynch will then take the final slot.

Andrew Doyle (Wicklow, Fine Gael)
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I thank Deputy McHugh for sharing his time. I have not had the opportunity to speak on the budget or the Social Welfare Bill because there has been so much interest in them. So many Members have wanted to express their anger at the measures taken that I left them the time to express their views. However, I would like to point out that the first responsibility of the Members of this House is to lead by example. Unfortunately, that example has not been set over the past couple of years. Instead, the policy of the Government Members has been to bury their heads in the sand, deny anything is wrong and insist that we have turned the corner.

We have turned the corner so often that we must be going around in ever smaller circles, because we are now back way behind where we were two years ago and way behind where we should be today had we taken corrective action at the right time. Nonetheless, Fine Gael has accepted the broad parameters of what needs to be done to restore stability so that we can send home the people who have been riding shotgun over the country and those who have been in Government. We will be all right on our own and do not need them anymore. The budget, the four year plan and the deal negotiated here last week show all the hallmarks of a Government that is bankrupt of ideas. It is a Government that no longer has the moral authority or the vision to implement measures that will restore the country to stability.

I would like to focus on the issue of the minimum wage, having listened with interest to Deputy Gogarty. Of itself, the minimum wage is not the problem. Less than 4% of the working population is in receipt of it. Deputy Gogarty referred to the hospitality sector. Members of the hospitality sector, the Restaurants Association of Ireland and IBEC, made representations to us asking us to deal with two issue - reference is made to these issues in the IMF proposal and in the budget. They asked that registered employment agreements and joint labour committee terms would be dealt with through legislation and negotiation.

It would have been far better to have implemented the Fine Gael proposal concerning those on low pay, which was to forego the PRSI contribution of 8.5% up to the level of the minimum wage, approximately €356 per week, than to impose a cut on the minimum wage. What will happen now is that those people whose wage will be reduced to €7.65 per hour will fall back on the safety net of the family income supplement and other measures, which will cost the State as much as the money foregone and probably more. At the same time, the cuts will deny employers the opportunity to employ people and generate wealth and stimulate further employment if money was available from the banks. I will not go into the issue of credit other than to mention that this dimension is something else that must be tackled. Stimulating employment would have meant we had people working who did not require extra assistance from the State.

There will be no difference in the cost to the State as a result of the reduction in the minimum wage but it will make a huge difference to prospects for employers. If an employer was going to employ someone at a rate of €7.65, he would do the same if the rate was €8.65 but there was an 8.5% exemption from PRSI. The cost to him would be the same. It makes more sense to provide the exemption from PRSI and I cannot understand why the Government did not think outside the box and adopt that policy. Fine Gael put that option in good faith to the Government in its alternative budget, but the Government was not magnanimous enough to accept it. The Government has, when it suited it, asked for our assistance and co-operation, but when we offer them it refuses to take them.

It is ironic to see on the front pages of our newspapers today that a bank we practically own is paying out bonuses of €40 million while we, on the other hand, are cutting the minimum wage. I said we should lead by example. It was suggested here that those bonuses should be taxed at a rate of 99%. That may sound draconian, but I would like to know on what basis those bonuses were earned or on what improved performance they were earned.

The issue of politicians' pay is dealt with in this Bill. It is only appropriate that at a time when we are taking €40 a week from a person earning the minimum wage, we should take €300 or so a week from the salary of the Taoiseach. We must lead by example. Fine Gael put forward the proposal that all public sector pay should be capped at €200,000. The reduction of the Taoiseach's salary to €200,000 would have been a significant gesture. I cannot understand why that was not done and the example set.

On the issue of public service pensions, we must acknowledge that people in receipt of public service pensions have done well. I am the son of a retired school teacher who would admit that she expected some change in this regard and we all expected the same. However, it is not clear in the Bill whether the pay reduction is in addition to the universal social contribution. Will these pensions be hit twice? As I said earlier, the Government must set the example. As the saying goes, if one gets up early enough in the morning, one can stay in bed all day. The Government has not done that over the past two years. We need a reality check.

The people are feeling pain but they believe we do not understand or empathise with them. Some of the carry-on, posturing and denial that has gone on here makes this worse. We have heard one arm of the Government say it was fiction that anybody was coming into Ireland from Europe to offer help or that we were going to send a request for assistance while another was saying that we were sending a request for help. People ask where is the leadership and whether those in charge know what they are doing. The answer, unfortunately, is that they do not.

Over the past seven or eight years many of us have seen this Chamber become irrelevant. The partnership arrangements and the manner in which the Cabinet worked has meant that the other Members of the House and the people were not represented. Now responsibility has moved even further from us. It has not come back into the House, but has gone to people who have been here for the past three or four weeks negotiating new arrangements. That is not for what the founders of the State set up this institution and these structures. They did not set them up to be sidelined and parked and handed over to people who come from countries of which our forefathers never even heard. It is a sad day for that to have happened. This budget, limited as it was in terms of what could be done, has not done anything to set out a roadmap to get us out of this situation.

Kathleen Lynch (Cork North Central, Labour)
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I spoke on the budget and on the Social Welfare Bill and now we have the final piece of the jigsaw that will deal with the immediate cuts that will come into effect as a result of the mismanagement of the economy. We could speak all day about the issues but every time a member of the Government stands up to speak, he tells us about the international crisis and the banking crisis. The last item on the agenda is always the mismanagement of the country. The international financial crisis also affected other countries but they are coming out the other end. The difference with Ireland is that the international and banking crises was compounded by the economic mess created by an arrogant Government that believed it could do no wrong.

Deputy Gogarty spoke about his involvement in the last two general elections. I am always fascinated by people who remember what they said as long ago as 2002 or 2000. The only things they seem to remember are what they got right.

Martin Mansergh (Tipperary South, Fianna Fail)
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That is correct.

Kathleen Lynch (Cork North Central, Labour)
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They never recall the things they got wrong. The human condition is fascinating. I am no different, except that I cannot remember what I got right or wrong.

Child care was the main issue in the by-election held in County Kildare prior to the 2007 general election. Fianna Fáil introduced the early child care supplement just before that general election. Governments usually know when an election is being held, although I do not think anyone knows the date of the next election. All we know is that it will be soon and, according to Senator Boyle, it will not be fought in the cold. I do not know how these conditions will be met. The introduction of the scheme was a blatant political gimmick. The Government's intention was not to offer child care, preschool education or the other child supports a civilised society should provide. It was simply a case of throwing around money in order to win an election. At the end of the day, people bought into the offer.

The last election was all about not rocking the boat. One could feel the change in the last two weeks of the election campaign. There was an undercurrent of worry because people knew in their guts that the pyramid scheme of our economy could not last. They were warned by different economists to the ones we hear from now. However, Fianna Fáil won the election because when people get nervous, they are inclined to stick with what they know. As the Government must have known by then that the economy was going downhill, the election was not fought honestly .

The consequences of the Bill before us will be felt long into the future. Every time I hear the words "financial emergency in the public interest", I am reminded of Frank Hall as the minister for hardship and the chant "in the national interest". We would not be in our present predicament had Fianna Fáil taken those words to heart but its links to a small elite caused it to follow the course of action which led the country to crisis.

I do not think anger can be sustained for long but the memory of anger will linger. A supposedly sacrosanct pension fund comprising €17 billion is now to be used to bail out bankers who lived the lives of princes and did not give a damn about the country or the little person. As the money will not be enough to fill the hole, we are now being run by outside parties. I do not blame the IMF or the ECB. We probably should be grateful they are around to clean up the mess created by this Government. The people blame the Government.

We are debating a Bill that will reduce the minimum wage by €40 per week while the people who caused this crisis are being paid €40 million in bonuses because the Government continues to make a mess of getting guarantees from the banks. Nobody would believe the Government if it announced this €40 million was to be the final payment. I am not even certain that the contracts drawn up to take over the banks are watertight. Somebody else is probably waiting to take another lump of money from the taxpayer.

People on disability benefits, the blind pension and widows are now paying for what the bankers and Fianna Fáil did to the country. While the anger may dissipate, the memory will not. I grew up listening to my mother criticise Ernest Blythe for taking a shilling from the widow's allowance. In fairness, I would not recognise the man if he walked down the steps of the Chamber because he made his decision long before I was born. However, he is still remembered. This period in our history will be remembered equally.

I ask for clarification on the extension of the grace period until February 2012. If I understand correctly, we cannot tax retrospectively the €40 billion paid out by AIB. Are we able to introduce this type of change in pensions policy even though we cannot do so in respect of a bank that we own?

How does the Minister of State at the Department of Finance, Deputy Mansergh, define the word "republic"? He is the best qualified Member of the Government to answer that question. This is not a republic. We do not have equality at the heart of our society. In a republic this crisis would not have occurred and we would not be asking the poorest of the poor to pay for the mistakes of the rich.