Friday, 10 December 2010
Financial Emergency Measures in the Public Interest (No. 2) Bill 2010: Second Stage (Resumed)
The purpose of this Bill is to cut public services, the pay rates of Government officeholders and to take €1 or 11.5% off the minimum wage. The Bill contains another batch of cuts following on the slash and burn Social Welfare Bill yesterday. This time it is public service pensioners and the minimum wage earners who are hit. A sweetener is thrown in, curtailing the earnings of the Taoiseach by 5% and the Tánaiste and Ministers by 4.5%. While those reductions follow on 20% and 15% reductions respectively last year, they certainly will not put the Taoiseach or his Cabinet on the breadline. The annual remuneration of the Taoiseach will still be a hefty €214,187 while the Tánaiste will still earn €197,486 and each Minister will earn €181,283. The Labour Party believes nobody in the State sector should have a salary of over €200,000. There should be a statutory maximum salary in the public service and €200,000 should be the absolute ceiling, with the Taoiseach leading by example. The Cabinet salaries should be reduced proportionately. The Minister for Finance stated in his budget address:
The Government believes there should be a maximum salary rate of €250,000 in the public sector. Only a few officeholder posts have salaries above this level at present but there is a larger number in the State agencies.
What is the Minister going to do about it? He proceeds, typically, to suggest that we will "enforce the objective of the maximum salary [€250,000] within a reasonable timeframe" but there is no reasonable timeframe for those on social welfare whose income is being reduced to less than €200 weekly. The blind the disabled, the widowed, the lone parent, the unemployed and the carer are not being provided the buffer of a "reasonable timeframe".
Yesterday's Social Welfare Bill made all the social welfare cuts operational from the end of December 2010 or the beginning of January 2011. High earners are given time to acclimatise to "adjustments" while so called "social protection adjustments" are immediate and ongoing. It gets even worse for the less well off. The Minister for Finance put it chillingly in his budgetary speech: "Over the next four years, further reductions in social welfare spending are unavoidable if we are to reduce the budget deficit."
The Fianna Fáil view of the financial crisis is frightening. The sins of the bankers will be visited on social welfare recipients. The less well off must pay for the bailout.
The title of this Bill is the laughable Financial Emergency Measures in the Public Interest (No. 2) Bill. It is a bad political joke from the gombeen party of Ireland. How can it be in the public interest to reduce the minimum wage from €8.65 to €7.65 or by 11.5% and then to cut it further with the universal social charge, an additional tax that will result in a total slice off the minimum wage of at least 14%? Some 50,000 workers on the minimum wage will be hard hit by the provision of this Bill and this budget. The statutory minimum wage is a necessary bulwark against abject poverty and exploitation in the workplace. It should be a core principle in a civilised society. The 11.5 % cut in the minimum wage is not going to add one cent to the Exchequer while it will expose thousands of people to exploitation by unscrupulous employers and to poverty. Moreover, there is a mechanism through the Labour Court that enables an employer to plead inability to pay the national minimum wage. This mechanism has yet to be invoked by any employer.
With their across-the-board cuts in social welfare benefits and allowances and now their cut in the minimum wage the Government has begun a new race to the bottom for the most vulnerable people in our society. Already nearly 120,000 workers are deemed to be living below the poverty line in Ireland. This assault on the minimum wage could open the floodgates and sharply increase the numbers of working poor. The budget is about political choices and political priorities. The Labour Party presented a budget of €4.5 billion revenue raising measures divided equally between taxation measures and expenditure cuts. The Labour Party identified new tax measures such as the 48% tax rate; the Government chose not to touch the tax rates. The Labour Party identified major savings in eliminating pension and property-based tax reliefs; the Government chose to nibble lightly at these reliefs, which are enjoyed by the rich and powerful and influential friends of Fianna Fáil. The Labour Party identified 7,000 tax exiles, who are virtually all millionaires, not paying a tax in this country and yet who enjoy all the benefits of being Irish citizens jetting in and out of the country as the fancy takes them. The Minister for Finance mentioned the desirability of taxing them in last year's budget. It did not happen then and it will not happen now while this Government is in power.
These are the political choices that Governments make. Fianna Fáil has too many friends in high places to go after the big earners. Instead, they have disproportionately reduced the incomes of the middle earners and the less well off. The recent announcement that bank executives in AIB, a bank in public ownership, which received €3.5 billion in recapitalisation from the State, which will receive billions more and whose shares have plummeted from €23.95 to just 50 cent, will receive €40 million in bonuses is outrageous. How these executives could be entitled to bonuses when the bank was being driven into the ground and incurring astronomical debts is beyond any sane person's comprehension. There is a Christmas bonus for the executives, but a cold shoulder for wholly innocent front line staff. These are the people who will experience the sharp edge of public anger. The response of the Minister for Finance is typical. He has announced a 90% tax on such bonuses for the future but he is not willing to tax the €40 million at issue now.
The Minister has announced that there will be a 90% tax on such bonuses in the future. He cannot deny that fact. However, he is not willing to do it now with regard to the €40 million that will be paid out. I ask that the Minister table an amendment to the Bill, in keeping with its title of emergency measures in the public interest. Surely this is an emergency measure in the public interest. He should impose a tax of 90% on all bonuses, including the current bonuses. Everybody on this side of the House would support such an amendment unanimously. The bonuses are due to be paid out to the executives by 17 December so this is the only opportunity for Members of this House to take a stand on behalf of the Irish people and to say that we who were elected to represent the people will stand with the people and not tolerate this smash and grab. It is not too late for the Minister to do the right thing and I urge him to do just that. We will support him in every way and there is still time. Unfortunately, this budget protects the elite in our society, many of whom are associated with the financial institutions which have destroyed our economy and are threatening our social cohesion. This is a bad and dangerous budget. It must be opposed and the Government which produced it must be put out of office as quickly as possible.
That is fine and if Deputy Hayes arrives, I will be happy to share.
One of the key issues is the credibility of the public service process when significant pensions, gratuities or bonuses over and above what are normal amounts are awarded to people, amounts more than are usual even in the private sector. When I was party spokesperson on transport I was aware of the pay package of the chief executive of the Dublin Airport Authority which amounted in total to €750,000. This is a significant sum for one person to earn. The scandal in the public sector is that in some cases the Minister's political control has not been evident. I know attempts are now being made to bring this control into play. There must be control over the bonuses, credibility and accountability of chief executives of certain State commercial firms. It is a national shame that this has not been the case up to now. I received a number of replies to parliamentary questions, including some from the Minister for Finance. In the current financial situation it might be better if special bonuses which may be small in some cases, were not paid until the country is out of this crisis.
In the education sector there has been a significant number of reports from the Comptroller and Auditor General with regard to excessive pay or moneys being paid to individuals at the highest level in education which have not been sanctioned by the Minister or by the Higher Education Authority. I refer to the situation in the University of Limerick where over a two-year period, three presidents were all drawing a full presidential salary. A former president of NUI Galway voluntarily repaid over €250,000. There are issues in UCD over pay in excess of €1.3 million. No later than last week, there have been issues arising about the Royal Irish Academy of Music where significant amounts of money seem to have been paid over and above what was the going rate. With regard to FETAC, a number of employees took part in a restructuring programme and received pensions over and above what they would have expected to receive. Control of public sector expenditure is at the heart of these issues with reasonable and moderate bonuses being paid - if at all - in good times while in bad times everybody must put their shoulder to the wheel. I have a query on the situation in FETAC. It is currently carrying out nationwide audits of FÁS courses. What audits have been carried out in the past 12 months since the scandal of the FÁS manipulation of courses has come to public notice? What new information was FETAC given on 10 November and what are the results of the audits? At the heart of the public service is its credibility. FETAC should make a statement today about its actions and the information it has received. We must affirm the audit and the work but the quality of the certification of its courses is paramount and critical because more than 300,000 people per year receive FETAC certification. I refer to FETAC in the context of the credibility and accountability of the public sector. Those at the top in every organisation, particularly in the public sector, must be seen to take their fair share of the burden. There must be an end to these bonuses and the abuses which have been brought to our attention by the Comptroller and Auditor General.
The Higher Education Authority spent nine years writing to the universities to say these payments must cease as they were not sanctioned by the Minister but nothing happened. There has been a lack of ministerial accountability or vigour in pursuing these issues even though the abuse was clear and moneys were paid without ministerial sanction. This is the weakness at the heart of this Government. We need a general election to put a new team in place who will insist on more accountability and transparency from all these public bodies.
In responding to the debate, it is important to be very clear about the background to the measures in this Bill.
The preamble and recitals to the Bill outline the seriousness of the problems Ireland faces. The economic pressures of the last two years, coupled with the turmoil in the financial sector, have produced a significant deterioration in the Government's budgetary position which must be addressed as a matter of urgency. In a more fundamental sense and irrespective of who forms the next Government, there is no point in deluding ourselves about what must be done to ensure that Ireland emerges from this crisis. The future economic and social well-being of the country is at stake and the Government has acted, must act and will act decisively. We have to accept there are no easy options, although many like to give the impression that they can think of painless alternatives. A responsible Government does not have time to play games of this kind. I can assure the House that this Government has never been under any illusion about the scale of the problem and the very difficult decisions which must be made. We must stabilise the economy and the banking system and then bring forward the measures which will restore Ireland's economic health. This is what we have done in the plan for economic recovery and that is the cornerstone of the development of this country in the next four years. Any Government that is formed in the next year will depart from it at its peril in terms of the growth prospects for this country. The Government is determined to steer the country through these difficult problems and will do so by implementing the economic and budgetary policies required to put Ireland firmly on course to recovery.
Understandably, the reduction in the national minimum wage for new entrants to the labour market has caused much comment in this debate. Ireland has the second-highest national minimum wage rate in the EU.
Members must accept that this is no longer sustainable, given the economic crisis which has pushed unemployment to new levels. The policies introduced in the boom years, which contributed a great deal to pushing up the cost of employment and reducing Ireland's competitiveness, cannot be maintained. We have to change our approach and tailor what we do to the new economic realities to create more employment. I am sure Deputies will have seen the recent reports-----
-----about the increase in long-term unemployment, something which makes the need for action all the more pressing. The OECD and other international experts have identified a high minimum wage as a real barrier to job creation.
-----but, of course, this is not the case. It means the evidence shows that if the rate had not been increased, we could expect that employment opportunities would be greater.
The effects of a high minimum wage are wide-ranging. It is a barrier to employment in labour-intensive sectors like retailing, hospitality and tourism, where many jobs have been lost. If Ireland is to deal with the unemployment problem, these are precisely the sectors which must be encouraged to create jobs. In particular, I want to underline that a high minimum wage can be real barrier to young and less skilled people getting jobs in these sectors. The House will be aware the unemployment rate for those aged between 20 and 24 is nearly 25%.
This can be a major problem for people without the necessary skills and experience to get better jobs. With more entry-level employment, the young and the less-skilled do not have the opportunity to improve their skills and then move to better jobs elsewhere. Deputies should remember that, since it was introduced, the minimum wage increased well beyond the level of inflation; it rose by 55% while inflation only increased by 28%.
I remind the Deputy that there is plenty of taxation on that.
Even with the reduction the Government is making in this legislation, our minimum wage will still be considerably above the level of that in the UK and Northern Ireland. We need to start to face economic facts and become a competitive economy. We in all political parties-----
Last night, Deputy Penrose asked whether the Government's decision to reduce the national minimum wage was required or demanded by the IMF or the EU. I can assure the Deputy that this is not the case. Ireland has agreed a programme with our EU partners and the IMF which offers substantial financial support, amounting to a total of €85 billion through the European Financial Stability Fund and the European Financial Stabilisation Mechanism, bilateral loans from the United Kingdom, Sweden and Denmark, and the International Monetary Fund's extended fund facility. In the course of the discussions any international observer who discussed the Irish economy pointed to the ludicrous aspect of the present position - something that some in this House fail to comprehend.
The funds will be provided to Ireland on the basis of the terms and conditions in the memoranda of understanding and related documents. I can inform the House that it is expected that drawdown of the external financing element will begin early in the new year. The specific policy measures associated-----
I can point out to Deputy Penrose that the decision on the national minimum wage was announced by the Government in the national recovery plan and is clearly set out in pages 35 and 36 of the plan.
There was considerable debate last night about the issue of bank bonuses and I take this opportunity to repeat what I said last night. As the House will be aware, the legislation introduced on foot of the bank guarantee specifically prohibits the payment of any performance bonuses to senior bank executives.
I welcome the clarification by AIB's new executive chairman David Hodgkinson who told staff that the payments reflected the past - before 2008 - and that this was not the way the bank intended to conduct itself in the future.
----- I will include a provision in the upcoming Finance Bill to introduce a 90% tax rate on any future banker's bonus in all guaranteed institutions. In addition, the Government has recently passed new Central Bank legislation, which gives the Central Bank the power to take enforcement action in the event of non-compliance by the banks with remuneration policies. The Central Bank has seen a significant increase in its staff to allow for any necessary enforcement action.
The most crucial issue is that these bonuses are fully subject to income taxation and any attempt to single out a group of income taxpayers for penal treatment in a retrospective way would of course be entirely impossible.
In the light of the increasing cost of public service pensions, the Government had to reduce spending in this area. This was an extremely difficult decision for the Government to take and as I said at the start of this debate, this was not done lightly without very careful consideration being given to the consequences. However, the Government must have regard to cost and the increasing burden public service pensions place on the Exchequer and the taxpayer. The figures underline the size of the cost. Since 2006 expenditure on public service pensions has increased by 56% from €1,433 million to €2,235 million. Expenditure on pensions was approximately 3% of total gross current expenditure in 2006 and is estimated to be approximately 4% in 2010. Pensioner numbers, excluding local authorities, have risen from 76,000 in 2006 to 103,500 in 2010, an increase of 36%. By contrast, average public service numbers increased by approximately 12% during the same period. These costs will rise significantly in future. Increased life expectancy will be a major cause of the increase for public sector schemes as well as for other pension schemes.
There are also special factors which will affect the public service in Ireland. There was relatively high recruitment of public servants in the late 1970s compared with restricted levels in the late 1980s and well into the 1990s. This means that considerable numbers of civil and public servants will retire in the next five years or so, adding significantly to the pool of retirees. Of course, recent moves to reduce public service numbers have brought forward many of these retirements.
In common with all employers, the Government is very conscious of the fact that provision must be made to ensure that retirees are properly supported in retirement. Employers have a strong moral obligation to their older, former employees. When people have devoted years of service to the public as public servants, as teachers, nurses, or members of the Garda Síochána, there is a particularly strong duty on the Government to make certain that they have a reasonable level of income in retirement.
However, given the huge budgetary challenges we confront, the Government considered that it was right to ask some public service pensioners to make a contribution. There is no point in telling people that the pension reduction is avoidable if it means that the funding of the Exchequer is put at even greater risk than it is at present; avoiding the issue now could make things a lot worse in the longer run. I am glad to see that Deputies noted that the Government decided pensioners on an annual pension of €12,000 or less would be exempted and have acknowledged that the pension reduction is fair and proportionate, with those on higher pensions being asked to make the largest contribution.
Deputy Noonan asked why the Judiciary is included in the measure reducing pensions while not being subject to the pension levy and pay reduction. The Government decided to reduce judicial pensions as part of a general measure affecting all public servants on grounds that it was right to do so. All those who can afford to contribute should do so and there was no reason to exclude the Judiciary. The Constitution is very clear on this matter. Article 35(5) states: "The remuneration of a judge shall not be reduced during his continuance in office." Therefore, while the pensions of former members of the Judiciary may be affected by a widely based measure taken in the public interest such as is contained in this Bill, the pay of a judge during the continuation of office is, under the principle of separation of powers, protected from any reduction being imposed by the Government of the day.
I can assure the Deputy that what the Government has done on judicial pay and pensions is in complete accordance with the law.
The National Recovery Plan 2011-2014 presents in detail the measures that must be taken to put the public finances in order and to secure sustainable, export-led growth in the Irish economy. This week budget 2011 began the process of implementing the expenditure and taxation policies needed to meet the targets by 2014. The budget is a decisive step in this direction. The Bill now before the House implements three of the important measures announced in the plan and the budget. These measures are essential to our recovery. I commend the Bill to the House.
The Dail Divided:
For the motion: 80 (Bertie Ahern, Dermot Ahern, Michael Ahern, Noel Ahern, Barry Andrews, Chris Andrews, Seán Ardagh, Bobby Aylward, Joe Behan, Niall Blaney, Áine Brady, Cyprian Brady, Johnny Brady, John Browne, Thomas Byrne, Dara Calleary, Pat Carey, Niall Collins, Margaret Conlon, Seán Connick, Mary Coughlan, Brian Cowen, John Cregan, John Curran, Noel Dempsey, Jimmy Devins, Timmy Dooley, Frank Fahey, Michael Finneran, Michael Fitzpatrick, Seán Fleming, Beverley Flynn, Paul Gogarty, John Gormley, Mary Hanafin, Mary Harney, Seán Haughey, Jackie Healy-Rae, Máire Hoctor, Billy Kelleher, Peter Kelly, Brendan Kenneally, Michael Kennedy, Tony Killeen, Michael Kitt, Tom Kitt, Brian Lenihan Jnr, Conor Lenihan, Michael Lowry, Tom McEllistrim, Mattie McGrath, Michael McGrath, John McGuinness, Martin Mansergh, John Moloney, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Darragh O'Brien, Charlie O'Connor, Willie O'Dea, John O'Donoghue, Noel O'Flynn, Rory O'Hanlon, Batt O'Keeffe, Ned O'Keeffe, Mary O'Rourke, Peter Power, Seán Power, Dick Roche, Eamon Ryan, Trevor Sargent, Eamon Scanlon, Brendan Smith, Noel Treacy, Mary Wallace, Mary White, Michael Woods)
Against the motion: 72 (Bernard Allen, James Bannon, Seán Barrett, Pat Breen, Tommy Broughan, Richard Bruton, Ulick Burke, Joan Burton, Catherine Byrne, Joe Carey, Paul Connaughton, Noel Coonan, Joe Costello, Simon Coveney, Seymour Crawford, Michael Creed, Lucinda Creighton, Michael D'Arcy, John Deasy, Jimmy Deenihan, Pearse Doherty, Andrew Doyle, Bernard Durkan, Damien English, Frank Feighan, Martin Ferris, Charles Flanagan, Terence Flanagan, Eamon Gilmore, Noel Grealish, Brian Hayes, Tom Hayes, Michael D Higgins, Brendan Howlin, Paul Kehoe, Enda Kenny, Ciarán Lynch, Kathleen Lynch, Pádraic McCormack, Shane McEntee, Dinny McGinley, Finian McGrath, Joe McHugh, Olivia Mitchell, Arthur Morgan, Denis Naughten, Dan Neville, Michael Noonan, Caoimhghín Ó Caoláin, Aengus Ó Snodaigh, Kieran O'Donnell, Fergus O'Dowd, John O'Mahony, Brian O'Shea, Jan O'Sullivan, Maureen O'Sullivan, Willie Penrose, John Perry, Ruairi Quinn, Pat Rabbitte, James Reilly, Michael Ring, Alan Shatter, Tom Sheahan, Seán Sherlock, Róisín Shortall, Emmet Stagg, Billy Timmins, Joanna Tuffy, Mary Upton, Leo Varadkar, Jack Wall)
Tellers: Tá, Deputies John Cregan and John Curran; Níl, Deputies Emmet Stagg and Paul Kehoe
Question declared carried