Michael Noonan (Limerick East, Fine Gael)
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Question 63: To ask the Minister for Finance his understanding of his commitment in the EU/IMF Programme of Financial Support for Ireland actions to be completed by end Q3 2011 that he will consider an appropriate adjustment, including to the overall public service wage bill to compensate for potential shortfalls in the projected savings arising from administrative efficiencies and public service number reductions; and if he will make a statement on the matter. [1441/11]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As I stated in the Budget Statement, the policies set out in the joint programme of assistance closely reflect our national recovery plan. The programme sets out key points where the Government will assess the delivery of its current policies as set out in the plan to ensure they are achieving the savings and adjustments necessary to help restore the country's budgetary position, building on the significant savings already achieved over the last two years. The Government proposes to meet its target for further reductions in the cost of delivery of public services through planned reductions in the number of public servants and through greater efficiencies in the way public services are delivered. The savings targets for 2011 are set out in the budget Estimates and now form part of the allocation for each Department and agency over the coming year. These savings targets are based on an overall reduction of public service numbers to 301,000 by the end of 2011 and other savings to be realised through a range of efficiencies and reform measures, including those set out in the Croke Park agreement. The agreement will allow the necessary changes to working practices to be made to enable priority services to the public to be sustained in a period of reduced resources.

The EU-IMF programme of financial support for Ireland states that by the end of the third quarter of 2011, the Government will consider an appropriate adjustment, including in the overall Public Service wage bill, to compensate for potential shortfalls in the projected savings arising from administrative efficiencies and public service number reductions. Prior to that, and in accordance with a commitment under the Croke Park agreement, the first annual review of the position concerning public service pay and the sustainable savings arising from the implementation of the agreement will be undertaken. That review will be based on the same quarterly data on the public service wage bill and the number of employees as will be provided on a quarterly basis under the joint arrangement. There is therefore a synergy between the plan and the agreement. The reviews under the agreement will demonstrate clearly whether it is delivering savings in the costs of public service delivery, primarily through reductions in public service numbers, with the related changes in working practices necessary to ensure that priority public services can continue to be sustained or improved. In the event that the necessary sustainable savings are not being achieved, the Government is of the view that further cost saving measures will be necessary to achieve those reductions. A number of options would be available to the Government in those circumstances to reduce the cost of the overall pay bill.

In that regard the main commitments the Government gave under the agreement, namely those on pay rates, job security and superannuation entitlements, do not apply to any public servant which is represented by a union or association that has not accepted the agreement. Any union or association in that position should now give careful consideration as to whether it is best representing the interests of its members in adopting that approach.

Michael Noonan (Limerick East, Fine Gael)
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If the savings envisaged under the Croke Park agreement in the public pay bill are not achieved, then the Minister will have straight pay cuts, if he happens to be still around at the end of quarter three. Does he agree that the fact this is written into the memorandum of understanding is evidence that neither the IMF nor the European Union institutions believe the targets under the Croke Park agreement? If he is still in office, does he envisage raising this issue when the review of the Croke Park agreement takes place in early March?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I do not accept what Deputy Noonan indicated or inferred because this particular procedure was inserted in the national recovery plan prior to any agreement with the EU and the IMF. The position under the national recovery plan is that we will seek to reduce the cost of the public service payroll through reductions in the numbers and a very clear schedule of numbers is outlined there. Were those savings not to be secured in accordance with the Book of Estimates published for this year, then the ultimate option of other methods to reduce the cost of the public service payroll would be resorted to. That was made clear in the national recovery plan and I made it clear on many occasions before and after the agreement that it must deliver the necessary savings. Whatever government is in office at the time will have to take measures to ensure costs are contained accordingly. I have every confidence this Government will be in a position to deliver the necessary savings through the primary route identified in the Estimates this year.

Michael Noonan (Limerick East, Fine Gael)
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I agree the Minister signalled this in the national recovery plan but the wording I used, and the question I posed today, is not taken from the national recovery plan but directly from the memorandum of understanding with the IMF and the EU institutions. It states very bluntly that if he does not achieve the targets envisaged under the Croke Park agreement, he will have to cut public service pay. Has the Minister worked out the process, procedure and legal base for possible future cuts in public service pay or is that something he has put on the back burner until there is a change in government?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As Deputy Noonan is aware, the officials from the IMF, EU and ECB were very impressed with the national recovery plan. They viewed it as a very impressive document, unlike the Deputy-----

Damien English (Meath West, Fine Gael)
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Hence the interest rate.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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-----and decided to endorse the agreement. One of the features of the agreement is that to ensure there is delivery on public service reform, there must be some mechanism to ensure the savings are procured in any event. That is in the national recovery plan and it is confirmed in the EU-IMF agreement.

It is not the only measure in the agreement which ensures budgetary discipline on the part of future Governments. There are many other provisions, for example, the cash limiting of Government departmental allocations on the non-pay side, the appraisal of projects on the investment project side, the restrictions of Supplementary Estimates and the requirement to bring savings forward to future years and not to reallocate them. All of these measures will ensure a path of strict budgetary discipline is followed by whatever Government is elected by the people. Indeed, the measures adopted in the EU-IMF agreement, and confirming what is in the plan, ensure that a path of strict fiscal control will be exercised by any future Government.