Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

55. To ask the Minister for Finance the actions he expects and the timetable for implementation following the completion of the Mercer report on bank pay and pensions; and if he will make a statement on the matter. [24384/13]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Deputy will be aware that when publishing the review of remuneration practices and frameworks at the covered institutions on 12 March 2013, I indicated that the Government had formed the view that with the remaining State-supported banks still incurring losses it was an inescapable conclusion that the cost base of the institutions needed to be reduced further. This is essential if they are to return to profitability and be in a position to support the economy and repay the State's investment through a return to private ownership. On behalf of the Government, I directed the banks to come up with plans as to how they intend to address this issue in a manner that can help meet the State's objectives, and I expect the value of those plans to mean a saving of 6% to 10% of total remuneration costs. I was not prescriptive in how this was to be achieved, respecting their differing State ownership and investment arrangements and paths to profitability. I can confirm that the three State-supported banks responded with their individual strategies designed to achieve the required savings by the due date of 30 April, as requested by the Government. Those plans are being evaluated by my Department currently. It is not possible at this stage to reveal precise individual details bar what has been put into the public domain. I can confirm that all three institutions have put forward pension changes to varying degrees as part of their respective overall responses.

I am constrained as to what I can say at the current time due to commercial sensitivities and, perhaps more critical at this stage, industrial relations concerns as the normal protocols continue and need to be respected and observed by all parties. This is something I have advocated throughout the process. I am anxious, therefore, that all the participants in these discussions are given space and time to conduct these critical negotiations.

Accordingly, I would encourage all sides to engage in these discussions proactively, through the appropriate forums, in view of the serious and critical consequences for all concerned. In this context, the Government readily acknowledges the sacrifices and changes made by bank employees to date at all levels, and recognises that this has been achieved without major industrial unrest in what is a critically important sector.

It follows that, at this stage, it would not be appropriate or realistic to specify a timeframe for the savings to be delivered. However, in view of the fact that the three institutions continue to be loss-making, the timely delivery of such savings is critical to their viability and to the future employment prospects of their employees.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank the Minister for his reply. He is right to acknowledge that many bank employees have taken some pain and made sacrifices, and are concerned about what will be imposed on them by way of the cuts required as a result of the Mercer report. As he stated, the Government has decided that cuts of between 6% and 10% in total remuneration costs are required across the State-supported banks. I have some questions on that.

The Minister said he was not prescriptive in what he was asking the banks to do once they brought in savings within the band of 6% to 10%. Does that mean he is completely neutral as to how the banks achieve those savings? For example, if they proposed a flat rate cut from the CEO down to an ordinary bank official, would that be acceptable to him and the Department? Has he given the banks an indication that he would at least expect a sliding scale, whereby the greater impact of the reductions will be felt by those on the highest pay? Is he completely indifferent as to how they achieve the cuts?

What will become of the savings that will be achieved as a result of these decisions? He mentioned the need for banks to return to profitability, with which we all concur. It is essential. As the Minister knows, a commitment was given that the banks would be required to reduce their costs in order to forgo a 0.25% interest rate increase. Will the cost savings be used to accelerate the return to profitability? Will customers, in particular those on variable interest rates, enjoy a rate cut as a result?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am not neutral on the method the banks may use to achieve payroll savings. We are talking about a reduction of between 6% and 10% in the cost base of each institution. The Deputy will recall that Mercer did an evaluation of the three institutions concerned, which we published. Arising from that, the Government decided that the cost bases of the banks were still too high. They are all suffering losses and they need to reduce their cost bases.

They have submitted an initial response to my letter, laying out in primary colours what their plans are. I have to be satisfied with the work out of that. We are all living in the real world; there is an industrial relations process. The banks are unionised and represented, and we have to respect the negotiation process. Some things that are being proposed will, I presume, be acceptable and others will not. They will work their way through the process. In the final analysis, my officials will advise me as to whether what is happening is adequate. The arrangement will not be put in place unless I sign off on the agreement on behalf of the taxpayer.

My weight in respect of AIB and PTSB is more than that in respect of Bank of Ireland, in which the State is a 15% shareholder. The purpose of the savings is to cut the cost bases of the banks in order that they become profitable again. Profitable banks are a great advantage to people who do business with them, in terms of the availability of credit, the service they can give and the cost of what happens.

It is within all this range of activity that I would see customers of the banks benefiting in due course. One point on which we can be absolutely certain, however, is that banks which continue to lose money in present circumstances are not doing any favours to their customers.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Ordinary bank employees would be quick to point out that they have not had much say thus far in the cuts to their pay and the changes to the terms and conditions of their employment. There may have been some consultation, but when it comes to pension changes, for example, unilateral decisions were made by the management of the banks. I acknowledge that a parallel industrial relations initiative is under way between the banks and employees' representatives. The Minister, however, is more than a passive bystander in this.

My question in this regard was very straightforward. The Minister said he is not neutral but that the savings have to come from remuneration. I am asking whether he will insist that those who are earning the most in the banks - the highest-paid executives - rather than ordinary employees, will bear the brunt of the pain. I accept what he is saying about profitability; it is a given that the banks must return to profitability. Nevertheless, a commitment was given regarding an interest rate reduction of 0.25%, to be facilitated by a reduction in costs. Costs are being reduced, but the promise to reduce the interest rate seems to have disappeared.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Surely nobody in this House is advocating that the banks should continue trading unprofitably and that Irish taxpayers should be asked to put more money in to keep salaries up and pensions high. That is a ridiculous proposition. Banks must cut their cloth according to their measure, but I will not dictate the specific terms of how they cut it. I have said that I want to see reductions of between 6% and 10% in the cost base. That is a fairly wide tolerance. I have said that management must negotiate with employees and include the representatives of those employees in the negotiations, before coming back to me with a proposal which achieves that level of saving. Then we will talk about it. It is not the job of the Minister to blunder into delicate negotiations seeking to lay down the arrangements. That simply does not work. The banks must be run on a commercial basis, they must be run by the management and board of directors, and they must negotiate arrangements with their employees in the normal way.

Doing nothing is not an answer. My colleague, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, will today announce the result of the negotiations on a successor to the Croke Park agreement. We are very pleased that he has again reached a satisfactory arrangement with the unions. We are aware, however, that this will cause a great deal of pain for large numbers of civil and public servants, including teachers, nurses and gardaí. It is incredible that anybody would propose that the banks which are being kept going with taxpayers' money should not cut their cost base in order to make them commercial.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Nobody is saying that.