Dan Boyle (Green Party)

The figures in front of us are stark. Of the €55 billion we intend to spend in 2009, €20 billion will go on social welfare, €20 billion on public sector pay alone and only €15 billion will go to all other services. Our expectation, which could yet prove to be very optimistic, is that at best we will raise €37 billion in tax this year. We are getting used to using the word "billion" without putting it in its proper numeric context, which is €1,000 million. On the surface, the gap is €18 billion. In the October budget we decided to cut public expenditure by €2 billion, raise additional taxes by €2 billion and secure the rest through borrowing for capital expenditure.

The Exchequer returns for November and December were even more disappointing and resulted in a shortfall of a further €2 billion and the Government has taken direct action to try to alleviate this. This shortfall is in public expenditure which means we must look at the main area of public expenditure to see how it can be alleviated. Public sector pay is the option chosen by the Government but it could have done so in a number of ways such as through a pay cut or a reduction in numbers, as proposed by Fine Gael which seeks a reduction of at least 5,000 in the public sector.

The mechanism the Government is using is a levy on public sector pensions. There is no doubt we need to tackle the long-term costs of public sector pensions. We in this Chamber and many in the political system benefit from a system of pensions which is hard to justify and is far from sustainable. Everyone in the political system must take cognisance of the ballooning cost of pensions. The reality is that, on average, the cost of a public sector pension is not met as economically as the cost of a private sector pension. The proposed mechanism allows pensions to be maintained and protects the interests of existing pensioners. A pay cut, which probably would have been more honest, would have meant pensions would be reduced in the future and existing pensioners would have their entitlements reduced. Perhaps that would have been a better approach but the current proposal is perhaps more honest in terms of reducing the public pay bill.

The public sector pay bill is at its current level because public sector workers' incomes were well below those of private sector workers in the past. Processes such as benchmarking helped redress the imbalance but we did not try to redress it as private sector workers' wages decreased by comparison with those of public sector workers. A comparison between public sector workers here and in the North, where the proportion of GDP is 60%, will show many equivalent grades in the North are on a far lower level of pay, albeit with a lower cost of living.

We must recognise the proposed formula is to maintain as many jobs in the public sector as possible and to achieve the true cost of employing public sector staff and of providing pensions in the future. Obvious anomalies arise as a result of the standard and higher rates of taxation and the circumstances arising from pre-1995 and post-1995 pay arrangements. If it were possible to create a formula to deal with these now, it would certainly be preferable, but I am confident that in the course of the coming months, by way of the White Paper on Pensions and the subsequent budget, we will get rid of the anomalies. If one judges every public sector employee by way of a paper exercise, one will note that Department of Finance figures show the new levy, added to existing levies, PRSI and taxation, results in progressivity with regard to total reductions in pay.

The difficulty is that we need to make public sector workers subject to the kinds of fiscal changes that are required. I have heard Opposition parties state they have answers, particularly for making savings of €2 billion. Arguments were made, certainly by the trade unions, that the way to address the shortfall is solely by means of taxation, but there is a problem with that argument.