David Norris (Independent)

I move amendment No. 2a:

In page 4, to delete lines 41 and 42.

I indicated to the Minister of State last night that I would pursue this matter. I do this not to curry favour with the employees of the Central Bank but to illustrate a very important point of policy, one on which Mr. Jean-Claude Trichet of the European Central Bank commented in a way in which the Government would be well advised to take on board. Last night I referred to a case heard by the Supreme Court and on which it delivered a judgment on 14 March 1997, namely, the Central Bank of Ireland v. Martin Leo Gildea. The finding of the court was as follows:

He is not a member of the staff of any of the organs of state created by the Constitution and accorded a role in the constitutional order of separate and distinct from the three organs of government, legislative, executive and judicial, such as the Attorney General. He is not a civil servant in any of the departments responsible to the individual ministers who constitute the government and hence is not a 'civil servant of the government' and thus a person 'employed...under the State'. He is employed by a body which has been created by statute, the powers of which, however essential they may be to the functioning of the State, can be removed from them at any stage by the Oireachtas. He is thus in no different position from those employed in a vast range of what have come to be called 'semi-state bodies', the employees of which may, by specific legislative provision, be deemed to be civil servants but who, in the absence of any such provision, are not to be so regarded.

The Minister may take the view that by simply rehearsing these in a list that he is taking that judgment into account. I am not sure this is the case and I point specifically to the independence of the bank and the fact it is not supported from central revenue but generates it own revenue. It does so by a variety of means ranging from the management of the country's foreign currency reserves to the wonderful exercise of what is known as "seigniorage" — which derives from the person of the monarch, or it did in the old days — the capacity to print money on behalf of the realm which generates money. It also generates money from the charge sought from Government and other sources for the operation of Government and other State accounts.

As I said, the employees of the Central Bank are not paid from money from the Oireachtas but are paid from the Central Bank's own resources and their pensions are paid from a fully funded pension scheme. In other words, they are exactly analogous to the private sector, which is not taken into account in this legislation. They are at the very least anomalous; they are separate and distinct from the other sectors. Attaching a levy to their salaries does not, therefore, reduce the amount payable out of the Exchequer. Instead a levy on the salaries of employees of the Central Bank provides additional revenue to the Exchequer and, as such, it is clearly a tax. Even if the Minister is capable of defending this on technical grounds, there is no question that this is a pension levy; it is a tax. I will be supported in this by the opinion of the European Central Bank signed by Mr. Trichet.

The Central Bank is a commercial and highly profitable semi-State body, albeit atypical of that group. In 2007, the Central Bank had a surplus income of €192.8 million. The profits of the Central Bank are transferred annually to the Exchequer. In other words, the Central Bank, far from being paid by the Exchequer, pays into it. Most of the Central Bank's income comes from monetary policy operations. Monetary policy operations relate to the lending to credit institutions by the Central Bank as part of the euro system's monetary policy operations. As this function represents the lion's share of the bank's income, we need not go into the other sources in any great detail, such as seigniorage to which I referred.

By singling out the Central Bank and treating it differently to other semi-State bodies, the Bill is, in effect, creating a special tax for Central Bank officials. This view is supported by the opinion of the European Central Bank published on 24 February 2009 which, in expressing serious reservations about the levy, noted that "the proposed deductions might therefore be regarded as a form of taxation on the Central Bank's officers and employees".

As part of the European financial architecture, the central bank system is regarded as being necessarily independent and that independence is jealously guarded. We are being told very clearly by Europe that this independence is being transgressed upon by this legislation.

The Government almost automatically seeks the opinion of, or a view by, the Central Bank authorities on this type of legislation. Highly unusually in this case, and perhaps because of a bad conscience, the Government did not seek a view on this occasion as it did, for example, on the recapitalisation of various Irish banks on almost the same date.

However, the European Central Bank took this matter so seriously that it provided a view without being asked and from which I wish to quote. It started by giving its locus standi on the matter. It stated:

The competence of the European Central Bank (ECB) to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third indent of Article 2(1) of the Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions, as a draft law relates to the Central Bank and Financial Services Authority of Ireland (hereinafter 'the Central Bank').

In particular, the draft law proposes to deduct up to 10% from the remuneration of public servants accruing from 1 March 2009, including employees of the Central Bank. In the light of the above and considering the direct implications of the above mentioned provisions for the Central Bank, the ECB has decided to submit this own-initiative opinion, with a view to assisting in the ongoing legislative procedure by commenting on specific provisions.

The Minister and his advisers will be more familiar than I with the type of language system used by European bankers and central bankers. They will detect in that and in what follows a certain sharpness of tone, in particular the fact it decided to submit its own-initiative opinion — in other words, it was not asked for it. This is regarded as highly unusual.

I refer to the definition of "a public servant". It stated:

For the purposes of the draft law, public servant is defined, inter alia, as a person who is employed by, or who holds any office or other position in, a public service body. The draft law includes the Central Bank within its list of public service bodies. Under the draft law, the deduction is to be made by the person responsible for, or who authorises, the payment of remuneration, which in the case of the Central Bank's officers and employees is the Central Bank. In addition, the deductions are to be made in accordance with regulations to be issued by the Minister for the purposes of the calculation, making, collection, disposal and recovery of such deductions (including, for instance, regulations addressing the manner in which and the periods within which deductions are to be made and paid into or disposed of for the benefit of the Exchequer). The draft law further requires the deductions made to be paid into or disposed of for the benefit of the Exchequer in accordance with the directions of the Minister or otherwise paid or disposed of as the Minister may direct.

The draft law has been introduced in the context of the priority being given to the stabilisation of public finances in Ireland. [Of course, it indicates it understand this; it is a given.] To that effect, the Minister has announced that the draft law introduces provisions to give effect to a pension related deduction for the public service. The deductions under the draft law therefore apply to public servants who on 1 March 2009 or any time afterwards are a member of a public service pension scheme, are entitled to a benefit under such a scheme, or receive a payment in lieu of the membership of such a scheme. For this purpose a public service pension scheme is defined to include an occupational pension scheme or a pension arrangement for any part of the public service which is made by a relevant Minister or has been approved or requires the approval or consent of the relevant Minister. Under the Central Bank Acts, the Central Bank may establish and operate one or more superannuation schemes under which superannuation benefits are payable on the retirement or death of persons. However, such a scheme does not take effect until it has been approved by the Minister.

The draft law exempts from the definition of 'public service bodies' 22 bodies whose officers and employees are subject to the deductions. The Explanatory Memorandum to the draft law indicates that the public service bodies whose officer and employees are subject to the deductions include non-commercial semi-state bodies where a public service pension scheme exists or may be made.

The opinion then moves on to the general observations. I will not rehearse the first one in great detail. I regret the time it is taking to put this matter on the record but it is highly important. I regret very much that because of the guillotine, we may not get to very important amendments concerning farmers and attempts to exclude the most lowly paid people. I condemn the Government outright for operating this guillotine but this must be put on the record because it is from our European partners. The observation is made that:

As noted in the ECB Convergence Report 2008 under the sub-chapter 'Autonomy in staff matters', member states may not impair an NCB's ability to employ and retain the qualified staff necessary for the NCB to perform independently the task conferred on it by the treaty and statutes of the European System of Central Banks and of the European Central Bank (hereinafter the ESCB Statute).

They may not "impair" this independence. It continues:

In addition, an NCB may not be put into a position where it has limited or no control over its staff, [There is no question about it, but this legislation limits that control and nobody could suggest otherwise] or where the government of a member state is in a position to influence its policy on staff matters.

This point has been stressed in a recent ECB opinion on draft German legislation regulating certain matters concerning the national central bank staff. The ECB also stated in its opinion on draft Italian legislation establishing a threshold for the overall remuneration of the national central bank staff "that the ECB defines autonomously its staffs conditions of employment and that this autonomy forms part of the ECB's independence as guaranteed by Article 108 of the Treaty and Article 36 of the [ESCB Statute]".

Basically, what Mr. Jean-Claude Trichet, who is received in the higher circles here and whose opinion was lauded on our broadcasting services and quoted approvingly by the Government, is saying as director of the European Central Bank and with the full authority of that institution is that the Government is transgressing the independence of the Central Bank system in this country. This is not my view, not the view of some dingbat from the university sitting on the back seat of the Seanad, but the view of somebody who must be taken seriously.

The ECB opinion moves on then to specific observations, stating:

The proposed deductions are conceived as pension-related deductions for the public service. However, while the Minister formally approves the Central Bank's superannuation scheme, the Central Bank's scheme is not funded through the Exchequer, but is established, operated and financed by the Central Bank independently. In this regard, the proposed deductions do not appear to reflect the distinctive features of the Central Bank's superannuation scheme, and might therefore be regarded as a form of taxation on the Central Bank's officers and employees.

Under the Central Bank Acts, the employees of the Central Bank are to be employed on such conditions (including conditions as to remuneration and allowances) as the Central Bank's Board of Directors fixes from time to time. In order to protect the Central Bank's autonomy in staff matters, which is a particular aspect of the principle of central bank independence under Article 108 of the Treaty, any pension-related deductions applicable to the officers and employees of the Central Bank in view of the current difficult economic circumstances should be decided in co-operation with the appropriate decision-making bodies of the Central Bank. Such co-operation with the Central Bank should also ensure compliance with the Treaty provisions on the prohibition of monetary financing established by Article 101.