Martin Mansergh (Tipperary South, Fianna Fail)

This Bill gives effect to the decision of the Government to reduce the pay of public servants to achieve a saving of approximately €1 billion in the public service pay bill in 2010. The debate on the Bill should be set in context. This is the first time since 1933 that legislative measures have been brought forward by any Government to reduce the salaries of public servants. This is not a measure that has been considered lightly or easily embarked upon.

The measure reflects the continuing threat to the economic stability of the State, where the forecast outturn for 2009 will result in a deficit of in excess of €25 billion. Without the expenditure reductions announced in the budget which included a reduction of approximately €1 billion in the public service pay bill, the finances of the State will continue to deteriorate to a position where they become unsustainable. That is not a position any responsible and sovereign government can allow to continue. To address this, the Government has adopted the necessary measures to reduce public expenditure and begin the process of stabilising the public finances under a programme agreed with the European Union.

In simple terms, the budget strategy of the Government is designed to maintain the economic independence of the State. The pay reduction measures for public servants contained in the Bill form a vital part of this strategy. It is a strategy based on necessity, not choice. As it impacts on all major areas of public expenditure, it is certainly not painless. Undoubtedly, the pay reductions provided for in the Bill will impact adversely on public servants, as the reductions in the social welfare expenditure will reduce payments to social welfare recipients. However, the magnitude of the adjustment required in the public finances and the budget decisions necessary to effect this process in 2010 have involved decisions which have adversely impacted on all sectors of society.

In setting out the context for the legislation we must also consider the significant process of engagement undertaken by the Government with the public service unions in an effort to agree measures that would deliver the targeted reduction in the public service pay bill in 2010. Agreement by discussion was the preferred option of the Government to secure the necessary savings. The failure to reach agreement does not adversely reflect on the bona fides of either party to the discussions. The need for the savings required in the public service pay bill shaped the discussions because the Government was up front with the requirement to reduce the public service pay bill in 2010. This raised issues for the public service unions and their members which were immensely difficult. I readily acknowledge the real efforts on both sides to achieve agreement.

However, there came a point for the Government when it became clear that the necessary amount of permanent savings required could not be obtained from the measures proposed by the unions. Even in the closest of relationships, there will be setbacks and difficulties which will, at the end of the day, have to be addressed and overcome because ultimately it is in the interests of the unions and Government to address them.

We have had 22 years of, for the most part, very productive social partnership. I regret the difficulties partnership is in but there were exceptional improvements from 2000 to 2007, particularly in public service pay, conditions and numbers. This is also part of the context and, unfortunately, in the current circumstances not all these improvements remain sustainable.

There has been much talk of the reform agenda and opportunities lost in the discussion process. On public service reform, I will confine myself to a simple statement. If real, practical and necessary reforms have been identified by the public service unions and Government in the discussions, as they clearly have been, these reforms continue to stand on their merits and represent nothing less than what we, as servants of the public, must deliver. We owe our citizens nothing less.

The Bill provides that public service salaries of up to €125,000 will be reduced as follows: by 5% on the first €30,000 of salary; by 7.5% on the next €40,000 of salary; and by 10% on the next €55,000 of salary. This produces overall reductions in salaries ranging from 5% to slightly less than 8% in the case of salaries up to €125,000. This is a progressive, measured reduction that provides that those who have higher salaries will contribute more. However, the reality is that the majority of public servants, around two thirds, are on a salary of less than €50,000. It is not possible to obtain the scale of the reduction proposed in the pay bill without impacting on those even with relatively modest salaries.

That the majority of public servants are on relatively modest incomes is one of the more salient facts which has been ignored by some commentators in their less than objective criticisms of a public service, which continues to serve on a daily basis and will, I am sure, serve this country well into the future. As I stated yesterday, public servant is the title of which I am most proud and I have been a public servant for 35 years.

Salaries above the level of €125,000 will be adjusted in line with the recommendations of the Review Body on Higher Remuneration in the Public Sector, bar a few minor upward adjustments. Last week, the Minister for Finance published Report No. 44 of the Review Body on Higher Remuneration which examined top level rates of pay in light of the changed budgetary and economic circumstances and benchmarked them against rates for similar posts in other countries of comparable scale, particularly in the eurozone.

Following its examination, the review body recommended reductions in overall remuneration varying from 8% to 15% generally and 20% in the case of the Taoiseach. In the case of Ministers of State and the Leas-Cheann Comhairle their salary level would attract a reduction of 8%. However, Ministers of State and the Leas-Cheann Comhairle felt, notwithstanding the recommendation of the review body that a permanent reduction of 10% should apply to them. The Bill, as passed by Dáil Éireann makes provision for this.

The reduction in rates of overall remuneration for officeholders in the Seanad is set out in Table 1 of section 2 as between 7.2% and 7.9%. These percentages reflect the rate of reduction applicable to persons on equivalent rates of salary of less than €125,000 in the public service. As recommended by the review body, these permanent cuts in pay will replace the temporary waivers of pay made by some individuals, including Ministers and Secretaries General of Departments.

Owing to time constraints, the review body confined its examination to a sample of grades but recommended that the reductions be extrapolated for other relevant groups. Tables 1 and 2 of section 2 set out the extended range of pay reductions as follows: 8% on all salary for persons with salaries from €125,000 to less than €165,000; 12% on all salary for persons earning from €165,000 to less than €200,000; and 15% on all salary for salaries of €200,000 or more.

One of the largest groups of public servants at these salary levels, hospital consultants, was not among the grades examined by the review body. However the Government has decided that reductions should be applied to hospital consultants on the same basis as other groups at similar salary levels and on their current salary.

Taxable allowances which are related to basic salary, such as overtime, will be cut in line with the relevant salary reductions. Fixed taxable allowances will be reduced by 5% for those with salaries of up to €125,000 and 8% above this figure. Any allowance or payment which is a reimbursement of an expense will not be reduced.

While the review body concluded that it was constitutionally precluded from recommending a reduction in judicial pay, it stated that were it so precluded, it would have considered a downward adjustment. The Government and I share the view of the Chief Justice and Presidents of the courts who have urged all judges to pay a contribution equivalent to the pension levy and provision will be made in the Finance Bill to facilitate these payments. In light of the findings of the review body, the Government has decided there will be no increase in judges' pay during the lifetime of the Government. The Minister has also stated that future Governments may choose, as in the past, to continue this course of action.

The Government has accepted the review body's recommendation that there be no increases in the pay of the higher public service groups, including any adjustments that might otherwise arise under national agreements, before the end of 2012. It has also accepted the recommendation that performance related award schemes in the public service should be suspended.

I will now outline briefly the other principal features of the Bill. Section 1 is a standard type provision providing for the definition of terms used in the Bill for interpretation and other purposes. It defines for the purposes of the Bill the terms "public servant" and "public body" which delimits the application of the pay reduction provisions of the Bill. The Bill sets out the range of bodies whose employees are liable to the pay reduction and broadly corresponds with that which applies for the pension related deduction. It applies to the public service as traditionally defined. The Civil Service, Garda Síochána, Permanent Defence Force, local authorities, Health Service Executive and vocational education committees are all public service bodies.

In addition any statutory body, company or subsidiary established and financed wholly or partly by a Minister in respect of which a public service pension scheme exists or applies or may be made is defined as a public service body. However, the legislation will not apply to the many bodies in the community which, while in receipt of funding from the State, are independent of it. The staff of such bodies are not public servants and do not have access to public service pension schemes.

Any body funded by the Oireachtas or Central Fund and in respect of which a public service pension scheme exists or applies or may be made also is defined as a public service body. Non-commercial semi-State bodies, such as FÁS or Enterprise Ireland, are included in this definition and their employees are liable to the pay reduction.

Commercial State sponsored bodies are not included. These bodies were not included for the pension related deduction and they are expressly listed in the Schedule. Pay cuts in the commercial State sponsored bodies such as Bord Gais and the ESB would not bring any reduction in expenditure on the public service pay bill. The pay of these bodies is funded generally through their commercial activities and not by the Exchequer. Due to their nature, they have a large degree of autonomy in regard to pay and they have not been covered by the public service element of pay rounds in the past. The Minister for Finance does not control the pay of the staff of these bodies except for the chief executives. The Minister has announced that he will bring proposals to Government early next year to review their pay levels.

I have already outlined the main content of section 2, which provides for reductions of pay rates by amendment of all provisions, including statutory provisions, circulars, instalments and contractual arrangements, which currently fix the remuneration rates of public servants. Section 3 enables the reductions of salary rates to be disregarded for the purposes of the calculation of the pension entitlements for those public servants who have previously retired or will retire in the period from 1 January 2010 to 31 December 2010. Having considered the potential legal, superannuation and personnel management issues and their impact on the public service, the Minister may extend the period beyond the specified date of 31 December 2010. A managed retirement rate for older and more experienced public servants over the course of next year, and beyond if necessary, will help avoid disruption of service delivery.

Section 4 affirms that, other than as provided for in the Bill, any purported amendment of a provision fixing the remuneration of a public servant that would increase the remuneration of a public servant has no effect, unless it is by a future Act of the Oireachtas or is necessary to reflect a legal entitlement of the public servant or servants in question, for example, because of an equal pay claim under European law.

Under section 5 a public servant has no entitlement to receive a higher rate than that provided for under the legislation and the employing public service body has no entitlement to pay a higher rate. Any overpayment should be recovered by the public service body concerned; otherwise, the overpayment amount may be withheld from any funding provided to the body concerned.

Section 6 provides a limited power to the Minister of Finance to exempt or vary the reduction in pay rates provided for in the Bill in respect of a public servant or group or class of public servants, where exceptional circumstances exist relating to a condition or aspect of employment and a substantial inequity would arise as a consequence or because of an arbitration award that the Government would normally be required to implement. A similar power was also included in respect of the pension levy. It intends to exercise this power sparingly and only when just and equitable.

Section 7 requires an annual report to each House of the Oireachtas reviewing the operation, effectiveness and impact of the legislation and considering whether any or all of the provisions of the Act continue to be necessary, having regard to its purposes, State revenues and the public service pay and pensions bill. The first such report will have to be submitted by June 2011 at the latest. Section 8 is a standard regulatory power. Section 9 permits disputes as to whether any public servant is affected by the reduction provided for under the Act to be finally determined by the Minister. Section 10 states the Short Title of the Act and provides for its commencement. I commend the Bill to the House.