Dan Boyle (Green Party)

This Bill is one of a series of measures that is difficult to deliver but it is necessary in the current budgetary context. The public reaction to the 2010 budget has been grounded in a sense of realism and perhaps resignation that shows that we as a country are beginning to deal with the fiscal situation in which we find ourselves. Obviously reducing the income of any group of workers would be strenuously avoided in most circumstances and it would be a decision that would be avoided to the greatest extent possible, but the two areas where public expenditure has been curbed in the 2010 budget, those of public sector pay and social welfare payments, represent more than 50% of public expenditure every year. If we have to make savings in public expenditure, those are areas where savings cannot be avoided. The remainder of public expenditure funds the provision of public services. The choice facing the Government in curbing public expenditure was either to reduce the level of public services or to reduce the cost of the provision of public services. The former option would have involved closing hospitals, schools, Garda stations etc., an option that was chosen far too readily in the past. Fortunately, in the past ten years we have been able to reward and acknowledge public service in a way that was not done in the past. Some of that was done in a quite controversial manner. When the economic history of this country is written, the act and practice of benchmarking and the fact that it was shrouded in such mystery will be looked upon by economic historians with mild surprise at the least and perhaps they might even be aghast if they were honest. Even at this remove we do not know what was being bechnmarked against what and under what circumstances. The State was forced to invest a large amount of resources to make that exercise work.

We must acknowledge that with part of the narrative about the public sector that is talking place now we are in danger, philosophically, of going down a cul-de-sac. The question of whether we pay the public sector enough is a side issue from some of the comments that were made which run the risk of having the impact of demeaning and undervaluing the sector. We must get an appropriate balance with a renewed public sector in the future. There is no doubt that reform of the sector is needed. Whether the climate exists to do it with the way these measures need to be introduced by the Government is difficult to know in the short term, but it must be acknowledged across the political spectrum that such reform must take place as well as the implementation of cost-saving measures in this Bill.

One of the dangers with the introduction of new legislation or a new policy is that anomalies may be created. A sincere attempt has been made to graduate the cuts in public sector pay from the very highest incomes to the very lowest incomes, especially at the lower end. There are some difficulties we need to address to examine if they can be finessed in the medium term in particular.

I do not support the argument proposed by Fine Gael that there should have been a cut-off point at which these cuts should not have applied. In the context that social welfare payments had to be cut, the introduction of such a cut-off point would have created an even worse anomaly. The difference between the gross cut applied to people on higher incomes and the net cost for people on lower incomes creates a difficulty for those on higher incomes. If people are not in the tax net and other people are paying income tax at 20% and all the levies do not apply to them, the net effect proportionately for people on lower incomes in the public sector is higher. We need to remedy that in the short term.

There is also a difficulty as to how we define the public sector and the public service, and I will deal with the semi-State sector in a moment. There was also the difficulty as to whether workers in non-governmental organisations which received block grants from Departments and who had their pay pegged with public service rates should be treated the same as those in the public sector. That difficulty has been addressed by way of amendments made in the other House. I argue that they should not be treated the same because they lack job security and do not qualify for the type of pension arrangements that apply in the public sector. Amendments have been accepted in that respect. That question also arises about bodies such as county enterprise boards and whether the staff in those bodies should be treated the same as those in the private sector. A huge dichotomy arises in that respect in the case of a body such as Anglo Irish Bank which has been nationalised but is not seen to be part of the public sector because it has a commercial remit. The principle that applies seems to be that because semi-State bodies are independent and most of them do not receive any direct input from the State in terms of additional funding, this Bill should not apply to them. That is obviously not the case with Anglo Irish Bank, given the level of recapitalisation to which we have already committed and which we might need to do again. In terms of how we approach the further rescue of financial institutions, if they are nationalised or largely nationalised institutions we should define them as very much part of the public sector.

One has different types of bodies in the semi-State sector depending on the competitive environment in which they exist. One has semi-State agencies that get a State subvention, such as CIE for public transport, but other semi-State bodies operate in a semi-competitive environment where they have a monopoly. If we wish to bring about competitiveness in the economy in general, there is not a role for Government to direct what should be the wage levels in each of the semi-State bodies. It is in order for the Government to suggest that controlling wages in semi-State bodies is something for which we should strive, because if we can get competitive costs down, especially in the utility companies then the economy will improve more quickly. I echo Senator Hanafin's welcome for the fact that we have had a 0.3% of 1% increase in GDP, although GNP has decreased by a further 1.4% in the most recent quarter. That is a positive sign.

The indications of where we are in terms of the private sector, the public sector and semi-State bodies could be explained by a set of figures I wish to place on record before concluding. The average industrial wage is €36,000. The average rate of pay in the public sector is €48,000. The average level of pay in one particular semi-State body, the ESB, is €68,000. When we have those types of divergence in terms of how we go forward as a country, as awkward and difficult as legislation like this can be, I do not think we can avoid making decisions of this type at times such as this to achieve the benefit we need as a country and economy.