Jim Walsh (Fianna Fail)

I welcome the Minister of State. It is a difficult time to be in government and with the downturn we have seen that the challenges facing us on many economic fronts are precarious, as mentioned by Senator Bradford. I listened with interest to what he had to say and found myself in agreement with much of it, as I did with Senator Harris. He put his finger on the problems.

At the end of this year our borrowings will be approximately €76 billion. This year we seek savings of approximately €4 billion. I have stated here and at parliamentary party meetings that we might have sought a higher figure than this, even though much pain is attached to the €4 billion. By the end of 2013 we will be nearer borrowings of €150 billion than €100 billion. Therefore, not only does what we do need to be very effective, but we must also build on it and plan for the future. I will make suggestions in this regard.

This year we will spend €56 billion and will have an income of €32 billion. Income will not rise in 2010, as predicted in the budget, and we must get back to that spend. We need to look beyond the figure of €4 billion at what we need to save and what the structural deficit is. We need to consider the structural deficit as being €13 billion. We spend €20 billion on pay and need to save €5 billion; the cuts we are discussing will amount to in excess of €1 billion. We need to save another €5 billion on social welfare payments and €3 billion on other expenditure items, bringing the total to €13 billion, which would be quite painful.

We have allowed our incomes and the cost of living to escalate, which happens in good times when money flows through the economy and we have very high rates of growth. It also happens in other countries. Now we have gone into reverse. Correspondingly, therefore, we must reduce those costs if we are to survive. Pay levels in this country are well in excess of what they are elsewhere in Europe in the private and public sectors. Some economists state pay levels in the public sector are approximately 22% ahead of those for comparable positions in the private sector. There are very strong challenges facing us.

The cuts in social welfare were unavoidable. Nobody likes doing them, no more than we like cutting pay. My pay has been cut and I certainly do not welcome that but I understand that if we do not do these things, the outlook will be dire for all of us. The impact of the social welfare cuts on the most vulnerable should be closely monitored. I suggest that perhaps a small group of officials from the Department of the Taoiseach, the Department of Finance and the Department of Social and Family Affairs should be established so that we can monitor these impacts on an ongoing basis. Social welfare is a very complex area and decisions taken often have unintended knock-on effects. The one thing we must do in this recession is to preserve some decent standard for the most vulnerable in society.

I mentioned the figure of €5 billion. This time last year, I said in this House that we needed to save 10% on public service pay, which is approximately €2 billion. We also need to take 15% of the numbers out of the public pay bill. If we do that, we will be close enough to the €5 billion figure. I appreciate that this is a gross amount, and the net amount against the tax take will be less than that. This is a start to provide some foundation. We had 220,000 people on the public service payroll in 1998, which included those working and those on pensions. According to information I received from the Department of Finance, that figure is now 370,000. In other words, there has been an increase of 150,000 in the interim. We need to reduce that figure by at least 50,000 in the hope that this will steady the ship for us. That represents a lot of people, but if we fail to address the issue we will have to reduce salaries again next year by an equally significant or even more significant amount. We need to look at that.

All this means we need to reform the public service. It means we need to increase productivity. There are very good people in the public service. I feel very sorry for people who are losing incomes in the private or public sector over the past 15 months and who are having difficulties meeting their commitments because of that. However, the real tragedy of this recession is the number of people who are unemployed, people who lost their jobs and who may find it extremely difficult because of age or because of the lack of skills required to get back into the workforce. That is a serious consequence to any recession and it should be a priority.

There is a huge cost involved in public sector pensions. I have looked at comparisons in the private sector, where I have worked most of my life, and one could not buy the public service pension. There is also what is called legitimate expectation. We need to change it, but we need to be careful and fair in the manner we do that. Nobody likes quoting the banks, but they changed from a defined benefit scheme to a scheme which provided defined benefit up to €50,000 in earnings, while any income above that went towards defined contribution. Most businesses changed to a defined contribution scheme only, but the banks' system is something that should be examined.

Suggestions have been made that the income of people retiring in the future could be based on an average of their career earnings. That is a very long time span, and it might be difficult when we go back to eras of inflation. Looking at a three to five year horizon instead of the last year might be the way to do it. I have been critical before about the Public Appointments Service and the Commission for Public Service Appointments, which operates within the local authorities. There has been a propensity in both of those bodies to promote people nearing retirement to enhance their pension. It is a very human thing to do to people who have given a lifetime of service. We should be getting away from promoting people based on seniority and promoting them exclusively on the basis of their calibre, merit and aptitude to do the job. That should be a very significant cornerstone of public service reform. Very few people in the private sector are promoted on seniority because it is not seen to be a very sensible way of doing things.

I abhor some of the irresponsible statements by people in the trade union movement who look to bring down the Government or bring the country to its knees. That kind of disruptive comment shows a mindset alien to the interests of the people of this country, especially to those who pay them good wages to represent and protect them. If we are to move forward, we need a much more enlightened approach from the trade union movement. Many of them who operate in the private sector have shown remarkable common sense and maturity due to the job losses in the 1970s and the 1980s, where they adapted to the new economic reality and now have a partnership with employers in resolving disputes. That is a good move and is one I would like to see operating in the public sector. We have nothing to fear from that in the public sector. It is really common sense.

Some of the professions have escaped much of this. This seriously needs to be tackled. I have been critical of successive Ministers for failing to take on two particular sectors. In fairness to her, the Minister for Health and Children has shown tremendous courage in what she did with the pharmacists. She has now done this in respect of the dentists. They will be seriously affected as a consequence. However, hospital consultants have got huge increases in order to rationalise the service. I know the wages have been reduced by 15%, but they need to be reduced by at least one third just to bring them back to what their peers in the neighbouring island are paid for similar jobs.

I also think something similar needs to happen to accountants, the Judiciary and particularly barristers. Claiming wages of €2,000 to €3,000 per day amounts to legalised larceny.