Brendan Howlin (Wexford, Labour) | Oireachtas source

This is not self praise. I acknowledge the work done by numerous civil servants, who have fronted the bulk of the work on a remarkable level in recent months.

While much is made of the significant remuneration rates at higher levels in the public service which were allowed to develop before the current fiscal crisis enveloped us all, my record as Minister since taking office in March 2011 stands scrutiny in respect of measures taken to tackle higher pay in the public service for employees and officeholders alike. However, the reality remains that the public service is not dominated by high earners. Currently, approximately 87% of public servants earn less than €65,000, a fact worth reflecting upon, and when the pension-related deduction is factored in this reduces to €60,225. A total of 68% of public servants earn €50,000 or less, and when the pension-related deduction is factored in this reduces to €46,750. This is reflected in the proposals made by the Government which ultimately, following the expert and welcome intervention of the Labour Relations Commission, have given rise to the proposed Haddington Road agreement, HRA.

The proposals in the HRA should be considered in the wider context. The HRA has resulted from an intensive engagement between public service employers and the process has been assisted by the Labour Relations Commission. They have negotiated a difficult and complex set of proposals which will deliver the necessary €1 billion saving in the public service pay bill by 2015 while ameliorating the impacts for public service staff on low and middle-incomes to the greatest extent possible. I underscore that the proposals have protected the core pay of 87% of the workers in the public service. They also address many of the concerns expressed by the staff representatives during the long negotiations.

The Haddington Road agreement seeks to achieve a broad balance of equity between public servants and sectors, notwithstanding the complexity and the diversity of public service roles, particularly at individual level. The measures provide that those at the highest levels of pay contribute the most. The proposals also clearly distinguish between the lowest paid, that is, those earning under €35,000, those on middle incomes, that is, those earning between €35,000 to €65,000, and the higher paid, that is, those with a salary greater than €65,000. Those earning under €65,000 will have their increments paused by between three and six months. They will, however, receive their next increment on time and the following increments will be paid in full. The HRA also provides for the continued payment of Saturday and night duty premia and the double time Sunday premium has been maintained. That was an important negotiating demand of some sectors, especially nurses. Other than the increment pause, there will be no impact on their core salaries. In contrast, those on salaries over €65,000 will have their pay reduced by between 5.5% and 10% with longer periods for the award of future increments where those apply.

Like the financial emergency measures legislation that has been introduced, the Haddington Road agreement also reflects the fiscal crisis and challenges which we face as a country. The legislation and the agreement are instruments of their time and their economic environment. Pay reductions through legislation are highly unusual in the history of the State despite our experience of recent times. A negotiated agreement between public service employers and their employees that provides for a significant reduction in the public service payroll is rarer still and I believe such an agreement has never been negotiated before in Ireland. Private employers often have to open their books to employees in similar circumstances but with the public finances there was no such requirement in this case. It is no secret that a sum of almost €1 billion per month is being borrowed to keep the show on the road to fund our public services and pay our public servants, while we are committed, through our international funding partners, to meet a general government deficit of less than 3% of GDP by 2015. These are the restrictive parameters within which the Government must work. These are recognised and understood by public servants and their representatives because they are all stakeholders in the country and citizens. While we may differ to some degree on how the situation can best be addressed, public servants recognise that the current situation is unsustainable in the longer term.

The Haddington Road agreement, brokered by the Labour Relations Commission, represents a proportionate and equitable contribution to the fiscal consolidation required. The measures provided for in the Bill underpin it. I truly hope all public servants will be able to consider its provisions carefully in the context of the fiscal crises faced by their employers and the people as a whole. I hope they will all get the opportunity to make their judgment through the ballot box or whatever mechanism each union prescribes.

Before addressing the detail of the Bill, it is appropriate to confirm the approach and position of pensioners under the proposed legislation. In seeking to spread the burden of these financial measures it was necessary to look for a further contribution from public service pensioners by revising the public service pension reduction, PSPR. However, on this occasion I was determined to ensure lower paid pensioners would be fully shielded from any impact. On that account, the Bill sets a pension threshold of €32,500 below which no reduction will apply. There has been some confusion that the new PSPR rates applying to pensions of €32,500 would also then be applied to spouses’ pensions at €16,250. This is not correct. The only spouses’ pensions that will be affected by these measures will be those over €32,500. Just as 13%, a small percentage, of the overall public service earns more than €65,000, the number of pensioners entitled to pensions of €32,500 is also a small figure, 22% of the total pension cohort.

It is worth pointing out when the first PSPR was introduced from 1 January 2011, there was absolutely no consultation with any pensioner group and the measure was introduced unilaterally to impact on all pensions over €12,000. On this occasion I have introduced a PSPR measure which will impact on less than one quarter of public service pensioners. My officials and I have met the Alliance of Retired Public Servants to discuss the rationale behind this move and explain its detail. I felt it was important to show them the courtesy of meeting them, listening to their very genuine concerns and explaining to them why, in the interests of equity, it was necessary that a further contribution be sought from higher paid pensioners. As I explained, it gives the Government no pleasure to have to take these measures and we would all genuinely wish economic circumstances were otherwise. The reality, however, is that the Government must take steps to ensure the economic survival of the State and this impacts across society. The additional reductions, of between 2% and 5%, could not be regarded as excessive, particularly on pensions over €32,500. There was a general view that there must be a further contribution from higher paid pensioners. We saw many people walking out of office or financial institutions which were supposed to be monitoring the State’s progress in times of crisis with very large pensions. To ensure they make a contribution, one has to have a wider take as one cannot constitutionally target one tiny group of citizens to make a disproportionate contribution.

On the question of representation of pensioners, I indicated to the Alliance of Retired Public Servants that there would be advantages for both public service pensioners and the Government in having a formalised structure for ongoing engagement on public service pension matters. Before, when one dealt with retired public servants, each sector was represented by its own unique group such as civil servants and nurses. It was necessary to have an overarching representative group. I welcome this move to have an alliance. As soon as economic circumstances permit, it will be my priority to move as a matter of priority towards reducing the burden of the PSPR, with the initial focus on those in receipt of lower pensions. We owe this to public service pensioners.

The Bill’s primary purpose is to implement the proposed pay reduction for public servants earning annual salaries of €65,000 or more and the parallel but lesser reduction in public service pensions over €32,500. Contingency measures that may be deployed to secure reductions in the public service pay and pensions bill are also included, including provision for a universal freeze on pay increments. The legislation also provides a facility for unions and representative associations to conclude collective agreements with their public service employers which will avoid the need for these contingency measures to be used. I want each public servant to decide on these choices. I accept they are difficult, but I have promised that once this contribution is made, it will be the last ask of public servants.

Section 2 provides for a graduated reduction in the remuneration of public servants earning €65,000 or more. Any amount earned by those higher paid staff up to €80,000 will be subject to a reduction of 5.5%, any amount over €80,000 will be subject to a reduction of 8%, any amount over €150,000 will be reduced by 9% and any amount over €185,000 will be reduced by 10%. All public servants, including the Government and Members of the Oireachtas, other than the President whose pay is protected under the Constitution and the Judiciary will be affected. Those affected by the measure represent some 13% of the public service workforce, those who are paid the most in core salaries and allowances.

This section also includes a provision to enable a public employer or a Minister of the Government to exercise an existing power to fix terms and conditions so as to result in less favourable remuneration, other than core salary, or increased hours for the public servants concerned. That existing power may be exercised, notwithstanding the terms of any enactment, contract or otherwise. In essence, this provision aims to permit public service employers, including Ministers, to make necessary savings if they cannot be achieved by way of collective agreement.

It is important to point out that this section does not grant additional rights to employers to adjust terms and conditions. Basic salaries are excluded. Reductions in basic salaries should only be made in the context of primary legislation and with the consent of the Oireachtas. Furthermore, any group that has its terms of employment set by the Oireachtas cannot have them changed by a Minister or employer. This would include officeholders, in particular the Judiciary whose pay terms are determined not by a Minister but by the Oireachtas.

Section 3 sets out technical amendments which provide for the application of all existing ancillary powers of the Financial Emergency Measures in the Public Interest (No. 2) Act 2009 to the new pay reduction, including the prohibition on pay increases and the ability of the Minister to modify the pay reduction as it applies to certain persons or groups on limited grounds, to the pay reduction provided for in the Bill.

Section 5 provides for amendments to be made to the Financial Emergency Measures in the Public Interest Act 2010 to increase and extend the impact of the PSPR on persons who have retired from the public service and attract pensions of €32,500 per annum or more. Persons in receipt of annual pensions of less than €32,500, or their widows who have pensions less than €32,500, will be unaffected by these measures.

To reflect the fact that public servants who retired before 29 February 2012 would have had their pension entitlements based on pay rates greater than those who subsequently retired after that date, different levels of reduction detailed in the tables apply. The reductions will apply from 1 July 2013. Section 4 is a consequential amendment to the definition of "pensioner".

In essence, there will be three categories of pensioner. We must remember that people who retired after the last grace period had already had their pensions reduced because their core pay was reduced. I think it fair not to make the same deduction from them as from those whose pensions were based on a higher core pay. It is to have equity that this graduation has been introduced.

Section 6 consists of technical amendments to ensure that relevant elements of the Financial Emergency Measures in the Public Interest Act 2010, including in respect of aggregation of pensions and calculation of pension, are adjusted for the purposes of the Bill.

Sections 7 and 8 provide for a freeze of progression along incremental scales by public servants for a period of three years, commencing on 1 July 2013. Public servants may have the effects of this provision modified on the basis of a collective agreement, which has been registered with the Labour Relations Commission, having been reached. As is standard in these FEMPI Acts, the Minister is, under section 8, granted a power to exempt public servants from the application of the measure on limited and exceptional grounds. That is an important provision. In designing any scheme for approximately 300,000 people, there might arise an anomaly where somebody is adversely affected to an extent that would be unjust. I believe we need the power to address this and to modify the impact where such a case arises.

Section 9 provides that persons retiring before 31 August 2014, or on a later date that may be ordered by the Minister, will be entitled to have their pensions calculated as if the pay reduction and any increment pause or freeze had not applied to them. This provision is similar to the "grace period" provision provided for under the Financial Emergency Measures in the Public Interest (No. 2) Act 2009. It is intended to prevent an unmanageable and unaffordable short-term outflow of staff affected by the pay reduction to the detriment of the delivery of public services. In other words, if people are coming close to their retirement date in the next year or so, they might want to go immediately if they felt their pay would be reduced and, therefore, their pension would be reduced. To deal with this issue, I want to give that grace period until August of next year for the gradual retirement in an orderly way of public servants who are approaching retirement age.

Section 10 amends the Financial Emergency Measures in the Public Interest (No. 2) Act 2009 to provide that the employees of the Railway Procurement Agency and the National Treasury Management Agency will be subject to the measures proposed in this Bill. While they were not included in the pay reduction imposed under the Financial Emergency Measures in the Public Interest (No. 2) Act of 2009, this Government does not consider that the basis for their exclusion continues to be valid. It should be noted that the RPA is due for merger with the National Roads Authority under the rationalisation programme I announced in 2011. This was an anomaly. I do not know why the RPA and the NTMA were excluded from the cuts that were announced in 2009 and I intend to include them in this legislation.

Section 11 amends the Financial Emergency Measures in the Public Interest Act 2009 to provide for a modification of the pension-related deduction that applies to serving public servants. This was one of the changes negotiated under the Haddington Road Agreement. This modification will reduce the pension deduction on all public servants by a very modest €125 a year, to commence from 1 January next. It looks like something that is almost totemic, at €125 a year, but it is important. I chose to anchor these necessary reductions in a financial emergency measures Bill because that says it is not a normal piece of legislation, nor is it a permanent piece of legislation. It is to deal with a hole in the public finances that must be addressed in as equitable a way as possible, and it should be relaxed as soon as those circumstances change. As a signal that these things are not permanent, a modest start in rowing back at the very lowest level was asked for by the unions and agreed under Haddington Road. That is how section 11 comes about.

Section 12 provides for annual review and report to the Oireachtas of the necessity of the measures set out in the Bill. As an administrative efficiency measure, one single review will now encompass the reviews currently necessary under the FEMPI Acts to date. In other words, it will be necessary for me, as Minister for Public Expenditure and Reform to, on an annual basis, come back to the Oireachtas and say the financial emergency continues to exist and that this is the reason these measures are still justified. The day will come, hopefully in the not too distant future, when that will not be possible to justify, and that happy day will mean we can unravel these measures. As I said, for reasons of administrative efficiency, rather than do it five times in five separate reports for the component parts of each of the five pieces of FEMPI legislation, I propose to have one single reporting mechanism. Section 13 states the Short Title of the Act.

Before concluding, I know that in some quarters there is an effort to portray both this Bill and the Haddington Road Agreement as being anti-union and anti-worker. In my view, nothing could be further from the truth. Certainly, as I have acknowledged earlier, the measures provided for in the Bill and the Haddington Road Agreement are far from painless for public servants, anything but, as I and this Government acknowledge. Many public servants are already well challenged by the impact of the crisis that has befallen our country and they will be impacted again by this Bill. I am very conscious of this, which is why I want to mitigate it as far as is possible and to apportion the burden in as fair a way as possible. However, it is a burden on all who will be impacted by it, and there is no escaping that.

However, there is nothing more pro-worker and more pro-trade union than their employers sitting down openly and honestly with them across the table to tell them the full truth of the economic circumstances of their place of work and, in this instance, of the country of Ireland, and to identify solutions that can be addressed to shared problems, while ameliorating the impact of the measures adopted to the greatest extent possible and generating a collective agreement on a collaborative basis that can enable both employer and employee to share in a sustainable future, with a guarantee of employment. Both the Financial Emergency Measures in the Public Interest Bill 2013, which is now before the House, and the Haddington Road Agreement are mutually supportive of the worker as a stakeholder in the enterprise that employs him or her, that is, the Irish public service. They provide the framework for the concluding of fair and balanced collective agreements - not done on the previous occasions that FEMPI Bills were introduced - across all sectors of the public service so the necessary savings from the pay and pensions bill can be secured.

This is a vital contribution to the final leg of our fiscal consolidation efforts, while delivering public services and securing continued industrial peace. We owe this to our paymasters, the citizenry of our Republic, who pay all our wages and who depend on us to steer the ship of state in these turbulent and difficult times to safe harbour, and to give growth, job potential and a future for this land. I commend this Bill to the House.