These people worked, reared a family and paid taxes until the rug was pulled from under them. This is a global financial crisis on a massive scale. The global boom — which made our own Celtic tiger possible — has now become a global bust and no country is immune from its impact.
Ireland is different. This economic storm is battering Ireland harder than our fellow EU member states because, by the time it arrived on our shores, we were already extremely weakened. For the past six years, our economy had been artificially propped up by a construction boom. Addicted to the revenue that concealed our economy's deep-seated weaknesses, Fianna Fáil again and again failed to intervene in runaway property speculation and unsustainable lending practices by the banks. It has failed to hold those in the golden circle to account and now working people are paying the price.
Working people are paying the price but not fairly, equally or according to their role in the crisis. The thousands losing their jobs every week did not inflate the property bubble and the children losing their special needs teachers did not cause it to burst. Those paying through the nose for health care, medicine bills and care for their elderly parents now that home help hours have been cut did not buy land banks for billions of euro in the hope that they would sell them on for even more billions. Public servants, just by doing their jobs, did not cause the problem in our public finances. They were not borrowing millions of euro from a bank to invest in the same failing bank. And yet, who is asked to take the pain and to "readjust"?
It is some irony that nurses, teachers, gardaí and county council workers are now being asked to pay more into a pension fund, half of which is to be handed over to banks, whose top executives are still paid in millions of euro. In their haste to take money from public servants to give to the banks, the Government chose to unilaterally impose a so-called pension levy on every worker on the State's payroll. No other adjustments were made and there were no changes to the cost of living, just to how much public servants would have in their pockets to pay for it.
As with any unilateral, late-night, back-of-an-envelope proposal, it was not thought through. It took two days for the Taoiseach and the Minister for Finance to get their story straight on whether the levy was on gross income or net of tax. Now we know the levy is net of tax, we are left in the dark as to how much it will actually raise. One thing is certain; it is unlikely to be the €1.4 billion announced initially by the Taoiseach.
Most of all, this pension levy is unfair because it singles out one category of worker in our economy for a unilateral pay cut. It is unfair because it will be levied on income that will not ultimately be reflected in many public servants' pensions. It is unfair because it fails to take into account the differing contributions public servants already make to their pensions. It is unfair because it places a disproportionate burden on low and middle-income public servants.
It does not take an economist to work out that a clerical officer on €25,000 will find that she feels the pinch of €1,000 missing from her pay packet more than the Minister for Finance earning €250,000 would miss the €14,000 missing from his. She is paying an additional levy of 4% of her gross income towards her pension while he is only paying a levy of 5.6% on his. In some cases, lower paid public servants actually pay a higher levy than those on higher pay. How is it fair that a person on €39,000 will pay €2,120 when their colleague on €44,000 will pay only €1,858?
Despite what some would like to imply, the majority of public servants earn a modest wage. Nobody signs up to be a clerical officer or primary school teacher because they want to make big money. Most of those who have contacted me earn between €30,000 and €40,000 a year. They are working people who must pay for everything. Many have made considerable sacrifices to save up enough money to buy their own home at a crippling cost.
These are not the cosy, cosseted elite that it suits some to caricature. Last week, I received an e-mail from a separated mother of four teenagers. She works for the HSE and earns €31,000 a year. The Government deems this family's income low enough to be eligible for the family income supplement but the same Government also wants to levy €1,480 from her take home pay. Another woman told me how, after her mortgage, child care, life assurance and petrol, she, her husband and their three children had €450 per month to live on, even before she is required to pay the pension levy.
A nurse in a hospital wrote to explain how, now that her husband was unemployed, all of her income was consumed by keeping her family afloat. Like many of the public servants who got in touch, she accepted the pay freeze. She accepts this, like she accepts the HSE staff embargo that has put her and her colleagues in the emergency department under great strain. She simply cannot absorb another pay cut.
There are many others, with hundreds of stories that reflect the high cost of living in Ireland, whether one works in the public or the private sector. There are stories about spouses or partners losing their jobs, the cost of medicine and about fear of not being able to make ends meet. There is even fear of losing one's home.
Almost every single public servant who got in touch with me indicated that they appreciated the public finances were in trouble and they were willing to contribute to fixing the economy. They just wanted that contribution to be fair. Many said they would be willing to contribute more to their pension.
This is why, when the Taoiseach abandoned partnership negotiations, it was a missed opportunity. If public servants were willing to co-operate with a reduction in the public service pay bill and if the trade unions had agreed a €2 billion adjustment, why did the Government decide to effectively collapse the talks and unilaterally announce badly thought-out cuts and levies? As time goes on, it seems this Government is more concerned with public perception — with being seen to be tough — rather than taking the right and fair decisions.
What is fair about taking money from an employee on €15,000 but asking nothing of banking executives or super-wealthy developers? What is right about a move which does nothing to reduce the cost of living, or to restore consumer confidence, or a decision which offers nothing in the way of new jobs, and only vague promises about retraining? Our economy hinges on jobs. Job losses, business closures, the drop in consumer activity and the consequent loss of tax revenues have caused the critical problem in the public finances, not the other way around.
Every job lost in the economy costs the public purse €20,000 between social welfare payments and less tax revenue. That does not include secondary benefits such as rent allowance and mortgage relief. The cost to the Exchequer for January's job losses alone is therefore €730 million, more than half of what the Government hoped to raise in the pension levy. If unemployment rises to 400,000 by the end if the year, as the Taoiseach predicts it will, that will be another €2 billion.
This is why the fixation with cutting public expenditure alone will not solve this problem. The more jobs that are lost, the more that will have to be cut to pay for them, which in turn shrinks the economy, until we reach a point where there is nothing more that can be cut.
This is not to say that the public finances are not important, or that public servants have no role to play in our economic recovery. They do, and they have signalled that they are willing. Ultimately, however, saving jobs and putting people back to work is the only sustainable way out of this economic crisis. There is no public-private sector divide, just citizens who desperately want to know that their sacrifices will have a purpose.
I, and my party colleagues, have been arguing for some time that we need a national recovery plan, a road map which describes where we want the country to be at the end of this recession, and how we will get there. There must be a clear understanding that everyone will be required to contribute according to their means and that there will be no more hiding places for those who think tax is for the little people.
I am calling on the Government tonight to suspend the introduction of legislation to impose the pension levy on public servants and to re-enter negotiations with the social partners to reach agreement on a fair and equitable set of proposals that would meet the adjustment of €2 billion already agreed.
That is just the start of what must be a national effort. We in Labour are proposing a new national agreement for economic recovery, negotiated not just between Government and the social partners but involving the whole of society. Such an agreement should be framed over at least a three year period and would address jobs, pay, tax and public services. The time for incremental approaches, which only chip at the edges of these questions, is past. This would be a deal between citizens. There would be no room for scapegoating, no room for finger pointing and no place for those not willing to put their shoulder to the wheel.
There will be no room for the kind of reckless, arrogant behaviour that has destroyed our banking system and the reputation of our country with it. The first principle of a national agreement should be a cleaning out of the boards of the banks. If people in that golden circle are found to have committed a crime, let them account for their actions before the courts.
This is a time for pulling together, for working together, for unity among working people in the public and private sector. It is a time for understanding each others' fears and risks, for refusing to be divided and for determining that we can come out of this recession to a better place.
I disagree with the Taoiseach when, in the Four Seasons Hotel, he told Dublin businessmen that the future might not be as good for our children as it has been for us. That is defeatist talk. The future can be better for our children if we are all willing to make it so. Better, not measured in material things and consumer goods, but by the quality of their lives, by the fairness of society and by the sustainability of both our economy and our environment.
I commend this motion to the House.
