Dáil Éireann debate -
Wednesday, 23 Mar 1988

Vol. 379 No. 4

Estimates, 1988. - Vote 47: Public Service Early Retirement Payments.

Minister for Finance (Mr. MacSharry)

I move:

That a sum not exceeding £80,000,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1988, for the payment of lump sum and related payments resulting from early retirements in the public service.

I have already outlined to this House the basic approach underlying this Government's decision to initiate a scheme of voluntary early retirement in the public service. It has been apparent for some time that this State has built up over the years a range of schemes and programmes designed to meet needs and problems which emerged from time to time but that we were less assiduous than we might have been in dropping or curtailing schemes when their aims had been largely attained, or had become less critical. This Government have faced up to that problem since coming to office and have scaled down activities in the light of the new order of priorities necessitated by our financial situation.

Public services in all countries tend to be labour intensive. It would, therefore, be pointless to drop or curtail public services and at the same time to retain the full complement of staff employed to provide them. The taxpayer would be meeting a largely unchanged bill while getting no or less services in return. If schemes are dropped or curtailed the staff numbers engaged on them must fall.

The pattern of growth of our public service and the age structure of its major occupational groups means that we cannot afford to rely on natural wastage to bring about the justifiable fall in numbers. It is abundantly clear that if we retained surplus staff until their normal retirement age the savings intended to arise from the curtailment of services or from enhanced efficiency would be significantly diminished. The retention of personnel in numbers greater than reduced work requirements demanded would be wasteful for the Exchequer and the taxpayer. It would also be demoralising for the people involved.

The rise in public service numbers has contributed significantly to the budgetary difficulties which confronted this Government. Employment levels in the public service, including the local authorities, peaked at almost 221,000 in 1982. Despite reductions in particular sectors the fall from that peak achieved during the period 1982-86 averaged out at about 600 a year. During 1987, however, due to the combined effect of natural wastage, career breaks, the total embargo on recruitment which I announced in the 1987 budget, and the early retirement scheme, numbers employed in the public service fell by 6,500 to approximately 211,500. The number of people who left the public service in 1987 under the voluntary early retirement scheme was 1,135.

As I indicated in my recent budget speech I expect numbers to fall further by some 9,000 during 1988. This fall will be consistent with having public service agencies operate within their budgetary allocations. This reduction in numbers will be achieved by a combination of natural wastage, public servants taking career breaks and the voluntary redundancy scheme.

Approximately 2,600 people, including 340 non-industrial civil servants, have availed of the scheme to date in 1988. The costs of redundancy lump sum payments are borne in the first instance by the direct employer. It is necessary to have this Estimate passed now to allow the Exchequer to recoup these costs to the employing agencies.

This Government are the first to bring forward a scheme to deal with excess staffing, other than by natural wastage, across the whole of the public service. The matter has frequently arisen in various parts of the private sector. Strategies to deal with it in a positive way have been evolved and implemented over the years in Ireland and abroad. Employers finding it necessary to reduce their work forces have found that among their employees there were many who were willing to accept early retirement on suitable terms. The experience to date with the public service scheme has confirmed that this is so there also.

The early retirement scheme for public servants was initially confined to specific areas or groups within the public service where it was clear that staff surplus to actual requirements existed. This entailed the exclusion from the operation of the scheme of substantial elements of the public service where staff surpluses did not exist. People working in those areas whose personal circumstances made the prospect of early retirement attractive wished to have the scheme extended to them. Many of them approached their employers and public representatives to explore the possibility of having the scheme extended. On the basis that retirements in these areas would be used primarily to provide alternative employment opportunities for personnel in areas where the problem of surplus staff had not been fully catered for by the scheme of voluntary early retirement, it was agreed to extend the scheme to a limited category of staff — those over the age of 50.

In the case of the Civil Service, arrangements are now being made through the Civil Service Commission for competitions restricted to public servants in areas where substantial numbers of surplus staff exist, from which posts vacated by early retirement will be filled. The posts in question cover the main general service and specialist areas of the Civil Service and offer a remarkable range of choice for staff in bodies such as ACOT, AFT, and An Foras Forbartha who are being invited to apply for them. I think it important to emphasise that the overall costs of the retirement package make it impossible for me to agree to fill all the posts which have been vacated under the scheme and that the very restrictive regime which I have found it necessary to apply to vacancies otherwise occurring in the Civil Service is in no way being modified.

The application of the scheme in each public service organisation is a matter for the management of the organisation in question, subject to the approval of the relevant Minister. It is local management who decide in the first instance how widely the terms of the scheme will be offered in each organisation and also the criteria to be used in deciding whether or not to accept applications. In general, the scheme is to be applied in such a way as to ensure that organisations will live within their budgetary allocations, while maintaining vital services.

In the health area, the terms of the scheme are available to all personnel aged 50 or over, although key personnel are still to be retained. The package is also available to other personnel who are identified as surplus to requirements. The application of the scheme is initially the responsibility of local management, subject to the approval of the Minister for Health.

Almost 600 employees in the health area availed of the scheme in 1987 and it is expected that a further 1,500 will leave under the scheme in 1988.

In the education sector details of the voluntary early retirement package have been made available to primary and post primary teachers. The processing of the over 3,600 applications received to date is now taking place. This figure does not include applications from vocational teachers as the closing date for them is 31 March 1988. In addition, the school-by-school review of the effects of the pupil teacher ratio changes at primary level is being carried out by the Primary Quota Review Committee. In accordance with a resolution passed by Dáil Éireann on 9 March a meeting of the Central Review Committee under the Programme for National Recovery is to be convened in order to examine the implications of the decision to increase the pupil-teacher ratio in the vocational and community-comprehensive school sector.

In the context of the 1988 Estimates local authorities were asked to maximise savings on manpower costs through natural wastage, redeployment, career breaks and job sharing in the first instance. Having exhausted all such options local authorities were then authorised to offer voluntary redundancy or early retirement to staff other than key staff or those required to maintain essential services in areas where staff surpluses were identified. At this stage, applications for voluntary redundancy or early retirement from an estimated 1,900 staff, including officers and servants, have been accepted. As I have previously indicated, the Central Bank has agreed to make advance payments of surplus income to the Exchequer, so as to assist the Exchequer in meeting the exceptional costs of the redundancy programme.

In the normal course the Exchequer receives from the Central Bank each year the surplus income earned by the bank in the previous year, less certain appropriations to the reserves of the bank. Under the arrangements now agreed with the bank the Exchequer will receive in 1988, in addition to the normal payment of the surplus income from 1987, an advance payment out of the surplus the Central Bank will earn in 1988. The additional surplus income from the Central Bank will come into the Exchequer as non-tax revenue in the normal way and has been included as such in the budgetary figures.

The advance by the Central Bank will be repaid. Repayments will be financed out of the annual savings to the Exchequer from the redundancy programme. Therefore, the exceptional lump sum payments financed by the Central Bank will not increase the national debt or the cost of servicing it.

The repayments will take the form of four equal annual deductions by the Central Bank from the normal payments of surplus income for the years 1990 to 1993 inclusive. This repayment period was agreed by the bank so as to allow the full impact of the savings to come through to the Exchequer and to ensure that realised savings are adequate to meet repayments to the bank.

The bank also provided £8.4 million in 1987 to finance the lump sum payments which arose last year under the scheme. Similar financing and repayment arrangements to those that I have already outlined, in respect of the 1988 Central Bank advances, will apply. This amount has also been included as non-tax revenue in the outturn for the 1987 budgetary figures.

I commend the Estimate to the House.

Mr. J. O'Keeffe

Many regard as economic lunacy the pay policy of the present Government, based on a twin-pronged approach which involves trading jobs for increases in pay and, in addition, providing substantial public sums to encourage early retirement from the public sector. In a country with an unemployment level of 250,000 this approach simply does not make sense. Therefore, it is clear that the question of redundancies cannot be taken in isolation. This must be examined in the context of our overall unemployment figures, our payroll costs, the level of our services and, in particular, the need for sufficient support in the productive sectors of our economy from which the necessary growth so desperately needed must be achieved.

In countries like Holland — which have successfully come to terms with their problems vis-á-vis public finances — an exactly opposite approach to that being observed by the present administration was taken. In that country there was a cut in public sector pay of 3 per cent. It was only by pursuing that course of action that the Dutch were able to come to grips with their problem. There is a question as to whether we are any different. I believe that ultimately we will have to face that prospect here. There is an absolutely clear connection between the number of jobs and the level of salaries; increases in the latter automatically involve reductions in the former. All those who are genuinely interested in proposing and supporting a solution to our unemployment problem will have to face this fact and have the courage to implement the necessary decisions. Only then will we be able to face our young people with an effective manpower and employment policy and a reasonable prospect of ensuring them a livelihood in their own country.

It is against that background we must consider the second leg of Government payroll policy and the public service early retirement payments we are now debating. On this issue it is proper to recall that the difficulties of numbers in the public service arose primarily because of the policies implemented as a consequence of the 1977 Fianna Fáil manifesto. Following the return of Fianna Fáil to Government in 1977 we had the ludicrous position of huge additional unnecessary numbers being taken on in the public service and semi-State bodies, health boards and local authorities, who were all being harassed and harangued because of their tardiness in taking on extra numbers into their ranks which they did not need and which the taxpayer certainly could not afford. The explosion in numbers was such as to put an unbearable stain on the public finances which resulted in the enormous leap in our borrowing requirements. On that score it is somewhat disingenuous for the Minister to gloss over this point in the course of his introductory remarks when he implied that the problem had arisen because of the curtailment of certain schemes. Of course if schemes are dropped or curtailed there will be a reduction in numbers. But that is not the prime cause of our current problem, which I believe is related directly to the absolutely crazy policy following the return of Fianna Fáil to Government just over a decade ago.

The chickens have now come home to roost. It is perhaps ironic that it is another Fianna Fail Government who find themselves in a position of proposing such extreme measures, at such enormous cost, to bring about a reduction in numbers. When talking about a reduction in numbers, as one who served for a short time in the now defunct Department of the Public Service, it is proper to recall that the last Coalition Government — in the face of quite considerable opposition at the time — commenced the job of reducing public service numbers. This was done by the imposition of the embargo and other measures. Principally reductions arose through natural wastage. As a consequence of this policy significant savings were effected without the enormous expense associated with the present redundancy programme. I acknowledge that the present programme does have, as an objective, a much more accelerated pace of reduction in numbers in the public service.

Dealing with the Minister's proposals, his main concern focuses on the financing of the redundancy package. In presenting his budget the Minister stated that he hoped to achieve an outturn for 1988 which would reduce the current budget deficit to 6.3 per cent of GNP and the Exchequer borrowing requirement to 8.2 per cent of GNP. It really makes nonsense of these objectives and figures to have major Government expenditure on a redundancy package which is not provided for within those figures. The cost of the redundancy and early retirement package is not provided for at all in the official figures which are, as it were, off balance sheet. Indeed I question the propriety of funding the redundancy arrangements in this fashion. I believe that in due course the Comptroller and Auditor General may have comments to make on this approach. Essentially the Government are drawing down from the Central Bank's reserves sums of money which would otherwise be available to the Exchequer in ensuing years.

A simple analogy would be the position of an employee who wanted to go on holiday and sought an advance from his employer which would be deducted from his salary in the months after his return. It is clear that this is a device to borrow money without having the amounts included in the Government's balance sheet. Here again the Minister is somewhat disingenuous in his presentation when he tells us that the advance by the Central Bank will be repaid. Is he suggesting that if we arrange borrowings, those will not be repaid? I believe the presentation is such as to avoid the Minister admitting the basic fact that he is drawing down moneys in advance which amount to borrowings. I suppose a rose by any other name will get the Minister by but I believe it is less than clear-cut to both adopt that approach and present it in that fashion. The whole operation is questionable and it certainly does not inspire confidence in those who lend money to the State. The Government can be seen to be playing fast and loose with the reserves of the Central Bank.

There are other aspects of the redundancy and early retirement programme which are a major cause for concern. Essentially, in many instances some of the brightest and best are leaving the service. As somebody who knows the Civil Service and some of the public service quite well, I know there are some very fine people there. Of course, as is natural in any such organisation, there are some people whom the organisation could do without. However, there is no fear that those people whom one could do without will apply to leave. What is very obvious is that some of the finest people who were there have left the service. This turns logic on its head.

The normal approach nowadays is for business and firms to head hunt individuals who are needed for the requirements of their operations. I strongly question the wisdom of the approach adopted by the Government, in particular, in the area I know best — and I am referring of course to the agricultural scene — where upwards of 500 people in AFT and ACOT have already accepted the redundancy package. People who have developed an international reputation working on behalf of the country are now being shed from the service at a time when we are entering a crucially competitive phase in the development of our agriculture and food industry.

Another aspect which needs to be looked at concerns the manner in which semi-State bodies implement the redundancy and early retirement package. Is the funding to be provided from the Central Bank to enable them so to do? The figure involved could be very enormous indeed. I understand that in Bord na Móna about 30 per cent of the staff, or 1,300 in all, have applied for voluntary redundancy. How is this to be funded? It is important that the Minister tell us fully what his strategies and policies are in this regard.

Further problems, will, of course, arise in relation to the payment of pensions to those people who are applying for voluntary redundancy now. Most of them will be entitled to pensions in the years ahead. Where is the funding for this going to come from? I want to refer again to the situation in ACOT and AFT, whose budget has been so cruelly slashed. How will the new farm body cope with the additional pension provision for the years ahead? The Minister for Agriculture and Food indicated that about 1,000 redundancies in all would be sought. Taking average figures, this would involve a pension provision of around £7.5 million a year. Where is this annual sum going to come from? Already the organisation are finding it impossible to cope with their existing £20 million Exchequer provision. I have been told that the money will have run out by July this year. Where is the money needed to pay the pensions for this year and all the years ahead going to come from? The Minister in his speech referred to the fact that the fall in numbers will be consistent with having public service agencies operate within their budgetary allocations. If the pensions are lumped on top of ACOT and AFT it will not just be a question of trying to force a pint into a half pint glass but trying to force two pints into a half pint glass.

As in other areas of Government policy, such as PRSI for the self-employed, the full implications for the future of this approach have not been fully teased out by the Minister and Government. There are enormous overhanging problems which, as a consequence will have to be faced by future Governments. Generally, we are dealing with a scheme which is filled with flaws and, of course, was obviously introduced without thinking out the full implications. In the years ahead the public sector will be enormously affected as a result of this approach on the part of the Government, apart altogether from its effect on the economy. I am thinking of the productive sectors of the economy and, in particular, the effect on agriculture of the cuts in the research and advisory service.

Looking at the situation from that limited context it is very clear that the brain drain will continue and I would be interested to know if the Minister has introduced any provision to ensure that those employees who are regarded as essential will be retained in the service of the State. What, for instance, is the position of the senior officials in the Ministers' Department who deal with money markets? They are people of enormous skills and surely the Minister is not going to encourage them to leave his Department, encouraged by State gratuity and pensions, so that those skills will be available to, as it were, the opposition in those very markets. This is the one example which bears on the question of whether there are some categories of State employees who are regarded as being of such essential importance to the State that they will not be offered the scheme.

Ten years ago the then Fianna Fáil Government took a leap in the dark, against all advice from the Opposition, in relation to the enormous expansion of numbers in the public service. That policy contributed very substantially to the enormous financial difficulties facing this country. The present Fianna Fáil Government are taking a further leap in the dark in obtaining advance payments from the Central Bank of enormous sums to provide public service early retirement payments. I fear that the consequences of this approach will be just as disadvantageous to the country in the years ahead.

Miss Colley

At the outset I should like to say, as I said last December in the debate on the Estimate which we are now considering again, that I support the notion of reducing public service numbers and everything I say this evening is to be put in that context. I also support public spending that is open to scrutiny and that stands up to that scrutiny. That is why I feel there are a great number of questions that must be asked about this scheme.

I agree with the Minister who adverted to this, and also Deputy O'Keeffe, that during the past ten years the public service grew inordinately. That happened because services grew. A decision was taken, albeit in a different era, to build up numbers in the public service as a method of pump-priming but for a variety of reasons that failed and we are now seeing that it failed quite dismally. I was extremely surprised to hear Deputy O'Keeffe, who was in Government with Deputy Desmond on my right for a number of years during that period — and while he and his colleagues were in Government the national debt actually doubled — berate the present Government, the Government of ten years ago and other Governments besides his own for allowing, first, the debt to rise and, secondly, the public service numbers to rise.

Mr. J. O'Keeffe

We reduced them.

Miss Colley

The services provided and the numbers providing them greatly contributed to the debt rising.

Mr. J. O'Keeffe

We reduced them.

Miss Colley

That is the essence of where the Government have gone wrong. We in the Progressive Democrats have advocated from our inception that one must take control of public spending by looking at one's own house, and that includes the public sector as a whole. That is why I made the statement at the start, that I support a scheme which would reduce the numbers.

However, the sum allowed in this Vote, £80 million plus £8.4 million last year, is, I submit, grossly excessive. The Minister in his budget speech predicted and he referred to it tonight, that the public service would reduce by approximately 9,000 in number this year. What does he then foresee as a saving for the pay bill this year? There has not been reference to that figure at any stage. I know to a certain extent it depends on the grades of those who retire, take career breaks or otherwise take advantage of the scheme, but I believe some costings, some projections, should be made public.

For instance, if we are to measure it against the repayments to the Central Bank which the Minister has assured us are going to take place on a yearly basis between 1990 and 1993, how can we be certain that the Exchequer can fund that from savings in the pay bill until we know what the figures are? We know, because the Minister has told us, where the money is coming from. It is coming from the Central Bank in a roundabout way which none of us would have suspected was possible in the beginning, and we know how it is going to be repaid because he has told us that — in four equal payments, but it should be shown as part of the national debt.

I agree with Deputy O'Keeffe when he says this is obviously a debt the State has incurred, when the Government borrowed from the Central Bank. Because they acknowledge from the beginning that the repayments of this debt are to come from a particular source, does not mean it is not a debt. It is absolutely a debt. May I give an example of how ludicrous it is to write that off as not part of the national debt? It is somewhat similar to saying that if we can earmark precisely the savings envisaged which would enable us to pay the interest on any part of our foreign or domestic debt or repay the capital on that debt, we do not have to write it into the books. That is exactly what is happening here. This is off balance sheet financing and there are no two ways about it.

I want to look at whether the scheme in itself and in its terms is over-generous or, it could be argued, simply enticing. My opinion is that it is enticing in the extreme. I do not believe public servants need to have the kind of terms they were offered in order to leave. The Minister said there are many public servants, as there are people in other organisations, at various stages who wish to leave of their own accord. They do not need the over-generous terms that are on offer.

I am not a proponent of compulsory redundancy in this instance. I am very much in favour of voluntary redundancy and redundancy on terms that are suitable, but in this instance I believe they are going over the top. For instance, a principal officer in the Civil Service, aged 51, with 33 years' service, on a salary of £26,000, can expect a lump sum of £39,000 and a pension of £250 a week, about £13,000 a year. After tax that package is very attractive. In fact, it is so attractive that it is no wonder we are losing managerial staff throughout the Civil Service in areas where we cannot afford it. We will find that we are making a mistake by almost pushing them out in the numbers in which they are going.

As I said, I think these terms are over-generous. There are many civil servants who themselves see that it is a mistake to have done this, there are many civil servants who are questioning the way this scheme is being financed and there are many civil servants for whom it goes completely against the grain. I have to ask whether this is a responsible course of action. If the IDA or CTT or some other State body were to embark on incurring a debt of £80 million without projections or costings, with the whole thing shrouded in mystery, with a leave-it-to-us, with a belief that it will work attitude and that this loan will be repaid in time by the savings envisaged, even though we do not know what they are, you can imagine what a normal civil servant's view would be to that transaction.

I believe there is a detrimental effect on the essential services being provided by the public sector to the public, not necessarily by the existence of a voluntary redundancy and early retirement scheme but by the lack of redeployment which followed. I have mentioned this on a number of occasions in this House but there is still no central co-ordinating section or group to work with all the Departments and to make sure that areas are pinpointed quickly where there is staff available and staff moved into the areas where they are needed. We have had a number of examples of that problem in the last year.

In the Department of Social Welfare, one of the most heavily over-burdened Departments handling £1.6 billion this year, there is one accountant employed. The staff numbers in the social welfare services office have increased by 132 since last year, about 4 per cent against a background of 250,000 people unemployed, not to mention all the other benefits which have to be administered. I note from a recent parliamentary question I asked that there are still 54 vacancies in that Department resulting from the restriction on promotions. Obviously redeployment is simply not working for this Department. Staff should be immediately deployed to the Department of Social Welfare. We all know that. The people in the Department of Social Welfare know it, and the Department of Finance seem to acknowledge it, but nothing has happened. I see no reason those vacancies should not be filled in a Department which is particularly over-burdened.

We have witnessed some moves to strengthen Revenue. We had the very strange decision with the anti-evasion unit for VAT being disbanded and the people moved into the Collector General's Office. For the life of me I cannot see the reason behind that. That is redeployment in a negative direction, because we have a further squeeze on those who are already in the net and are abandoning chasing those not in the net.

In education we do not know how many teachers will be needed. There is a review body sitting, yet the Department are in the process of going through the applications for early retirement. We may find ourselves making redundancy payments and paying pensions to teachers, and in the end find that we have to hire new teachers. At that time the cost to the Exchequer will be far more than it need be, and the planning will be shown to be very shortsighted, to say the least. The package for teachers should be suspended until the review body have reported and decided how many teachers we need.

In the Department of Justice we are in danger of losing a very substantial number of principal officers, perhaps as many as one-third, thereby endangering particularly important sections of that Department.

This is not to say I do not believe people should move out of the service but I believe this scheme is unplanned and unco-ordinated. There is no proper co-ordination between the Departments. There is still no committee of secretaries of Departments meeting on a regular basis, co-ordinating the policy which the Government wish to implement, and which was envisaged in the White Paper on Public Service Reform. This would be invaluable at the moment, but it is not in existence.

Lastly I would like to refer very quickly to the effect of this scheme on public servants. Morale in the public service is at an all-time low. One of the reasons for that is that the early retirement scheme was handled badly. Civil servants see most of their colleagues leaving and promotional vacancies remaining unfilled. I have no doubt that if those vacancies were filled it would be possible to restore morale. It is possible to continue with the embargo and not employ people from outside but promote from within the service. There is no doubt that a slimmer service is needed and most public servants realise that that is possible but the plan must be well motivated and cohesive. The public service is losing to the private sector many people they trained in technology at huge expense. While that is taking place there is still over-staffing in many Departments.

Mr. Desmond

The management of public service numbers is a complex operation and in terms of providing money it has taxed the best Ministers for Finance we have had. In terms of managing that money the best efforts of those involved is taxed. A change in the system requires flexibility, a lot of imagination, a great deal of tunnel vision in going ahead and implementing policies. I regret to say that the Minister for Finance has expounded one quality, that of tunnel vision. The other qualities are absent. There is no management concept in this operation. There was no selectivity or inter-departmental consultation. I understand that in the Department of Finance a decent memorandum on the subject has not been introduced, not even one that would go beyond six pages. I do not know what is expected from the former DPS, the exception being that they are expected to supply the odd figure in the hope that they will not be asked for another one.

I do not have any objection to a rigorous control of public service numbers by way of well established methods. Natural wastage is a classical method that has been availed of for many years. It was a masterful approach by successive Ministers for Finance and Ministers for the Public Service. I do not have any objection to a one-in-three embargo. I operated such an embargo for four years in the Department of Health and for three years in the Department of Social Welfare and in that period we ran both Departments well. I would not object if the Minister said that instead of a one-in-three embargo he was going to impose a one-in-four and may go to a one-in-five embargo. I would not object if he said that he was going to be very rough and tough up the line but that did not happen.

The background to the new scheme is very simple. Health were faced with mandatory redundancies because there was no money for that Department. Health sent a memorandum to the Minister with mandatory redundancies written all over it and the Cabinet baulked at it and decided that they had better omit the word "mandatory" and substitute the word "voluntary". Three or four Cabinet Minister were involved but meanwhile the Minister for Finance thought it was a good idea and suggested that the voluntary aspect should be applied to the whole of the public service. About a month later the Minister for Finance got an even better idea and suggested voluntary retirement at the age of 50. I nearly jumped out of my skin when I heard that. I will be 53 next May but the Minister would not offer me voluntary redundancy from the Dáil with seven added years.

Mr. MacSharry

The Deputy did not apply.

Mr. J. O'Keeffe

The Minister should not tempt the Deputy.

Mr. Desmond

I was not offered a lump sum payment. However, as a result of that scheme the Minister has landed himself in an appalling mess. He then had to decide how he would pay for that scheme bearing in mind that he could not increase the national debt, the budget deficit or the provision for public service pay and pensions. He decided to have a word with the Governor of the Central Bank with a view to borrowing £80 million from him. The Governor, being the bright person he is and having been Secretary of the Department of Finance, warned the Minister that he would have to pay the money back. The Minister replied that it would be paid back between 1990 and 1993, or maybe 1995. In telling the Governor that the money would be paid back in equal moieties the Minister coined a new phrase, "accelerated advance surpluses of the Central Bank", reminiscent of the notorious phrase, "self-financing subsidies", introduced by Fianna Fáil.

I do not have any objection to a rigorous selective application of control of public service numbers but I would be damned if I would say to a teacher aged 51, "there is £30,000 and a pension for life for you so that you can emigrate to the UK where you will pay 25 per cent in tax or so that you can go to live in Spain where the tax is less and enjoy yourself for the rest of your life." I understand that 3,600 teachers are laughing all the way to the bank because the Minister for Finance made an eejit of himself, in that classical sense. I understand that the number seeking early retirement is growing by the day. Anybody would try to get out of the public service on that basis. What will this cost? The average payment this year will be £20,000 and 9,000 public servants will have left by the end of the year. Of that number about 4,000 will qualify for the early retirement payment. The remainder will be on career breaks or will have reached retirement age. The Minister will have to provide £80 million for this.

Under the policy of the last Government the number of public servants was being reduced. Without this notorious package we were reducing the number by about 5,200 annually. The package was not necessary. The Minister has told us in the course of his speech that repayment will be financed out of the annual savings to the Exchequer from the redundancy programme. What savings? How much will be saved per annum? It should not be that difficult to give us that information. For example, we are aware that next year the Minister will have to provide an extra £7 million for public service pay, £15 million for special pay and between £20 million and £23 million for increments.

I do not know what the Government are up to. Fianna Fáil indulge in a type of zig-zig approach to this matter. We have had a decade of zig-zagging from them. In 1977 they could not take on public servants quick enough.

When I was appointed Minister for Health in 1982 I sought information from the personnel section and I was shown letters from the late Deputy Colley congratulating the dear Minister for Health at the time, Deputy Haughey, on taking on an extra 4,000 employees for the health services. Deputy Haughey rode on the back of that into the leadership of Fianna Fáil — he sent a letter to every applicant. He got the name and address of every little trainee nurse and of the local Deputy and sent them letters. Eventually the matrons were saying there was not canteen space to feed the nurses or accommodation for them in nurses' homes and that there was nobody for them to look after, but that was Fianna Fáil policy. Fianna Fáil then had the nerve to come into this House and talk to us about doubling the national debt when we came here in 1982 and from then up to 1986 battened down the hatches in an effort to bring the system under control.

Miss Colley

What about the national debt?

Mr. Desmond

The national debt in the process did grow, but in the present process it is growing at another £80 million of borrowing which must be repaid. It impacts on the overall indebtedness of the State because on the non-tax revenue side it is money foregone in the years in question.

There are more serious aspects. The public service are demoralised. They do not hold us politicians in much esteem at this stage and I do not blame them. They must think that we are the greatest yahoos of all time in terms of management of the public service. No other European country has done this. If other European civil servants for example, in the Scandinavian countries, were offered these terms, they would be jumping like lemmings into the North Sea. In Dublin County Council 600 or 700 of the staff are leaving. The very large potholes are going to grow ever bigger and it will cost four times as much to fill them in when they reach a certain dimension. Reinstatement of our roads instead of conventional maintenance is to a factor of four and the Department of Finance know that. But the Government say these people should be let go, let retire to their public service haciendas in Benidorm, where their children will visit them in summer and where they will have a great time on their public service pensions. That is the nonsense that is going on.

The Department of Education do not know whether they are coming or going. I sympathise with the Minister for Finance in this regard because while the Minister for Education never knew whether she was coming or going, the Minister for Finance, in fairness, has a fairly tough vision of what he wants. However, he made a bad mistake here. There are 3,600 educational staff wanting to leave the public service and the Minister for Education tells them that Circular 20/87 is in full operation, that she does not intend to withdraw it. She will not come into the Dáil to say anything about it and is chuckling in the corridors because she will not have to come near the House until 19 April. Meanwhile, the central review body are up in arms and the situation is in a shambles.

An Ceann Comhairle

The Deputy has two minutes left.

Mr. Desmond

There are times when I despair. I regard the Minister for Finance as one of the most responsible people ever to have occupied that post. He tried desperately in 1981 and only missed succeeding by a hair's breadth. That was a terrible shame. He came back into office and has done many excellent things, but this one is a bad and silly mistake. The scheme should be dropped for what it is, an enormously costly hot potato of total irrelevance, and one which will not in any way contribute to the effective management of the public service. In the Department of Health alone, to take one example, an assistant secretary is gone, along with 16 senior officers and a principal officer and there is nobody left to manage their budget. They now have no financial expertise. The policy is to let them emigrate, or do what they want.

An Ceann Comhairle

I am obliged to call another speaker.

Mr. Desmond

I conclude by urging the Minister to drop these schemes and let us get back to normality. Let there be control of the public service without spending £80 million on this escapade which was ill-thought out, never researched and which has made us a laughing stock in public services throughout the world.

Tomás Mac Giolla

It is rather difficult to know where to start in dealing with this Estimate. As many previous speakers have pointed out, the decision seems to have been taken in panic. There has been no planning whatsoever and this is the type of operation which before its implementation, needs intensive and very detailed planning in every section and area of the public service. It has been rushed in to deal in a purely monetarist fashion with a problem, without seeing the dangers looming ahead. Without some coherent economic planning strategy on the part of the Government, this could result in enormous long term economic problems for the country, apart from the effect of spending £80 million rather unnecessarily in what I have referred to as a panic measure. It simply does not make economic sense to make public servants redundant in this blanket fashion, voluntarily or not, without dealing with the whole area of productive employment, redeployment and so on. The Minister's speech is simply unacceptable. He had a short 20 minutes in which to address the problem and skimmed through what could have been given in five minutes. He gave us no idea of his thinking in implementing this measure.

In reply to a question last February, he gave a little more detail which he should have given here tonight as regards the thinking behind accepting any particular redundancy. He listed four considerations which will be taken into account in each case, all of which are important. If they were taken into consideration, they would result in many fewer redundancies. The first consideration, was whether the granting of the application would reduce the strength of the cadre concerned to a non-viable level. Some of the cadres will be destroyed completely, let alone reduced to a non-viable level. The second consideration was whether direct net Exchequer receipts would be put in jeopardy by the granting of the application. Before even the redundancy package is implemented, the staff of the Revenue Commissioners have been reduced by 14 per cent and they are just not capable at the moment of dealing with the collection of taxes. That aspect is not being considered at all. The third consideration was whether public safety would be put at risk or genuine hardship caused by the granting of the application. That was not put into effect when the firemen had to go on strike in order to maintain a safe service, not by way of any benefit to themselves but simply because redundancies in the fire service rendered the service unsafe for the people of Dublin. Safety was being put at risk and genuine hardship being caused, but that was not taken into consideration. The fourth consideration was whether an applicant in a situation where one of the above criteria applied has specialist or technical qualifications and/or expertise for which it is not feasible to compensate by redeployment. That is the area of the over-fifties. I wonder how the Minister will apply that criterion and how many would actually be allowed to take redundancy if those proposals were put into effect when considering applications. The Minister, in not giving us any idea of what he was about, treated us with absolute contempt. He should have given us some detail of his thinking, planning and strategy, Department by Department. Even in 20 minutes he could have given us some idea of the way in which he was implementing this measure.

We fully support the need for a highly efficient and effective public service. I have always maintained that in relation to State companies, particularly in relation to commercial State companies, there is a need for efficiency and cost effectiveness at all times. We recognise that, as a result of changes in society, some areas of the Civil Service are short of staff and that there could be a surplus in others. This is what leads to considerable scope for redeployment in the Civil Service. There are problems but the Minister should be prepared to deal with them in order to enforce redeployment. As I said, revenue collection is one area where redeployment would be self-financing, a famous phrase used by Fianna Fáil in Opposition. A team, later disbanded, proved to be self-financing when they collected £7 million or £8 million in a period of eight or nine months. That area does not seem to have been examined by the Minister.

I referred to monetarism and it is clear that the thinking of the Minister for Finance is involved in this because, when one goes through each Department, it is obvious that it was not a question of trimming them to make them more efficient, but of dismantling them. The Minister said that 600 workers had left the health service in 1987 and we know how bad things were that year. He said that 1,500 more are expected to go in 1988. There was no reference to the devastating effect that the loss of 2,100 health workers would have on the level of care to the famous sick, old and handicapped about whom the Fianna Fáil Government were so concerned just over a year ago. It seemed to be a matter of deciding to cut jobs, and that is unbelievable, especially in the health service, where there is such wide scope for saving money in other areas instead of the jobs which provide the service to the people who need it. This is all the more maddening when there are areas in the health service crying out for reform.

The cost of drugs in this country is higher than in any other country in Europe, five times dearer than in France. The health service is being ripped off by drug companies, right down to the pharmacist, but nobody is prepared to face up to this. Our health service is totally controlled by the consultants who can hold a Minister up to ransom, as the previous Minister for Health well knows. There are areas in which millions can be saved but in chopping 2,100 jobs we are cutting a lifeline to many people who will die from lack of attention.

In the teaching area, no one can give any good educational reason for dropping teachers when we already have the highest pupil-teacher ratio in Europe. It is even far higher than Northern Ireland, the "unfree" part of our country. We have a far higher pupil-teacher ratio and a far worse educational service than they provide in the North. This was the case even before the redundancies and the Minister said that 3,600 applications have been received to date from the primary sector alone. According to my information, many of those applications are to see how much they would get and they may not be genuine. Perhaps the Minister is rubbing his hands with glee because so many teachers want to get out of the system but he does not seem to have thought of the destruction this will cause to our educational system and to the great number of children who will be affected. There is no question of the Minister being able to say that there is a surplus of teachers or that the system will be more efficient as a result of these losses. There is no question of more efficiency; we will simply have to pay them less and save in that way.

The Minister should remember how Waterford Glass pushed themselves to the wall by precisely the same type of thinking in regard to a redundancy package. They are now fighting for their life, they have almost destroyed themselves with their £40 million redundancy package. Only for the fact that they acquired Wedgewood, they would have gone into liquidation. Perhaps the Minister thought that because this was done in the commercial world it must be right. However, Waterford Glass were wrong and they now realise it. Furthermore, there will be less handcrafted products than heretofore.

The Minister said that 1,000 applications have been accepted from workers in local authorities. Already in Dublin Corporation the redundancies of last year and the embargo over a number of years have caused an enormous strain. The level of services has gone up but the numbers of people to provide them have gone down. There is such enormous pressure on workers that the local government public services union have a work-to-rule operating because they are unable to deal with the enormous amount of work. Of course, the manager is being screwed by the Minister for the Environment, and if there are further redundancies it will be impossible to provide essential services. The Minister said that essential services would not be affected but that is not the case. Nobody thinks of essential services until something goes wrong in relation to water or sewerage. All these areas are under enormous pressure. We can laugh at the potholes on our roads but there will be no laughter if the sewerage or water systems break down. The Ombudsman had the number of his staff reduced from 16 to eight. That type of petty cut really sickens me. Public services are being cut unnecessarily and I believe the Minister is making a major mistake economically in doing this.

Mr. MacSharry

First of all, I would like to thank the Deputies who have contributed to this debate. I would not agree with everything that was said but I could agree with much of it. All the points made were similar in nature and I will now try to deal with some of them. Much of the discussion in the debate centred on who was responsible for what and on the mistake which was made in introducing this package. It might be no harm to remind those Deputies who inquired as to who was responsible for numbers in the public service of what the figures were in particular years. In 1980, three years after the famous 1977 manifesto, there were 207,500 public servants. In 1981, when there was a different Government——

Mr. J. O'Keeffe

How many were there in 1977?

Mr. MacSharry

I do not have that figure.

Mr. J. O'Keeffe

That is where the story began and let us not forget it.

Mr. MacSharry

In 1981, under a different Government, there were 219,696 public servants, an increase of 12,000.

Mr. J. O'Keeffe

For part of the year.

Mr. MacSharry

For most of that year and for part of the next year——

Mr. J. O'Keeffe

For the last five months of the year.

Mr. MacSharry

——when it went up to 220,000. For the years of 1983, 1984, 1985 and 1986 the figure stayed at almost 220,000 and absolutely nothing whatsoever was done about it. The figure went from 218,572 in 1985 to 219,790 in 1986, an increase of 1,200 people. They were the years in which the Deputies, who were then in Government, have said they reduced the numbers.

Mr. Desmond

Give us a breakdown of that figure, leaving out the Army and the Garda Síochána.

Mr. MacSharry

In 1988, not counting those who will leave this year, the figure will be reduced from 218,000 to 211,000. Therefore, I do not think the Deputies who made much play——

Mr. J. O'Keeffe

Lies, damn lies and statistics.

Mr. MacSharry

No, these are factual figures.

Mr. J. O'Keeffe

They are selective figures.

Mr. MacSharry

I can give the Deputy a copy of the figures.

An Ceann Comhairle

We should hear the Minister's reply without interruption. We have had a very good debate without interruption up to now.

Mr. MacSharry

I wanted to make that point so that people would know exactly what the facts were and that they could not be making these wild, unsustainable accusations.

Reference was made to the brain drain and Deputy O'Keeffe emphasised the loss of talent to the public service through early retirement and through those leaving to take up other jobs. Management throughout the public service were provided with guidelines which precluded the application of the scheme to those who could not be done without. While we do not deny that many talented people have left on the early retirement scheme, it has been noticeable that the retirees have included staff of varying capacities. The complaint has sometimes been made that the public service has drawn over the years a disproportionate share of people with talent. We do not see a scheme which allows or encourages some of that talent to migrate to other work as being in any way a loss to the community. If that talent can be drawn out of the public service and put to use elsewhere in a manner which generates a new creation of wealth, what objection can there be? If the scheme allows a hitherto undetected seam of entrepreneurial talent to be tapped for the benefit of the community as a whole, so much the better and everybody should agree with that. I want to say——

Mr. J. O'Keeffe

Try saying that to someone in Moorepark, Grange or Dunsinea.

(Interruptions.)

Mr. MacSharry

I think the point the Deputy was trying to make was that she wanted all chiefs and no Indians.

Miss Colley

No, I want a good balance.

Mr. MacSharry

As I have said quite clearly, the fact of the matter is that guidelines have been issued——

Miss Colley

Who is implementing and co-ordinating them?

Mr. MacSharry

——and I am quite sure that the Deputies who have contributed to the debate have received representations from personnel within the public service generally and have been asked to make representations on their behalf so that they would be considered for voluntary redundancy or early retirement.

Tomás Mac Giolla

They did not come my way.

Mr. MacSharry

All those who are not guilty, please put up their hands. Deputy Mac Giolla is not guilty of anything. Reference was also made to the Central Bank and to the arrangements which are being made. I would like once again to emphasise and to stitch into the record the importance of this arrangement. Under the arrangements agreed with the Central Bank for the financing of the lump sum payments arising out of the voluntary redundancy and early retirement scheme, the bank will make advance payments of surplus income to the Exchequer so as to assist the Exchequer in meeting the exceptional costs of the programme. The arrangements are in accordance with section 63 (7) of the Currency Act, 1927 which provides that the Central Bank may at any time pay into the Exchequer such sums on account of surplus income as may be agreed upon by the Minister for Finance and the Central Bank.

In the normal course the Exchequer receives from the Central Bank each year the surplus income earned by the bank in the previous year less certain appropriations to the reserves of the bank. Under the arrangements agreed with the bank the Exchequer will receive in 1988 in addition to the normal payment of the surplus income for 1987 — the income for 1987 is estimated at £106 million — an advance payment of the surplus the Central Bank will earn in 1988. A provision of £80 million was included in the 1988 budgetary figures under this heading. The repayments will take the form, as I have said already, of four equal annual deductions by the Central Bank from the normal payments of surplus income for the years 1990 to 1993, inclusive. There is no question of raiding the reserves of the bank in connection with the financing of the voluntary redundancy programme.

Miss Colley

If it is being repaid, it must be a debt.

Mr. MacSharry

I will come to that in a moment. The agreement with the Central Bank involves the Exchequer receiving in 1988 part of the surplus which the bank will earn in that year instead of waiting until 1989 for it. Therefore, it has nothing to do with the reserves and it is not a debt. The advances of surplus income by the Central Bank are from the profits of the bank and not from the reserves. The repayments of these advances will be made from the savings arising from the voluntary redundancy scheme.

Mr. J. O'Keeffe

Why are you repaying them, if you already own them?

Mr. MacSharry

Therefore, these repayments will not make the Exchequer finances and the borrowing requirement worse than they would otherwise be during the period of the repayments.

Mr. Desmond

Non-tax revenue will be down for each of those years.

Mr. MacSharry

After the repayments are completed there will be a significant improvement in the Exchequer finances.

Mr. J. O'Keeffe

It does not add up.

Mr. MacSharry

Many people mentioned that it was off balance ——

An Leas-Cheann Comhairle

I have to appeal to Deputies to listen.

Mr. J. O'Keeffe

He is provoking us, a Leas-Cheann Comhairle.

Mr. Desmond

That should not have been written for him.

An Leas-Cheann Comhairle

If Deputy Desmond does not want to listen he knows the alternative. He must listen to the Minister, whether he likes it or not.

Mr. MacSharry

The redundancy programme is not off balance sheet. It is included on the expenditure side in the Vote being discussed here tonight and on the receipts side as an non-tax revenue. How can anybody——

Miss Colley

It is not part of the national debt.

Mr. MacSharry

I am coming to that, Deputy, and I want to thank you for your support on this programme notwithstanding the contribution you have made. It was fully taken into account in arriving at the 1988 Exchequer borrowing requirement. An advance of surplus income is clearly non-tax revenue and, therefore, there is no case for saying that it should increase the national debt.

Mr. J. O'Keeffe

And that is why the Government are repaying it.

Mr. MacSharry

I am sorry the Deputies are annoyed that it was possible to arrange such a scheme and that they, in Government for four years, could not do anything about it.

Miss Colley

Why do you not come clean and call it a debt?

Mr. MacSharry

It is not a debt. It is an advance payment of surplus income.

(Interruptions.)

Mr. MacSharry

Deputy Colley, Deputy Desmond and others are saying that the voluntary retirement terms are too generous and that there are signs that the voluntary package operating in the public service is costing far too much. The example quoted was a Civil Service principal aged 51 with 33 years service on £26,000 who would get a gratuity of £39,000 and a pension of £13,000 per year, which after tax was very attractive to those with talent who would get alternative employment. The two points that Deputy Colley and other did not mention was that under the existing pensions code the same officer could leave with a guarantee of a frozen pension and lump sum based on his or her 33 years service which would become payable on his or her 60th birthday. The extra cost to the State consists of the cost of paying the lump sum earlier than would normally arise and the cost of pension for seven extra years. These costs are offset by the fact that taking the public service as a whole, staff accepting the early retirement package are not being replaced. We have a pension cost instead of a salary cost so that the pay back period is of the order of 3½ years. Deputies said we made a bad mistake and there was no planning but the opposite is the case. This is a very good scheme. It is very popular and it is well worthwhile and very much in the long-term interests of the Exchequer and the taxpayer.

An Leas-Cheann Comhairle

Is the Vote agreed?

Mr. Desmond

No, it is not agreed.

An Leas-Cheann Comhairle

Does Deputy Desmond require me to put the question?

Mr. Desmond

I am giving up but I am not agreeing.

Vote put and agreed to.