Will the Taoiseach outline the details of the €1.4 billion saving in the public service pay bill to be achieved through the new pension-related payment to be made by all public servants? Can he spell out the grading involved and the percentages that will apply and what they will mean for a person earning €50,000, €60,000, €70,000 and above?
Leaders’ Questions.
Savings of approximately €1.4 billion will be made in a full year. As has been said, we are talking about a reduction averaging 7.5% in the public service pay bill as a pension levy or a contribution to a pension. The Pensions Board has done work on the benefit of public sector pensions and the difficulties private sector pension schemes have had in recent times. This will be a contribution towards the value of the pension at the end of one's one working life and not the payment of the full cost up-front. The reason we approached this as the means by which we could deal with the matter was it would not affect current pensioners' incomes. If one went for a payroll cut, one would also affect the income of existing pensioners.
Public service pensions are paid for out of current Exchequer funding and, therefore, this contribution is like an appropriations-in-aid for the payment of the pensions on an ongoing basis. The €1.4 billion is the full year cost and it will be approximately €1.16 billion in 2009. The proposal put to the ICTU was a levy of 3% on the first €15,000, 6% on the next €5,000 and 10% on the balance.
Statements have been made regarding the conduct of the negotiations. Experienced negotiators have been involved in this process for a long time. Social partnership is a well established process. It is standard negotiating practice in an industrial relations context to deal with the specifics of a proposition at the end of a process following the consideration of the background and relevant contextual issues and that practice was followed on this occasion. There was, however, significant discussion, both formal and informal, in advance of the tabling of these specific proposals about the contribution the public service payroll should make to the necessary fiscal adjustment. The fact that congress felt unable to agree to the proposals tabled by Government was due to the contents of the proposals not to the timing of their presentation. The measures proposed were what the Government regarded as necessary and appropriate having regard to all the relevant considerations including those put forward by congress itself.
By how much will these proposals reduce public borrowing, in the knowledge that they do not apply for a full year and that they themselves will depress tax revenues? How will the pension levy interact with the pension terms of some public workers whose pensions are co-ordinated with social welfare pensions? There is a link between some periodic workers who work in the public service and social welfare pensions. How will the levy interact with those persons?
The levy is applicable to all people working in the public service and whatever legislative changes required to give it effect will be introduced as a matter of urgency. Regarding the impact it will have on the overall budget deficit this year, we are trying to stabilise the situation by providing a €2 billion provision in this series of announcements today. We will have an opportunity tomorrow to set it out in a wider context. I am here to announce the decisions that were made by the Government today in the context of the €2.1 billion full-year savings decided this afternoon. Tomorrow we will have a debate in the House that will put in the broader context how we see the Government dealing with the economic issues of the day, going forward.
As has been said, in the context of a contraction in the economy this year of more than 4% — between 4% and 4.5% on recent analysis — it is a question of ensuring that we do not have further major tax changes during the course of this year. In answer to part of Deputy Gilmore's contribution to the House earlier, I have indicated that this gap of €17 billion cannot be simply filled by expenditure savings. There will obviously need to be a contribution by the taxation system in the years ahead in order to meet the difference that now exists between the spend in which the Government is engaged and the tax revenue that is being provided at the moment. This recession is having a particular impact on our public finances that we will need to address, therefore, it will be a combination of tax and expenditure items.
With regard to identifying items for next year and further on, the McCarthy public service committee is looking at numbers and expenditure items in all areas of expenditure in all Departments. In addition, the Commission on Taxation is taking a systemic review — the first in more than 25 or 30 years — as to what is the best way in which we can provide a taxation base that can meet the needs of the society in which we live today and in the years ahead.
While we have been discussing this matter, the Exchequer figures for January have just been published. They show that the tax revenue for January 2009 was €900 million less than the revenue for January 2008. Has that figure been included in the calculations the Taoiseach announced here earlier today or has almost half of the €2 billion savings that he has just announced already evaporated in the first month of the year through the reduction in tax revenues?
In respect of the pension levy, I understood that he said — perhaps I did not catch all the figures — it would be 3% for people on €15,000; 6% for people on €50,000——
The next €5,000.
I ask the Taoiseach to put on the record of the House the total graduated amounts for each level of income. Figures in the public domain suggest 3% for people on €15,000; 3.8% at €20,000; 5.8% at €30,000; 7.5% at €50,000; 8.3% at €75,000; and 8.8% at €100,000. Does the Taoiseach believe it is fair that somebody on €15,300 a year would now pay €450 extra as a pension levy? Is it fair to ask somebody on that low level of income to pay €450 on top of all the other things he or she must pay? I ask the Taoiseach to clarify how this will be treated by way of taxation. Will the pension levy be on the gross income figure or on the net figure or will people pay the levy and then pay tax on the levy that they have already paid?
The Deputy referred to what the levies were. I have indicated — he is reading from the same page — the proposal that was put to the congress last night.
That is right.
Regarding a salary of €15,000 the deduction as a percentage of overall salary is 3%, which is €420; at €20,000 it is €750, 3.8%. It graduates up along as the Deputy said. At €25,000 it is a €1,250 deduction or 5%.
Can the Taoiseach supply the table?
I can forward the table.
The Taoiseach should read it out and put it on the record.
If the Deputy wishes me to put it on the record I will put it on the record.
What about the existing levies? If a person already pays a pension levy, is it on top of that or is it instead of it?
The Taoiseach cannot be interrupted while he is trying to reply to the question.
I have two conflicting requests. I will put it on the record if that is what the Labour Party leader wants me to do.
at €30,000 it is €1,750 or 5.8%;
at €35,000 it is €2,250 or 6.4%;
at €40,000 it is €2,750 or 6.9%;
at €45,000 it is €3,250 or 7.2%;
at €50,000 it is €3,750 or 7.5%;
at €55,000 it is €4,250 or 7.7%;
at €60,000 it is €4,750 or 7.9%;
at €65,000 it is €5,250 or 8.1%;
at €70,000 it is €5,750 or 8.2%;
at €75,000 it is €6,250 or 8.3%;
at €80,000 it is €6,750 or 8.4%;
at €85,000 it is €7,250 or 8.5%;
at €90,000 it is €7,750 or 8.6%;
at €95,000 it is €8,250 or 8.7%;
at €100,000 it is €8,750 or 8.8%;
at €125,000 it is €11,250 or 9%;
at €150,000 it is €13,750 or 9.2%;
at €175,000 it is €16,250 or 9.3%;
at €200,000 it is €18,750 or 9.4%;
at €225,000 it is €21,250 or 9.4%;
at €250,000 it is €23,750 or 9.5%;
at €275,000 it is €26,150 or 9.5%; and
at €300,000 it is €28,750 or 9.6%.
I would say Finian is glad he jumped now.
I would like to pursue that matter somewhat further because people need to know the full impact of this. Will the Taoiseach clarify whether that is on the gross income or the net income?
It is not allowable.
People will want to know if that is a reduction before tax or after tax. Those figures are in effect reductions in take home pay of that order. I ask the Taoiseach to clarify how the levy will apply and whether it is applying on full income.
Yes, it is on gross income. It is on full income. To answer the previous question the Deputy asked about the Exchequer returns, those Exchequer returns are in line with the profile in that we have factored in a reduction in revenue of more than €4 billion compared with last year in the 2009 figures. I understand from the Department of Finance that this profile of expenditure was what was expected for January 2009.