I essentially had concluded my argument which was that the insertion of a sunset clause, as we discussed this morning, would contribute to an easing of tension and restore some belief and confidence in public servants. This is an emergency measure, however, and will terminate after a defined period. The Government sent out the message that it will examine the tax option as a fairer way to deal with this issue in future. The fact that all income is encompassed is also very punitive for workers who tend to do shift and overtime work. Even members of the Garda Síochána have indicated their displeasure and as we know many gardaí earn a considerable proportion of their incomes in overtime. They will also be disproportionately affected.
Financial Emergency Measures in the Public Interest Bill 2009: Committee Stage (Resumed).
NEW SECTION.
Debate resumed on amendment No. 1:
In page 4, before section 1, to insert the following new section:
"1.—(1) This Act shall expire on the day that is 2 years from the date of its passing unless renewed by resolution of both Houses of the Oireachtas.
(2) Any such renewal shall be expressed to be for a period not exceeding 2 years.".
—(Deputy Joan Burton).
On a point of order, a letter was issued from the Ceann Comhairle's office to Deputy Joan Burton concerning amendments we had tabled. Amendments Nos. 38, 39 and 45 were deemed to be outside the scope of the Bill. I think that is a mistake and I cannot believe that it could be so.
As we have not reached that part of the Bill, may I suggest that the Deputy might make direct communication with the Ceann Comhairle's office to seek clarity on that matter before we reach it?
That would be a positive suggestion coming from the Chair. I think it is an error rather than any deliberate political act.
I am not familiar with the reasoning and it would be impossible to rule from here, but if the Deputy would approach the Ceann Comhairle's office we will seek to get clarity on that matter.
Okay.
The point is that the description of the Bill refers to serious disturbances in the economy.
We cannot go into it now.
It also refers to providing for the amendment of the Income Tax Act. My amendments that were ruled out included a proposal to amend the Income Tax Act so that people could not get big capital tax losses from the €451 million loan deal in Anglo-Irish Bank and a number of other matters.
I understand that the Deputy regards this as a very serious matter.
I believe the Chair is misdirecting itself.
Can I suggest that clarity on the ruling might be sought before we reach that section? The Deputy or the Deputy's party Whip might do that.
As has been said, the scope of the Bill's Title is so broad that we submit it ought, at least, to encompass some of the amendments that have been ruled out.
Given that the Bill is a crisis measure, I cannot believe that its provisions should be of indefinite duration. There must be a finite period. The sunset clause intends to suggest that it ought to be for two years and I ask the Minister to accept it.
While many points have been touched on, there are several issues I wish to raise. This is emergency legislation which normally means it should be a short-term measure. Public sector workers see the Government willing to give €3.5 billion to the two main banks, €7 billion in total, with no specific repayment date but an open-ended arrangement. The pension levy scheme which appears to be unfair and imbalanced is also open-ended. Public servants also believe they are paying for the banks' mistakes and the imprudent management of the public finances. Amendment No. 47 tabled by Fine Gael proposes that the levy scheme be revoked in three years. I would like the Minister for Finance to take that time limit on board.
We are looking at a national strike, the first in many years.
The first in decades.
Yes, decades. National strikes do not happen for the sake of it. The reason people are marching is they believe this scheme is unfair and that the Government has not taken control of the situation. Instead, it is progressing by fits and starts. Is it fair that a public servant earning €18,300 a year, the minimum wage, will pay a levy of 3.5% of his or her income while someone on €100,000 will pay 4.64% net? This is not a question of the public sector versus the private sector. It is about people paying their fair share and getting a return.
I mean no disrespect but the President should pay the levy. Why should the Judiciary be exempt from it? The levy is fundamentally unfair on those on modest incomes. The Government is using it as a source of revenue collection, not for pension provisions. From a control viewpoint, this should be brought forward as an emergency measure to bring the public finances under control rather than being seen as a long-term revenue stream in respect of which the Government would increase the rates every few years.
Amendments Nos. 1 and 47 are reasonable in seeking a sunset clause. It is important for public servants to know that control mechanisms are in place to get the public finances under control. The country is in an unparalleled situation regarding the public finances. What is needed is control to be shown at all levels, including the levy. However, the scheme is unbalanced, unfair and should only be seen as a short-term measure.
I have provided for the inclusion of a review section in the legislation. Section 13 provides for an annual review of the operation of the measures included in the Bill, consideration of whether the provisions continue to be necessary and the making of findings, as the Minister thinks appropriate. A report on the review will be laid before each House of the Oireachtas. There is nothing to stop a Minister for Finance in the course of dealing with the annual finance Bill from dealing with matters which might arise from the review.
Will the Minister take a question on that matter?
No, I will not. This is Committee Stage and I can take a question when I have completed my contribution.
The Minister should allow the Chair to explain that we are on Committee Stage and will have a back and forward discussion.
The Minister's attitude has answered my question.
Next year I will carry out a review of the operation, effectiveness and impact of the legislation having regard to the overall economy and national economic competitiveness. A similar approach has been adopted under section 11 of the Minimum Wage Act 2000 in which the Tánaiste and Minister for Enterprise, Trade and Employment takes account of these considerations when setting the minimum wage. I can consider whether any of the legislation's provisions continue to be necessary having regard to the purposes of the Bill. I will make findings consequent on such a review and consideration and cause a written report on the findings to be prepared and laid before the Houses of the Oireachtas.
Given the situation facing us and that facing governments across the European Union and the world, I am not prepared to accept the amendment. I am not in a position to foresee the circumstances in which we may find ourselves in two years time. I would not care to prejudge the position as the amendment seeks to do. Instead, I will review the position on an annual basis and report to the Houses when I have done so. Consequently, I cannot accept the amendment.
Those of us who over our cornflakes this morning listened enthralled to the Tánaiste and Minister for Enterprise, Trade and Employment suggesting on the radio that the problems in the economy had been solved are amazed that by afternoon tea the Minister for Finance has a completely different view.
Tweaking in Donegal is not the same as in Castleknock.
Section 13 does not address the questions raised by either the Labour Party or Fine Gael. It provides for a review by the Minister. I am sure that, as a competent Minister, he reviews all sources of revenue available to the State on an annual basis for the budget. However, the review provided for in section 13 has no status. If the Minister decides to outsource it, presumably it will be through the creation of another little quango to ensure the Minister will be at arm's length from any decision-making. It would probably end up as part of the bad habits of governance that have built up during the two recent Fianna Fáil-led Administrations.
It is unfortunate the Minister has failed to address the arguments in favour of a sunset clause. Public servants facing this levy are entitled to have an indication from the Minister as to how long it is proposed to have it in place. From his reply, it sounds as if this will be a permanent fixture, just as income tax was temporary for various wars but never removed. Once introduced, this levy will be in place forever. The purpose of the sunset clause would be to provide for a debating mechanism in the House.
Regarding the ideology behind the pension levy, having wasted the whole summer when he took office and not having addressed the serious emerging economic issues, the Minister brought forward an emergency budget. Many braced themselves at the time that they would have to pay more in tax but they were quite surprised that nothing much happened in the emergency budget. Now, the Minister is undertaking this pension levy, with the income levy, in order that he can claim income tax, particularly for those in the PAYE sector, is not rising. However, with the way the levies are structured, the 1% income levy is equivalent to between 2% and 3% on the top rate of tax. In effect, the 41% tax rate has moved to 44%. For public sector workers, the net increase in tax rates for those earning under €35,000 is between 4.5% and 5%. Therefore, their basic rate of tax has gone up from 20% to 24%.
For people paying at the upper tax rates who earn over €35,000, the net after-tax charge will be approximately 7% for those who work in the public service. This means they will be paying income tax at 48% rather than 41%. There will then be approximately three percentage points that will apply in respect of the 1% income tax levy. Consequently, workers in the public service will be paying, in effect and at a little over 50%, the top rate of income tax. Would it not be much more honest for the Minister to state he is increasing income tax? There is no other explanation for what he is doing.
Most of the money that will accrue under the levy will be used by the banks. As far as we can discern, it will not be used to sustain vital public services. It is not hypothecated or earmarked. If public servants knew that this money would be invested in schools or hospitals, they might perhaps have a different attitude to the levy. However, that is not the position. Therefore, most public servants are of the view that they are being singled out to pay for what has occurred in the banks, particularly Anglo Irish Bank. The Minister decided — wrongly — that the latter was systemic and had to be saved, even at the expense of the two major banks which are most certainly systemic in the context of the creation and retention of jobs and the extension of credit in the economy.
The Minister made a mistake when he introduced the bank guarantee scheme. On Private Members' business last night he pretty much acknowledged this by stating being an early mover in respect of banking reform was not necessarily the wisest move. However, I recall him and the Taoiseach coming before the House to inform Members that their early and absolute move in respect of the guarantee scheme was extremely clever. With hindsight, that move now appears to be the equivalent of Georgia invading Russia, namely, not very clever at all. The introduction of the guarantee scheme got up the noses of those in international markets because it was done in the absence of consultation or collaboration. The public finances are in their current state partly as a result of the decisions made by the Minister. We still do not know the background to them.
Through their representative trade unions, public service workers have repeatedly stated they are not unwilling to share part of the burden. However, they want to be informed that others will also share that burden. The others to whom I refer in this regard are the very wealthy, those who are tax exiles, people who have availed of the huge number of tax breaks designed to aid the construction sector and the elite group of 15 to 100 customers of Anglo Irish Bank who are uniquely privileged in having had an entire tax code written for them. The Minister's failure to introduce a sunset clause will not assist industrial relations with the public service unions. We do not want the country to return to a period of strikes and industrial unrest.
The Minister should be able to find a way to find the money he is seeking in a more honest manner. He should also deal more honestly with the public sector and not make those who work in it the scapegoats for the failures of the bankers.
We should move on with our deliberations because it is clear the Minister has set his face against the concept of a sunset clause. There are other important matters to be discussed. However, this is also an important matter in the sense that pickets will be placed on Leinster House tomorrow morning. Gardaí demonstrated outside the gates to the complex earlier today and the civil and public service unions have balloted their members in respect of strike action. All of this is a result of the disaffection felt by public servants in the context of their being singled out and in respect of the unfairness of this measure. It would do a great deal to allay their fears if instead of adhering to the traditional review mechanism, the Minister were to state the levy will only be imposed for a defined period.
If this is an emergency measure, it ought to apply for a defined period only. The signal the Minister is sending by not accepting these amendments is that the levy may well remain in place. As I argued, most thinking people will state it will be subsumed into a reform of the taxation system when the next budget is presented to the House. In the light of the scale of the problems relating to the public finances, we can anticipate serious changes in the tax code. Most presume that, in a progressive way, those who can afford to pay will pay most under those taxation changes and that the latter will absorb and replace the measures presented here. In such circumstances, the inclusion of a sunset clause would seem reasonable and would do much to allay the division in society which has led to public servants being of the view that they have been unfairly singled out. If the Minister at least stated the levy will apply for the duration of the crisis only, many — perhaps even a majority — of those public servants would be prepared to grin and bear it for that limited period.
I am disappointed the Minister is not willing to accept the amendments. While it is impossible to know whether, in two to three years' time, the issues that have prompted the Minister to believe the levy is the right way forward will have been resolved, it is important to recognise that this is unusual and exceptional legislation. The levy is not founded upon a fair allocation of the burden and does not relate to pension benefits. In that context, the money that will be collected will not be set aside for pension purposes. In essence, the Minister is using the levy as a mechanism to reduce the public service pay bill.
The Minister referred to the levy as a temporary measure and outlined the reasons for its introduction. If there were a sunset clause, he would be obliged to come before the House to explicitly renew the levy. Under the review mechanism, the levy will be renewed each year, without exception, and there will not be a requirement on the Government to come before the House to seek its renewal. The Minister's commitment in that regard is secondary in nature. He has indicated that it is a temporary measure and that all such measures need to be reviewed. However, people would accept his commitment as being much more serious if he set down a date by which he would be obliged to come before the House and state he was renewing the levy because the various items in the citation remain causes for concern. The Minister should be willing to shoulder responsibility in this regard and not proceed with his extremely watered-down review.
There are 50,000 primary school pupils who attend classes in prefabs. There are people whose children sit in the very prefabs in which they sat 25 or 30 years ago. In our experience, temporary measures tend to have a certain degree of longevity that creates certain doubts in people's minds with regard to the nature of such measures. I ask the Minister to consider what, in most people's experience, is meant by a temporary measure.
The wording used in the amendments tabled by my party and Fine Gael may not be acceptable to the Minister. That is perfectly fine. However, Report Stage is due to be taken before 10.30 p.m. If the Minister wants to avoid the industrial unrest that has not been manufactured but which manifestly is apparent, I urge him to reconsider his position. The statement he insisted on reading belittles him. Referring to the review of a review being outsourced to PricewaterhouseCoopers or some other firm is way below the competence of his Department or that of the public service.
I will not be present in the House later this evening. However, I put it to the Minister that — in the context of both the sunset clause and the remarks made by the Taoiseach during Leaders' Questions earlier — he cannot realistically respond to the olive branch offered by David Begg who, when speaking on radio this morning, accepted in principle that some form of levy was probably necessary. He also indicated, however, that the definition, context and application of the proposed levy needed to be reviewed. The Tánaiste may have gone on a solo run when she went even further in her definition of tweaking.
The Minister should indicate that he will be able, by way of regulation rather than review, to alter and vary the terms of the application of the levy. What was manifestly absent from his statement was reference to the use of secondary legislation to alter the application of the terms and conditions of the review. This is my understanding of the Minister's statement on first hearing, although I may be misinformed. I accept this debate may not be the appropriate forum in which to provide an answer.
I ask the Minister to consider the 50,000 children being educated in prefabricated school buildings. Many of these children are the second generation of their families to find themselves in this position. The word "temporary" means "permanent" for many people in this society.
I also ask the Minister to consider introducing a mechanism to enable dialogue to commence between the Irish Congress of Trade Unions and the Government about the application of the pension levy. While most people believe in principle that this measure is probably necessary, they do so on condition that it is perceived as fair.
The Minister varied the proposal to remove medical cards from those aged over 70 when he changed the original blunderbuss measure and a more refined proposal ultimately emerged. He must use a similar mechanism before 10.30 p.m. to find a similar degree of flexibility, particularly as he will need all the flexibility he can get.
On the broader issue of the economy, we must accept that the country faces a major crisis. In recent days, the term "economic treason" has been used. I share this view of recent actions in the financial services sector, specifically the banking industry. It is all very well to be critical but rather than calling for heads — this issue can be addressed on another day — I am interested in finding solutions to help the vast majority of the population. I call for economic patriotism.
I welcome the events of yesterday when the Garda entered Anglo Irish Bank, although I would favour taking a stronger line and calling in the Criminal Assets Bureau to deal with the issue. I hope the necessary process of cleaning up the banks has started.
We need to rebuild the economy. Members of the public are demanding that we do not play party politics. By international standards, income tax revenue remains low in Ireland. Increasing the standard rate of income tax to 22% and the top rate to 45% would raise €2 billion per annum. While they may not be sufficient to address our current problems, such increases should be considered.
We should focus on higher incomes and take a tough and fair approach to raising taxes. To this end, the Minister should consider taxing second houses, which I would not describe as second homes.
While I hesitate to interrupt the Deputy, the House is debating an amendment to insert a sunset clause in the Bill. If the debate veers off on tangents, we will not have time to discuss the amendments.
I raise these issues because they are important in the context of the broader debate on the economic crisis. I completely oppose the introduction of a pension levy on public sector workers whom I fully support.
Figures show that 165,000 people from a population of more than 4 million pay more than half of income tax. We must focus on reducing waste and bureaucracy rather than cutting essential services.
The Deputy will have to raise those issues when the appropriate amendments are discussed.
I strongly support the solidarity pact proposed by the ICTU as a way to solve the current crisis.
The ICTU solidarity pact does not require a statutory mechanism. Such a mechanism is not required for re-engagement to take place between the social partners and the Government.
A variation in the levy is required.
On the matters arising from the amendments before us, I emphasise that the obligation to conduct the review is on the Minister for Finance. Words such as "consultation", "consultant" and "subcontract" have been used. Under section 13, the obligation to do the review is imposed on the Minister. Clearly, the review must be done before 30 June 2010.
This is not temporary legislation but emergency legislation. It was never expressed to be temporary legislation and is designed to deal with an economic emergency which is increasingly being acknowledged on all sides of the House.
May we assume the levy will be permanent?
Is it similar to the Offences against the State Act?
It is not temporary legislation and because it is emergency legislation——
May I make an observation?
Yes.
To the best of my knowledge, the Emergency declared in 1939 lasted until 1975.
Yes.
Is a similar timeframe envisaged here?
The Deputy refers to an emergency under the constitutional provision in Article 28. This is not an emergency under the constitutional provision in Article 38.
It is called an emergency.
It is called an emergency because it is an emergency. While the Deputy may have been pleased to see the banks go west last September or the economy go west now, these important decisions must be taken now. This is the reason the legislation is before the House this afternoon and the reason the Government intends to implement it. This legislation must be enacted.
Questions were raised about whether income tax could have been used as an alternative to this legislation. I assure the House that the levy introduced under the income tax code, which was outlined by Deputy Burton, will be supplemented in due course by income tax changes to be announced in the budget later in the year. Deputy Burton insists on suggesting that the purpose of this levy is in some way to fund the banks. That is wholly without foundation.
We have no evidence to the contrary.
Amendment put.
The Committee divided: Tá, 73; Níl, 81.
Tá
- Allen, Bernard.
- Bannon, James.
- Barrett, Seán.
- Behan, Joe.
- Breen, Pat.
- Broughan, Thomas P.
- Bruton, Richard.
- Burke, Ulick.
- Burton, Joan.
- Byrne, Catherine.
- Carey, Joe.
- Clune, Deirdre.
- Connaughton, Paul.
- Coonan, Noel J.
- Costello, Joe.
- Coveney, Simon.
- Crawford, Seymour.
- Creed, Michael.
- Deasy, John.
- Deenihan, Jimmy.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Enright, Olwyn.
- Feighan, Frank.
- Ferris, Martin.
- Flanagan, Charles.
- Flanagan, Terence.
- Hayes, Brian.
- Hayes, Tom.
- Higgins, Michael D.
- Hogan, Phil.
- Howlin, Brendan.
- Kehoe, Paul.
- Lynch, Ciarán.
- Lynch, Kathleen.
- McCormack, Pádraic.
- McEntee, Shane.
- McGinley, Dinny.
- McGrath, Finian.
- McHugh, Joe.
- McManus, Liz.
- Mitchell, Olivia.
- Morgan, Arthur.
- Naughten, Denis.
- Neville, Dan.
- Noonan, Michael.
- Ó Caoláin, Caoimhghín.
- Ó Snodaigh, Aengus.
- O’Donnell, Kieran.
- O’Dowd, Fergus.
- O’Keeffe, Jim.
- O’Mahony, John.
- O’Shea, Brian.
- O’Sullivan, Jan.
- Penrose, Willie.
- Perry, John.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Shatter, Alan.
- Sheahan, Tom.
- Sheehan, P.J.
- Sherlock, Seán.
- Shortall, Róisín.
- Stagg, Emmet.
- Stanton, David.
- Timmins, Billy.
- Tuffy, Joanna.
- Upton, Mary.
- Varadkar, Leo.
- Wall, Jack.
Níl
- Ahern, Dermot.
- Ahern, Michael.
- Ahern, Noel.
- Andrews, Barry.
- Andrews, Chris.
- Aylward, Bobby.
- Blaney, Niall.
- Brady, Áine.
- Brady, Cyprian.
- Brady, Johnny.
- Browne, John.
- Byrne, Thomas.
- Calleary, Dara.
- Carey, Pat.
- Collins, Niall.
- Conlon, Margaret.
- Connick, Seán.
- Coughlan, Mary.
- Cregan, John.
- Cuffe, Ciarán.
- Cullen, Martin.
- Curran, John.
- Dempsey, Noel.
- Devins, Jimmy.
- Dooley, Timmy.
- Fahey, Frank.
- Finneran, Michael.
- Fitzpatrick, Michael.
- Fleming, Seán.
- Flynn, Beverley.
- Gallagher, Pat The Cope.
- Gogarty, Paul.
- Gormley, John.
- Grealish, Noel.
- Hanafin, Mary.
- Harney, Mary.
- Haughey, Seán.
- Healy-Rae, Jackie.
- Hoctor, Máire.
- Kelleher, Billy.
- Kelly, Peter.
- Kenneally, Brendan.
- Kennedy, Michael.
- Kirk, Seamus.
- Kitt, Michael P.
- Kitt, Tom.
- Lenihan, Brian.
- Lenihan, Conor.
- Lowry, Michael.
- McDaid, James.
- McEllistrim, Thomas.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- Mansergh, Martin.
- Martin, Micheál.
- Moloney, John.
- Moynihan, Michael.
- Mulcahy, Michael.
- Nolan, M.J.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- O’Brien, Darragh.
- O’Connor, Charlie.
- O’Flynn, Noel.
- O’Hanlon, Rory.
- O’Keeffe, Batt.
- O’Keeffe, Edward.
- O’Rourke, Mary.
- O’Sullivan, Christy.
- Power, Peter.
- Power, Seán.
- Roche, Dick.
- Ryan, Eamon.
- Sargent, Trevor.
- Scanlon, Eamon.
- Smith, Brendan.
- Treacy, Noel.
- Wallace, Mary.
- White, Mary Alexandra.
- Woods, Michael.
Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Pat Carey and John Cregan.
Amendment declared lost.
SECTION 1.
Amendment No. 2 is consequential on Amendment No. 9. Amendments Nos. 2 and 9 may be discussed together.
I move amendment No. 2:
In page 4, between lines 15 and 16, to insert the following:
""Act of 1970" means the Health Act 1970;".
The purpose of this amendment is to relieve the burden on those who are most adversely affected by the levy. It specifically refers to the possibility that people with medical cards would be excluded from the requirement to pay the levy. The 3% levy on people earning the minimum wage is seen as a significant burden. The issue can be addressed in two ways. In a later amendment, we propose that those earning less than the minimum wage would pay 50%. Alternatively, earnings could be considered on a family basis.
This amendment proposes an exemption for those who hold medical cards. As matters stand, medical card holders are exempt from other levies, such as those for PRSI and health. A principle appears to have been established, therefore, that medical card holders as a category should be exempt from measures such as this. Even in a time of emergency, a balance must be found in the provisions we introduce. The point has been well made that people would regard this levy as achieving a fairer balance if contributions were made across the board. However, a broader programme of fiscal reform has not been put in place and it seems unfair that medical card holders, for example, must contribute even though the State is stepping in to assist them in their medical costs and existing levy obligations. By considering this amendment sympathetically, the Minister would contribute to greater consistency and a more balanced way of identifying families who should be exempted from this burden.
The Labour Party supports these amendments. People who are unfamiliar with the medical card system are always surprised to discover the low level at which the threshold is set. The proposition that medical card holders should be exempted is reasonable and we support it.
On behalf of my colleagues in Sinn Féin, I express my support for these amendments and endorse the remarks made in respect of them.
It would be inappropriate to exempt public servants in receipt of medical cards from this deduction, which applies to a wide base. As Deputies are aware, the purpose of a medical card is to ensure those with medical needs have access to health care without undue financial hardship. The guidelines for determining eligibility allow for the application of discretion over and above the income guidelines and allowances under that scheme can be made in cases of individual hardship. Therefore, the conditions for determining eligibility under the medical card scheme should ensure that payment of this deduction will not result in low-income public servants being denied access to essential health services.
The Minister did not advert to the fact that the existing medical card provisions are not solely designed as a way of deciding on access to medical cards. It is a long-established practice in his Department to confer exemptions from paying levies to medical card holders. There are close parallels between this and other levies in terms of giving exemptions.
Is the Minister willing to consider any form of low-income relief? Deputies on this side of the House are trying to find ways of opening access to relief, even if some sort of compensatory mechanism is required. That is the intention behind the amendment I have tabled to provide for a 50% relief for those earning less than the minimum wage which would be compensated by those who are higher on the scale. Even within the terms of this Bill, I would be willing to contemplate exemptions or reliefs at the bottom which would be compensated by higher payments further up the scale because the latter are the major beneficiaries of public service pensions.
I am not convinced that a levy structure which ranges from 3% at the bottom to 5% at the top on a net basis is anything like commensurate with the alleged benefit of public service pensions. In my view, it does not constitute a fair adjustment in the public service pay bill.
Is the Minister willing to entertain some form of relief at the bottom end or are we wasting our time arguing the toss on this and other amendments? I cannot understand why, within the targeted savings of €1.4 billion, he would refuse to contemplate changes at the bottom which would be compensated by increases at the top. If a proposal such as this commands the support of the House, it would appear to meet the Minister's requirement in terms of telling the outside world that he has delivered savings while demonstrating his sensitivity to the concerns expressed on both sides of the House about the current structure of the levy.
I support the amendments proposed by Fine Gael. Certain categories of people who work in the public service earn very low incomes. For example, lone parents who work part-time in the public service often do so because they have child care commitments. If they work only part-time they can continue to receive part payment in respect of the lone parent's allowance and qualify for certain benefits such as medical cards. It is foolish in the extreme to create a huge amount of unnecessary administrative complexity in respect of the imposition of this levy on people on low incomes, some of whom, if working full-time and in receipt of low income, may, if they have a couple of children, qualify for the family income supplement.
What will be achieved in financial take from people on low incomes will be lost in the plethora of appeals that will ensue from people in that category to retain key benefits such as medical cards. A later amendment on behalf of the Labour Party seeks to provide that income below €18,000 be exempt from this levy in line with the 1% levy. The Minister would be wise to introduce disregards or exemptions for people in the low income category. The cost of administering consequence means tests in respect of medical cards will far outweigh the income collected from the levy. Also, this might result in people being deterred from taking up employment, contrary to the Government's policy for the past 20 years of getting people back into the workplace, even if only part-time or lone parents with child care commitments. The policy has been to encourage such people into employment rather than have them remain dependent on social welfare benefits. In that sense, the levy will create a poverty and employment trap, an issue on which there have been many studies.
The Minister could, in one fell swoop, either by adapting this amendment or the Labour Party amendment, exempt the first €18,000 of income. I support the Fine Gael amendment. For the sake of public administration, the Minister would be wise to consider adapting both amendments to address the burden which this levy places on low paid public servants. The Minister will be aware, from budget submissions from the Society of St. Vincent de Paul during the past five years, that the burden now borne by the working poor has become the heaviest burden. Taking into account housing benefit, a person in low paid employment, whether in the private or public sector, is entitled to far less than a person in receipt of social welfare payments and additional benefits such as rent supplement. The Minister will turn what is already a disincentive to people to remain at work, even if only on a part-time basis, into a poverty, income and employment trap.
I appeal to the Minister to accept the amendment or, alternatively, prior to Report Stage to consult with his officials on the Labour Party amendment in regard to exemptions for people on incomes below €18,000. The money required could be taken from those on higher incomes in order to ensure fairness in respect of this levy.
I support the amendment. It is a disgrace that we are focussing on poor sections of our community. The medical card has been always considered to be the standard by which we judge a person's needs. A person employed in the public service who qualifies for a medical card on income and, perhaps, medical grounds is being forced to pay this levy.
Another group which the Minister and his officials might consider is retained firemen, voluntary part-time firemen who work for local fire brigades. The Minister might not understand their situation as Dublin is privileged to have full-time fire officers. In country towns, fire brigades are manned by volunteers who receive an annual retainer in respect of their work. These people, of which there are 3,000 in the country, are known as retained firemen. Many of them are happy to remain involved in a semi-voluntary capacity and to receive their annual retainer. However, when they retire, they receive no pension. These people are not demanding a pension but are asking to be exempted from putting money into a pension fund. They receive only one lump sum when they retire. The case they make is a fair one. It is wrong that people operating in a semi-voluntary capacity, who are paid a retainer fee plus overtime payments if out all night fire-fighting and so on, should have to pay this levy. I would appreciate if the Minister would request his officials to examine this situation.
I, too, support the amendment. Does the Minister have any idea of the cost, in terms of numbers, of accepting this proposal? Will he explain what adjustments would be required to the other bands to compensate for the loss of revenue?
The Minister is asking people who qualify for family income supplement to make a contribution of 3%. Are these people to return this supplement by way of pension levy? Perhaps the Minister will provide us with an indication of the cost of this proposal. As Deputy Bruton correctly stated, the imposition of an extra 0.5% on a person in receipt of €100,000 extra gross will not break the State. We are not asking that the Minister reduce the amount he hopes to collect but to adjust the bands to compensate for the loss of revenue down the line. It appears stupid that people who qualify for family income supplement and in receipt of €15,000 will be required to pay €450 gross by way of pension levy.
Deputies opposite insist on characterising this measure as a tax and are debating it in taxation terms. The measure is described in the legislation as a contribution, against which tax relief is available. I do not know of any form of taxation against which tax relief can be claimed other than, for example, local rates and elements of corporation tax.
In regard to the cost of exempting persons in possession of a medical card, from our initial inquiries there are so few public servants in possession of medical cards, in all probability, the cost involved would be marginal. This bears out the point made in my initial reply that the bulk of medical card holders in the public service are people in receipt of a discretionary medical card rather than a medical card under income guidelines.
On the wider issue, there is no person in the public service who is paid less than the minimum wage. Deputy Burton was careful in this regard and used the phrase "low earner". Deputy Bruton suggested that people below the minimum wage should be exempt. No public servant is paid less than the minimum wage. If a person is earning less than the annual amount that a full-time worker would earn on the minimum wage, it is because the person is working part-time in the public service.
Regarding Deputy O'Keeffe's query concerning firefighters, I will have the issue examined. A discretion is conferred on the Minister by section 8, which deals with exceptional circumstances. I am not saying I will accede to the matter, but I will have it examined.
That is a good start. I thank the Minister.
Deputy O'Keeffe is correct on that matter. The provision for part-time firefighters was introduced during my time as a Minister of State in the Department of Social Welfare. The flat rate or average was arrived at to ensure that the State could almost have the benefit of a full-time service, but with very little input. It was believed that it was good value from the point of view of the State.
The case which can be made in those circumstances is that a person who depends entirely on the firefighters payment must work locally to be available for fire services. The new directive from the Minister on 4 December overrides that stipulation. The person must now be available to work in other areas and regions. As the Minister is aware, it is not easy to obtain work in other areas or in the local area. The position should be reviewed, because the local authorities and the public have received very good value for money. There was sufficient remuneration from the Department of Social and Family Affairs to encourage those dedicated fire service persons to continue to provide fire services.
I am pleased the Minister recognises that this proposal is of marginal cost. Surely, the corollary is that he would be willing to accept the amendment because only a very small number of people are affected and these are people who are deemed by the chief executive of the HSE to have significant financial burdens to meet. Let us not forget that the test for a medical card is financial. If someone has an illness, that person must produce the costs of medication and treatment. Such a person is awarded a medical card on the basis of such costs, not because he or she falls into a certain category of illness. It is because the cost of supporting oneself and treating the illness is such that he or she is not in a position to bear the burden. Let us leave aside the minimum wage; we will come to that presently. The Minister has convinced me that this is not expensive. It is reasonable and fair to people in this category which, thankfully, is small. I hope the Minister will accept the amendment.
Amendment put.
The Committee divided: Tá, 72; Níl, 82.
Tá
- Allen, Bernard.
- Bannon, James.
- Barrett, Seán.
- Behan, Joe.
- Breen, Pat.
- Broughan, Thomas P.
- Bruton, Richard.
- Burke, Ulick.
- Burton, Joan.
- Byrne, Catherine.
- Carey, Joe.
- Clune, Deirdre.
- Connaughton, Paul.
- Coonan, Noel J.
- Costello, Joe.
- Coveney, Simon.
- Crawford, Seymour.
- Creed, Michael.
- D’Arcy, Michael.
- Deasy, John.
- Deenihan, Jimmy.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Enright, Olwyn.
- Feighan, Frank.
- Ferris, Martin.
- Flanagan, Charles.
- Flanagan, Terence.
- Hayes, Brian.
- Hayes, Tom.
- Higgins, Michael D.
- Hogan, Phil.
- Howlin, Brendan.
- Kehoe, Paul.
- Lynch, Ciarán.
- Lynch, Kathleen.
- McCormack, Pádraic.
- McEntee, Shane.
- McGinley, Dinny.
- McGrath, Finian.
- McHugh, Joe.
- McManus, Liz.
- Mitchell, Olivia.
- Morgan, Arthur.
- Naughten, Denis.
- Neville, Dan.
- Noonan, Michael.
- Ó Caoláin, Caoimhghín.
- Ó Snodaigh, Aengus.
- O’Donnell, Kieran.
- O’Dowd, Fergus.
- O’Keeffe, Jim.
- O’Mahony, John.
- O’Shea, Brian.
- O’Sullivan, Jan.
- Penrose, Willie.
- Perry, John.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Shatter, Alan.
- Sheahan, Tom.
- Sheehan, P. J.
- Sherlock, Seán.
- Shortall, Róisín.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Upton, Mary.
- Wall, Jack.
Níl
- Ahern, Dermot.
- Ahern, Michael.
- Ahern, Noel.
- Andrews, Barry.
- Andrews, Chris.
- Ardagh, Seán.
- Aylward, Bobby.
- Blaney, Niall.
- Brady, Áine.
- Brady, Cyprian.
- Brady, Johnny.
- Browne, John.
- Byrne, Thomas.
- Calleary, Dara.
- Carey, Pat.
- Collins, Niall.
- Conlon, Margaret.
- Connick, Seán.
- Coughlan, Mary.
- Cregan, John.
- Cuffe, Ciarán.
- Cullen, Martin.
- Curran, John.
- Dempsey, Noel.
- Devins, Jimmy.
- Dooley, Timmy.
- Fahey, Frank.
- Finneran, Michael.
- Fitzpatrick, Michael.
- Fleming, Seán.
- Flynn, Beverley.
- Gallagher, Pat The Cope.
- Gogarty, Paul.
- Gormley, John.
- Grealish, Noel.
- Hanafin, Mary.
- Harney, Mary.
- Haughey, Seán.
- Healy-Rae, Jackie.
- Hoctor, Máire.
- Kelleher, Billy.
- Kelly, Peter.
- Kenneally, Brendan.
- Kennedy, Michael.
- Kirk, Seamus.
- Kitt, Michael P.
- Kitt, Tom.
- Lenihan, Brian.
- Lenihan, Conor.
- Lowry, Michael.
- McDaid, James.
- McEllistrim, Thomas.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- Mansergh, Martin.
- Martin, Micheál.
- Moloney, John.
- Moynihan, Michael.
- Mulcahy, Michael.
- Nolan, M. J.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- O’Brien, Darragh.
- O’Connor, Charlie.
- O’Flynn, Noel.
- O’Hanlon, Rory.
- O’Keeffe, Batt.
- O’Keeffe, Edward.
- O’Rourke, Mary.
- O’Sullivan, Christy.
- Power, Peter.
- Power, Seán.
- Roche, Dick.
- Ryan, Eamon.
- Sargent, Trevor.
- Scanlon, Eamon.
- Smith, Brendan.
- Treacy, Noel.
- Wallace, Mary.
- White, Mary Alexandra.
- Woods, Michael.
Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Pat Carey and John Cregan.
Amendment declared lost.
Amendment No. 3 is ruled out of order because it is consequential on amendment No. 12 which is not relevant to the provisions of the Bill. Therefore, we move to amendment No. 4 in the name of Deputy Arthur Morgan.
Amendment No. 3 not moved.
I move amendment No. 4:
In page 4, line 18, after "Finance" to insert "on behalf of the Oireachtas".
I am disappointed that amendment No. 3 was disallowed because bank executives and chief executives of State bodies need to be reined in and the amendment would have gone some way toward achieving that.
The purpose of amendment No. 4 is to try to focus the Minister for Finance somewhat on the Oireachtas. In January, when we nationalised Anglo Irish Bank, the Minister had information which he did not share with us. That refers to the PricewaterhouseCoopers report. He also let us down badly in respect of the terms and conditions of the bank guarantee scheme soon after many people on this side of the House had voted with the Government on the bail out scheme. We did so in good faith that the Minister would use terms and conditions as a useful mechanism to rein in banks. Unfortunately, we were let down badly in that instance too.
Earlier, we highlighted several measures proposed in the budget in October as serious errors and the Minister had to change those very soon thereafter. It is a pity the Minister would not listen to speakers on this side of the House because we would have saved him a great deal of trouble on each and all of those occasions. There is a benefit in listening to us but the Minister is obviously not well disposed to doing so. There is a propensity on this side of the House to be constructive and helpful. That opportunity is not being taken up by the Minister, as was exemplified when he refused to accept the two previous amendments, which were very reasonable and rational. The Minister knows that big, medium and small businesses across this land are struggling and facing serious difficulties. Jobs are in danger as a result.
I am concerned that this measure will damage the trade union movement. The leaders of that movement want to be reasonable and rational. I am careful not to say anything that might damage the movement or put its leaders under any more pressure. The way the Minister handled the talks with the trade union movement over recent weeks and months left a lot to be desired. It is obvious that industrial unrest, which would have a further negative impact across this land and beyond, is almost inevitable. Nobody is asking the Minister to reduce the amount of revenue he wants the Exchequer to get from this scheme. We are all on the same side in that regard. However, the Government is going after families with small and medium incomes that cannot afford the levy, or wage cut, that is to be applied, which augurs serious times for us all.
I echo and support the comments made by Deputy Bruton a few moments ago. We are asking the Minister to take a certain amount of money off the bottom end of this levy scheme. If he decides to recoup that money substantially further up the scale, where people can afford it, we will have no problem with that. I do not understand why the Minister is rejecting that notion, which is the essence of this amendment. I do not expect the Minister to accept it, given his disposition on this project to date.
It is not clear what Deputy Morgan has in mind in proposing this amendment. While he has made clear what is on his mind, in general, it is difficult to understand the intention of this amendment, which proposes to change the definition of "Minister" in this Bill from "Minister for Finance" to "Minister for Finance on behalf of the Oireachtas". That would be a departure from the usual definition of "Minister". It would call into question the authority and powers conferred on the Minister for Finance under this legislation. It would render the operation of the legislation somewhat convoluted and impractical. Each Minister is a member of the Executive. Ministers are not accountable to the Oireachtas — they are accountable to Dáil Éireann. They are appointed by Dáil Éireann. That is the position when it comes to the accountability of Ministers.
Under our strict constitutional practice, Ministers are not accountable to Seanad Éireann, although they attend Adjournment debates in that House as a matter of courtesy. I am responsible to this Chamber, of course. If he wishes to use strict constitutional parlance, Deputy Morgan should be proposing to change the definition of "Minister" in this Bill to "Minister for Finance on behalf of Dáil Éireann". That would be unprecedented, however, because Dáil Éireann appoints Ministers in the first instance. While the Deputy is free to make his own judgments in respect of the trade union movement, I assure him that no member of that movement has suggested that my conduct during negotiations with the unions left a lot to be desired.
As I said, I tabled this amendment to try to get the Minister to focus his mind on this House. I regret it if I did not make that point sufficiently clear. That is the purpose of this amendment. I do not intend to spend much more time dealing with it. I wanted to make the point that the Minister needs to be encouraged to face this House now and again. He needs to listen carefully to what Deputies say. More importantly, he should take on board what we say occasionally.
Amendment, by leave, withdrawn.
I move amendment No. 4a:
In page 4, line 22, after "Oireachtas" to insert the following:
"or of a local authority (within the meaning of the Local Government Act 2001)".
The purpose of this amendment is to provide explicitly for local authority members to be included in the definition of "public servant" in section 1 of the Bill. While it can be argued that they are covered in the definition as it stands, some doubt is cast by the fact that they are referred to as "members" in the Local Government Act 2001. It is not clear if a member of a local authority holds an office or position. It is prudent, therefore, to specifically include members of local authorities in the definition of "public servant".
Amendment agreed to.
I move amendment No. 5:
In page 4, line 30, to delete "as amended by" and substitute "inserted by".
This is a technical amendment. I am advised that Chapter IVC of Part V of the Defence Act 1954 was inserted by the Defence (Amendment) Act 2007, rather than amended by it. The Bill states that the definition of "public servant" does not include "the President, a member of the judiciary or a military judge". There is a profound case for asking why the Government decided to exclude the President, the Judiciary and military judges from the levy. I do not want to hear senior counsel arguments from the learned Minister for Finance to explain why judges, the President and military judges should be exempt from a measure that will affect hospital cleaners and men who work on shovels for local authorities. It is unfair that people who work hard but are paid low incomes will have to pay the levy, while an exemption is afforded to those who are paid the most and have the most support services. They have an elegant way of life and an elegant support system. They are given cars, for example.
If the Minister, who is a senior counsel, tells me that judges will take the State to court if they are required to pay this levy, I will respond by saying "bring it on". If the judges object to participating in the scheme, they are welcome to take a case to court. They will not be able to argue that the levy will reduce their income unless, contrary to what the Minister has said, it is actually an income-reducing device. As this is a charge, it should be paid by those who willingly pay all their taxes, pay their income taxes and pay every other charge that is levied on them. It is extraordinary that the Minister has decided to exempt some of the highest-paid people in the land from this charge. He might remind the House that some of the people in question have offered wage cuts voluntarily, but I would argue that voluntary wage cuts are neither here nor there, to be honest. If the Minister is to collect the kind of money he is interested in collecting and to nurture a sense of social solidarity, I suggest that he should include the President, the Judiciary and our military court judges in this scheme. I am confident that they will be proud to pay the charge being paid by their fellow Irish citizens. They are not like tax exiles who run away from paying tax. The Minister needs to explain why he is taking such a cowardly way out. Why has he decided to exclude high-flying people, who enjoy high-flying pay and conditions, from a levy from which county council workers and ward orderlies will not be exempt?
Deputy Burton will be aware that I sit in this House as a Deputy for the same constituency as her. I am not here in any professional capacity. The Government takes legal advice from the Office of the Attorney General. The advice it has received in this instance is that it would not be in accordance with the Constitution to apply this measure to the President, to members of the Judiciary or to military judges. When the members of the Government decided, following last autumn's budget, to make a voluntary gift of 10% of their salaries to the State, the President promptly announced that she would follow suit.
The advice I have received from the Attorney General on the general position under this legislation is that Article 35.5 of the Constitution prevents the Government from reducing the remuneration of a judge during his or her continuance in office. There is a similar provision, in an earlier section of the Constitution, in respect of the President. While it is not expressed in the same terms, it is the same in substance. There is a constitutional bar on doing what Deputy Burton has asked me to do. As she is perfectly well aware, I have two options in such circumstances. One is that the judges would consider the option of a voluntary gift. I assume that is a matter they would not entertain until these Houses complete their deliberation on this Bill. The other option is the question of a referendum on the subject.
Does the Minister accept that the pension levy is a reduction in salary for all other public sector employees?
That is the logical conclusion.
Yes. If it is not the logical conclusion and it is not a reduction in remuneration for the ordinary public sector worker on modest income, then I cannot see how it would be contrary to the Constitution that members of the Judiciary pay the pension levy. The Minister needs to clarify this point. Does he now admit that the pension levy is a reduction in remuneration?
I support Deputy Burton's contribution on this issue. Unfortunately, I did not get a chance to speak on Second Stage. Regrettably, that seems to be a recurring problem since I changed my status. In future, I hope to get further opportunities to give views on matters that come before the House.
I was shocked that the Government, while referring to a fair package of proposals, would state that some of the highest paid public servants in the land should be excused from paying this contribution to their own pensions, as has already been mentioned by the Minister and the Taoiseach. Do judges currently make any contribution to their pensions? Is this the reason it is not being included? It might be the first time those judges make a contribution from their salary towards their pension. If they already make a contribution, I cannot see the difference in making an additional contribution. It seems to me to be the same as the PAYE set up.
Do judges actually pay tax? I presume they do. On "The News at One" last week, a gentleman with legal expertise made the point that, in the past, a judge's widow brought a case to court claiming that her husband should never have been paying tax. The judge in the court threw the case out, which was the reasonable thing to do. We are in a great emergency and we all want to see social solidarity, so it is unbelievable that judges would claim that they should not be subject to the same contributions that lower paid public servants make. It is an indication of the disconnect between some Government decisions and the real needs of the ordinary people of this country. I appeal to the Minister to think again on this matter.
I am flabbergasted by this. Can we imagine a scene where the clerk of the court sees his wage deducted, while the judge on the bench does not make any contribution? The section refers to making a new deduction from the remuneration of public servants who are members of a public service pension scheme. Judges are either in a public service pension scheme, or they are not. If they are in a public service pension scheme, then they should pay like the rest of us. They should be included in this Bill, and if somebody wants to take a case, then let us await the result. However, it does not make sense that the garda standing in the court must pay the levy, yet the judge does not have to pay anything. It is certainly not a great example to others.
The standard position on the specific queries is that judges can pay a pension contribution if they opt into the spouses' and children's pension scheme. The same constitutional provision applies to that particular scheme. The constitutional position is clear and the Government has been advised by the Attorney General on this issue. It is not a matter the Government has any power to vary. The only basis upon which it could be varied would be by a referendum of the people. The constitutional provision is very clear, as it is remuneration that cannot be reduced. The view of the Attorney General is that the contribution is a direct deduction from the remuneration.
So it is PAYE.
No, it is a charge.
Unlike tax, the contribution does not apply in general to citizens, but only to some citizens. Therefore, it is quite different from the tax regime. Deputy Behan referred to a decision involving the widow of a former Supreme Court judge, who tried to argue that the imposition of increased tax on the salary had been unconstitutional. The view taken by the court was that taxation on a judicial salary is in accordance with the Constitution.
At the time of his departure from our party, Deputy Behan expressed his admiration of the views of Mr. De Valera and Mr. Lemass. Of course, Mr. De Valera originated this particular provision in the Constitution of 1937, and he lived to regret it himself somewhat. He asked the judges at one stage to engage in pay restraint, but they refused. His only remedy was to prevent a pay increase for many years.
Is it the case that judges can opt in to this if they want to be part of a spouses' and children's scheme? If they do not want to have such a pension element, is it the case that they do not currently make any contribution to their own pension?
That is the case.
Perhaps this might be an opportunity to appeal to their patriotic duty. If they are acquiring very generous pensions as a result of their public service, having been paid very generous salaries, then they might consider opting into paying pension contributions. Many public servants throughout this country, who are going to feel the pain of this levy, will certainly look askance at the news we have received from the Minister today.
Will the Minister make available the advice of the Attorney General on this matter? I have been advised that it would be possible to include a clause in this Bill which would allow for a voluntary opting in by the Judiciary to this arrangement, and by the President as well. I have no doubt that the President would opt in to such a scheme, and I believe that the majority of the Judiciary would also opt in to such a scheme. It is astonishing that the Minister has not been more innovative in providing for this. High Court judges earn well over €200,000. They have tipstaff and allowances for a car, and their remuneration package is very attractive. It may not be as much as they earned as leading senior counsels, but by the standards of some of the people who will pay this levy, their earnings are extraordinarily high.
All this proves to me that the view of the Attorney General is essentially that this levy has nothing to do with pensions, but is rather a charge on the income of one class of persons, namely, public servants. As such, it is a substitute for taxation. Were the Minister to raise the top or bottom levels of PAYE, I understand that the President and the judges would be automatically subject to those increased rates of tax.
There is such a thing as a moral authority in any country. I cannot understand how the Government can do stuff like this while talking to us about a national emergency. Nothing in law prevents the Minister coming forward by Report Stage tonight with a voluntary arrangement, an amendment to this Bill to make specific provision to allow the President, Judiciary and military court judges to opt in. That is my legal advice. They are all very learned legal people and if they have a problem with that, there are plenty of lawyers to take the case.
While there may be plenty of lawyers to take cases, as we all know, I have to follow the advice of the Attorney General. I have been advised that it would be improper for me to comment on the position of the Judiciary until the legislation is enacted. The legislation has not been enacted. It is subject to the legitimate debate and argument of the House. If it is a matter of contention between the parties it would be improper of me to request that the judges endorse Government policy.
Amendment put and declared lost.
I move amendment No. 6:
In page 6, line 10, after "servant" to insert "and excludes non-pensionable payments".
This amendment raises the issue of the categories of people and the types of payment included in this. The amendment sets out that the remuneration would exclude non-pensionable payments. We were just discussing retained firefighters but there are other categories, such as people providing home help services, who have no pension scheme. There are significant numbers of people working for the public service, on a contractual basis or otherwise, who are not covered by a pension scheme. The issue is what elements one includes.
The other issue that arises is whether the Minister intends to include overtime payments, even though pension entitlement would not relate to them. Many people are on very low incomes, which they supplement by working unsociable hours. Many of the submissions we see reflect the fact that people have undertaken to work unsociable hours for which they get no pension cover and that they are being treated in the same way as others who, perhaps, are on the same pay but have that pay entirely pension-covered. There is a sense of injustice because the only reason some people are getting into certain categories is that they work very unsociable hours or take on work that otherwise would not be done. If this is to be confined, excepting judges, to people who have pensions, if in public service, is it not fair to exclude people such as home helps and certain categories of payment if they do not contribute to a person's pension rights?
I support the amendment. The anomalies emerging from this legislation on Second Stage and this afternoon are astonishing. Almost every time the Minister stands up to speak he confirms that this Government is intent on pursuing those low-income families and excluding the higher-income families at every stage. That is sad.
Many low-paid people in the public service are in for the shock of their lives when they find out they are subject to this levy. I want to talk in particular about those who work as outdoor staff for the county councils and the many people working in the Houses here who are not civil servants, but might be called industrial civil servants. They pay full PRSI for a contributory, old age pension. They also pay a reduced rate of superannuation on their gross incomes less twice the old age pension to give them a small top-up pension when they retire, based on 40 years service. My father worked for CIE, and many of us who have families or parents who worked for bodies such as the county councils are very familiar with this system of a small additional pension. One pays PRSI, one's main income on retirement is the old age pension and one receives a very small, but very welcome, additional pension through the top-up from the extra superannuation one paid on one's gross income less twice the old age pension. That is broadly how it is calculated.
From the Minister's interpretation such people will pay the levy on their entire gross incomes, even though if they earn, say, €700 per week gross, and twice the old age pension is €400, they pay their superannuation at a reduced rate based on €700 minus €400, which is €300. They will pay the levy on the whole amount. That will bear disproportionately on them. They may have overtime and other special payments, and there are thousands of special payments in the public service, as the Minister knows, particularly in the health and county council areas. Most of these people do not know yet that they will be subject to the levy.
Deputy Bruton mentioned home helps. The Minister probably knows there are two categories of home helps: those directly employed by the HSE and those who work as ward assistants. They are very often in the same category, although they are on a higher hourly rate. According to the Minister, they will be subject to the levy if paid directly by the HSE. However, if they are paid by an organisation which receives a grant-in-aid from the HSE they will not be subject to the levy. The room for chaos regarding very low paid people is profound. We are offering the Minister a variety of ways out of this because administering this will be costly, by the time one sorts out the different entitlements. There is also a basic unfairness.
I will draw the Garda situation to the Minister's attention. This applies to a lesser extent to the Defence Forces. Most gardaí have to serve only 30 years to get a full pension. Therefore at a certain stage they are contributed out, if they stay for 40 years. For many of those who have between 30 and 40 years service and might be at sergeant or inspector level, once this levy comes in on all their overtime earnings, the Minister is creating an enormous financial incentive for them to retire early, take their lump sum and get some other part-time or full-time employment. I see the Minister nodding his head. If he tells me these people will not be subject to the levy that is different. In the Garda at the level of sergeant and inspector there are probably approximately 1,900 such members. The Minister is clearly charging them for a pension benefit which will give them no extra entitlements.
The same is true of people serving in the Defence Forces. We still have not clarified whether all of the various allowances paid to members of the Defence Forces and the Garda at different times will be subject to the pension levy. I strongly suggest that not ironing out these anomalies is deeply unfair.
There will be consternation in the ranks of the lower paid, particularly in local authorities and in the old health board systems, hospitals, etc., when they find out how this will operate. It is the 11th hour but I plead with the Minister to sort it out.
I am still not convinced how in the HSE, or the old health board structures where there is not a unified salaries computer system, the Minister will implement the complications inherent in the levy as proposed. When will it be implemented because it will be an administrative nightmare for IT sections?
It will be implemented from 1 March on income accrued after that date.
On the amendment tabled by Deputy Bruton, section 2(1) is the crucial section in the application of the Act. It applies to a public servant who is a member of a public service pension scheme, is entitled to a benefit under such a scheme, or receives a payment in lieu of membership in such a scheme. As I understand the position, home helps are not in such schemes but I am subject to correction on that.
Are they caught under section 10?
I do not have to rely on section 10 — that is the crucial point — to exempt such persons because if they are not members of a pension scheme in the first place, section 2——
Section 10 deals with the charge to people providing a service.
I am sorry, I was thinking of the exemption. I was thinking of a different section.
It is not clear.
Section 10, "Reduction of other payments", relates to professional services. It gives power to the Minister to make regulations. It is a precondition of the operation of section 10. The section does not relate to the contribution. It is a different section altogether which provides the foundation for the Government implementing the decision of the 8% reduction in professional fees.
I do not want to——
Section 8 is the exemption section. I am sorry for confusing the matter.
Sections 9 and 10 extend it to services provided to the health authority and other services. Will most of those persons, if they are low-paid workers such as home helps, be caught in the same terms as——
No. The precondition for the operation of section 9 is a regulation of the relevant Minister, the Minister for Health and Children, with my consent and the intention is not to apply through section 9 the operation of this contribution system to persons who are not entitled to a pension arrangement. The fundamental point is that under section 2 the status of the person must be such that he or she is entitled to a pension and section 9 will be implemented in that context.
Does the Minister wish to comment on, for instance, overtime payments and payments that do not make up the pension?
They are captured. That is the real point of difference between us, Deputy Bruton is quite correct. The legislation is clear on the question of the home helps and persons who are not entitled to a pension. It is also clear on the question of non-pensionable payments, which his amendment would take outside the scope of the levy, and which include overtime and allowances.
Such payments are a significant element of the public service pay bill. They simply cannot be ignored given the necessity to reduce the public service pay costs by some €1.35 billion in a full year. If we were to remove non-pensionable pay from the deduction we would have to increase the deduction from pensionable elements proportionately.
Could the Minister clarify the position for persons such as gardaí and members of the Defence Forces who must serve a lesser number of years, 30 years, to acquire a pension? Somebody who is a member of the Garda for, say, 35 years stops paying his or her pension contribution after 30 years and cannot accumulate any extra pension benefits. Will such persons, who no doubt are definitely in receipt of a public service pension entitlement but who have served sufficient time, be subject to the full levy on all of their earnings and overtime even though, as I stated, they have contributed the maximum amount contributable to their pension?
They will pay the contribution. As I outlined yesterday evening in replying to the Second Stage debate, the cost of funding that pension is way in excess of any contribution that is made towards the pension by more recent members who have joined the force. The purpose of this levy is to make a contribution towards the eventual pension which is paid. Of course, the member is not in receipt of the pension if he or she is in service.
Amendment, by leave, withdrawn.
Section 1, as amended, agreed to.
NEW SECTIONS.
I move amendment No. 7:
In page 6, before section 2, to insert the following new section:
"2.—The Minister shall lay before each House of the Oireachtas the annual cost on an actuarial basis of the total pension liability in each Government Department and specify the actuarial costs as a percentage of pay in each major category and grade within each department.".
It is important that the context of this payment is widely understood. There has been a great lack of understanding or knowledge of the true cost of public service pensions and it would be useful in this context to have this information clearly stated.
Indeed, Departments ought to be more cognisant of the pension implications of decisions when they take them. It is a fair criticism of Government accounts generally that they fail to take into account the pension obligations that they incur, just as they fail to take into account the true cost of capital which they use. We should, over time, move towards a system of budgeting that shows those true costs, which the taxpayer must furnish.
Showing the actuarial costs of different categories of employee would be important also because the pension levy we are considering is probably not fairly graded in accord with the benefits that accrue from public service pensions. If this was being reviewed in a year or two when there still were emergency conditions, people would expect that it would be graded more clearly in accordance with people's benefit from pension and ability to pay.
It would be useful to have this information laid before the House, perhaps with the Minister's review and perhaps even in the Estimate volumes or the annual reports Departments provide to the Oireachtas, so that we could have a clearer picture of what is going on.
I support this amendment. I have always felt it is a matter that should be inserted into and debated in conjunction with the Estimates for each Department. It is an actual cost.
It could lead to greater efficiency if Departments realise the cost of the pension liability. There are many areas where savings could be made if Departments knew that they were responsible and the costs attaching to the pension liabilities were clear.
At long last, this is an amendment that the Minister could find his way to accept. It will not damage in any way the amounts of money that will be collected. It is an attempt, once again, by this side of the House to be constructive and to help in the overall presentation of the costs of each Department year by year. It can do nothing but good in making people aware of the reality and perhaps in some way lead to savings or make people conscious of the need to make savings.
I agree with Deputies Bruton and Barrett. This is an excellent suggestion. In fact, my Department is in the process of considering improvements to the presentation of the financial statements of Departments and offices. This raises complex issues and will require careful consideration. On pensions, however, the Department and I have decided to include an estimate of the accrued pension liability for the total public service in the annual finance accounts. This will provide a view of the total accrued liabilities in respect of all of the public service. This will be a major addition to the information available on the cost of public service pensions.
On specifying the actuarial cost of each grade in every Department, however, there are hundreds of grades in the Civil Service and six major sets of pension benefits. It would not be appropriate at this stage to undertake to carry out the thousands of complex and separate calculations that would be needed to specify the pension cost at each grade. The actuarial cost of pensions for specimen grades of the public service is calculated as required, for example, as part of the recent benchmarking body exercise. I would be open, in addition to providing for the total accrued liabilities as part of the financial accounts, to give some information on the specimen grades.
I assume the Minister is not accepting the amendment but that he is willing to commit to it.
I accept it in spirit.
I welcome the Minister's commitment, which will give a greater understanding, but I would like each unit or Department broken down in order that we can see the picture.
We must build on the initial exercise of the total figure to look at specimens and in time break them up into general categories. I am not totally satisfied that doing this according to Department would be a good idea but one could take a substantial body of personnel in the public service, like the gardaí, the Defence Forces or teachers, and see if a separate computation could be made.
Amendment, by leave, withdrawn.
I move amendment No. 8:
In page 6, before section 2, to insert the following new section:
2.—The payment of any pension levy which accrues as a consequence of this Act shall not be included in any financial assessment of means for the purposes of eligibility for any state service.
This arose in our earlier discussion of people who pay the pension levy receiving family income supplement. It should be treated as a deduction from their income so those on low incomes would receive a supplement of 60 cent in the euro under the family income supplement scheme. If it is clear that means tests will be adapted, it would provide some relief and would not constitute a significant cost.
Many schemes are means tested on a net income basis, such as medical cards, family income supplement and rent supplement. It would be wholly unfair if the other Acts under which means tests are applied did not have included within them the deduction of the pension payment. Otherwise people who work in the public service would be treated unfairly in respect of means tested provisions compared to those in the private sector. These are designed to help families with specific needs, be they medical or because they are on low incomes or have family commitments. I hope the Minister accepts this or will arrange for the suitable amendment of other Acts that provide for means tests to take this into account.
I thank the Deputy for raising the issue but, as I understand it, the Bill already provides for what the amendment seeks to achieve. The Bill provides for an amendment to the Taxes Consolidation Act 1997 whereby income chargeable under Schedule E will be reduced by the amount of the deduction. It also provides, crucially, for amendments to regulation 41 of Statutory Instrument No. 559 of 2001, which is the crucial statutory instrument in the area of the family income supplement and the definition of an allowable contribution under that regulation to include the new deduction within its scope.
Where is that?
Section 15 deals with the issue, amending the Income Tax Act and the Income Tax (Employments) (Consolidated) Regulations 2001, which has the effect of including the contribution for social welfare purposes, which means the deduction will be disregarded in full before means from earnings are assessed for welfare purposes. I agree with the Deputy that it would not have been transparently obvious from the face of section 15 that was the case and I understand why he tabled the amendment. However, the effects of section 15(1) and (2) are that the deduction will be disregard in full before means from earnings are assessed for welfare purposes, which will alleviate the effect of the deduction for low income families and receipts of a range of welfare payments or where the spouse or partner is in receipt of them.
Will it apply equally to means tests under the various Acts?
Yes. These core provisions in the 1997 Act and the Income Tax (Employments) (Consolidated) Regulations 2001 are the reference points for such schemes.
Amendment, by leave, withdrawn.
Amendments Nos. 9 and 10 not moved.
Amendment No. 50 is consequential on amendments Nos. 11 and 15a, where amendment No. 15a is a technical amendment to amendment No. 14 and amendment No. 19 is related to amendment No. 14. We will take amendments Nos. 11, 14, 15a, 19 and 50 together by agreement.
SECTION 2.
I move amendment No. 11:
In page 6, between lines 25 and 26, to insert the following subsection:
"(3) No deduction shall be made under this section in respect of a person whose remuneration is below €18,000 per year.".
This amendment will provide an exemption for those earning less than €18,000, the figure the Minister used in the other levy he introduced this year. On Committee Stage of the Finance Bill, he decided the levy, which was originally set at a flat rate, with everyone paying, should have an exemption up to a threshold of €18,304. The tenor of the discussion suggests the Minister's more enlightened view when we discussed this at that time does not apply now, but I would like to hear his response.
The purpose of amendment No. 11 is clearly to exempt those on the minimum wage. Surely that is a reasonable ambition for any Deputy in the House? I support the amendment.
I thank my colleagues for moving this amendment. This will put the Bill in line with the 1% income tax levy, where the Minister exempted people with an income of less than €18,304. That made sense on administrative grounds alone. The Minister should do the same here. The administrative burden will be significant anyway and there will be a huge number of anomalies.
I welcome what the Minister said earlier, that he will try to address some of the issues for very low paid workers. He should bear in mind, however, that where people work directly for a VEC and particularly the HSE, there are complex employment grades and conditions and people who work part-time. As the Minister said, no public body pays less than the minimum wage. However, one finds that workers employed by agencies who are specifically mentioned as being subject to the Bill will inevitably end up being caught, unless the Minister gives an undertaking to be benign in drawing up the regulations to exclude such persons.
In the lists of exempted bodies at the front and back of the Bill, which include the VECs and the HSE, one State-owned body is conspicuous by its absence — Anglo Irish Bank. We own it and are paying through the nose for it, but it is neither in nor out. Given that it is not mentioned, its employees, including its highly paid top people, are out.
I will have to get the Deputy to assist the commissioner in his investigations.
From the Minister's face I know that this comes as an awful shock and that he would like nothing more than to apply the levy at the top rate to persons in the State owned Anglo Irish Bank. To be honest, it would be a small piece of poetic justice. We know that in a former life the Minister was a skilled senior counsel. I rest my case and wait for him to bring forward an appropriate amendment.
Before the Minister replies, amendments Nos. 14, 15a, 19 and 50 will be discussed with this amendment.
There is an over-riding need to reduce public expenditure, of which public service pay is a significant element. That is why we are seeking to secure the maximum savings possible with the pension-related deduction. The principle behind it is that the deduction will apply to all persons who are members of public service pension schemes and entitled to benefits under such schemes or receive payments in lieu of membership of such schemes. The deduction is a recognition of the preferential pension terms all public servants enjoy, compared to the generality of their private sector counterparts, both in terms of security and the terms available. I have tried to the greatest extent possible, consistent with the need to reduce the pay bill significantly, to ameliorate the effects on lower paid public servants through a banding approach. Public servants in this pay category are part-time employees.
I am addressing amendment No. 14, in particular. If the House goes full term on this occasion, to 2012, I might begin to get my head around how these amendments are measured or deemed to be in or out. Amendment No. 12 has been ruled out of order, although it appears that it would be of substantial benefit rather than a cost to the State. In it I was trying to deal with regulations to cap senior banking executives' pay to a level approximately equivalent to that of a Government Minister. I was also trying to allow the Minister to make regulations governing a collection of bonuses paid to senior banking executives in each of the last three years. We would have had great fun going after this, but it should at least have been attempted. I also sought to deal with capping senior executives' pay in some State bodies. I alluded to this matter and will not hold up the business of the House at length. In some cases CEOs of State bodies have received in excess of €500,000. Will the Minister assure me that they are worth it and deserve it? However, I remain to be convinced that such pay levels are warranted. When we measure the pay of hospital consultants against those of their European counterparts, we find that in Britain they earn about £70,000 per annum and €110,000 per annum in France. The highest sum paid is in the Netherlands where it goes up to about €120,000. There is a technical error in the amendment. I meant to put the figure at more than €70,000 for hospital consultants, but not much more — about €120,000 would be the absolute maximum, in line with what is paid in many European Union member states.
The whole thrust of everything the Government does is to hammer low and middle income families at every opportunity, while protecting and enhancing the status of those on significant incomes, including the Judiciary. Every time we debate any such Government legislation it beggars belief.
The effect of the amendments would be to delete the table setting out the rates at which the deduction is to apply and remove the Minister's authority to make regulations to provide for the deduction. I appreciate the fact that the Deputy tabled the amendment to have a debate on the subject of rates. We do have a constitution, as Deputy Morgan is well aware; therefore, I am not going to deal with the rest of his argument.
Yes, and it does not apply in this case, or else the Minister would be calling this a pay cut. It is one or the other, as Deputy Burton stated.
I remind the Minister that people earning up to €18,000 a year will pay 3% on the first €15,000, which amounts to €450. They will pay 6% on the next €3,000, which amounts to €90. Therefore, somebody on €18,000 a year will pay €540, if I understand correctly the way the levy is structured. This amounts to more than €10 a week for somebody on the very lowest rung of the income ladder. It might not be significant for a judge, the President, a Minister, a Deputy or people in the top echelons of the public service, but it is certainly a significant amount for somebody on a very low income. My worry is that for some people on low incomes it will pay them to go on the dole, claim housing benefit and a range of other benefits, including a medical card. It constitutes an additional poverty and employment trap. We spent a lot of time trying to get away from such traps to make work not just valuable for the fulfilment it brings, but also to make it financially more rewarding that being in receipt of social welfare payments. Strategically, the Minister's policy is wrong in this regard. The Labour Party amendment is reasonable, but if the Minister has a better version and wants to transfer the money lost to those in the higher income brackets, we will certainly support him.
My amendment is similar. According to the Minister's own statistics, there are not many people earning under €25,000. I think it is only about 20,000 in total. Therefore, the cost of making this concession would be extremely small. It goes to the heart of the matter. My original amendment which was ruled out of order provided that it be compensated for further up the levy structure but as that would constitute a charge on the people, the amendment was ruled out of order. My substitute amendment, No. 15a, was tabled so as not to impose that charge on the people. The principle is accepted across the House that, even on its own terms, the levy could be made fairer by some scheme of this nature. I calculated that, at most, it would cost about €5 million, which sum would have to be recouped further up the income scale. The cost of this concession would be €5 million out of a figure of €1.4 billion, which is not big money. The Minister could easily retrieve this sum further up the income scale. Even if only a small number of people were affected, it would show that the Minister was open to modifying his proposals. The Taoiseach said the proposals could be tweaked. The sum of €5 million would surely represent a tweaking. It would not be a substantial change.
In radio and television interviews Ministers all adopt the patter that the amount of money being sought through the levy cannot be reduced but, following their leader, there is room for tweaking. What does "tweaking" mean? When will we see it? No one on this side of the House suggested reducing the amount of money to be collected. All that is being asked is that those on low incomes be relieved from the provisions and the shortfall recovered somewhere else along the line. That would be my interpretation of "tweaking" but it could be very different from the Minister's. I would like to hear from the Minister, before we tweak any further, what he and the Taoiseach mean by tweaking.
The other night on "Questions and Answers", the Minister for Arts, Sport and Tourism, Deputy Cullen, made it clear there was some room for tweaking. Now it is tweaking time. Will the Minister explain to us what is meant by tweaking?
Amendment No. 50 aims to address our public finance deficit on the basis of fairness and equality which does not involve imposing an unfair burden on low-income workers. Every contribution from this side of the House has been about reasonableness and fairness. Deputy Barrett is correct that it is simply a matter of tweaking of rather than major surgery to the legislation. It is unfortunate the Minister will not accept these amendments.
This Minister is not for tweaking and I have to perform major surgery all the time.
On the question about the cost of the levy to a public servant earning €18,300 a year, if I were to accept one of the amendments which simply provided for an exemption under that level, it would increase the step effect at €18,300 to include not just the PRSI and the income tax but the pension contribution. That in itself would be a substantial disincentive to work at that income level.
If the Minister is not for tweaking, then will he ask his ministerial colleagues to stop tweaking?
The Deputy should ask them.
After that remarkable recent interview with Deputy Gogarty, perhaps tweaking is what happens under the duvet between Fianna Fáil and the Greens. Maybe we are looking in the wrong direction.
It certainly gives us an insight.
Colbert, the famous financial adviser to the French King Louis XIV, said the ideal tax was one that produced the maximum feathers with the minimum squawk. Can we find this tweak to minimise some of the squawk? Will the Minister reveal where these tweaks dwell on the benches opposite? They have been remarkably scarce in the past four hours.
I know the Deputy is an avid fan of Adam Smith, so I will stick to equity, efficiency and simplicity at all stages.
Amendment put and declared lost.
Amendment No. 12 has been ruled out of order as it is not relevant to the provisions of the Bill.
Amendment No. 12 not moved.
I move amendment No. 13:
In page 6, subsection (3)(b), line 33, to delete “that year” and substitute “the year concerned”.
The purpose of this technical amendment is to clarify the provisions refer to each following year, not just 2010.
Amendment agreed to.
I move amendment No. 14:
In page 7, to delete lines 3 to 9.
Question, "That the words and figures proposed to be deleted stand", put and declared carried.
Amendment declared lost.
Amendment No. 15 has been ruled out of order.
Amendment No. 15 not moved.
Amendment No. 15a cannot be moved as it has already been discussed with amendment No. 11.
Can I clarify the Chair's ruling on this? Does grouping an amendment mean it cannot be moved when it is reached later?
The directive is that it overlaps with amendment No. 14 and cannot be moved. The words already stand on amendment No. 14.
Deputy Burton's amendment was lost but I am still entitled to move an amendment that was different from hers. We have not voted on the section yet, so it has not been passed and established by the House. I would have thought I am still entitled to move my amendment.
I understand the Deputy used the same formula that is used for the minimum wage.
No, I had a 50% concession as opposed to a 100% concession. However, I will not press the matter.
Amendment No. 15a not moved.
Amendments Nos. 16 and 17 are related and may be discussed together by agreement.
I move amendment No. 16:
In page 7, subsection (5)(b), line 12, to delete “or” where it secondly occurs.
Amendment No. 16 will delete the word "or" and amendment No. 17 proposes a new subsection to bring it in line with sections 9(1) and 10(1). It will cover areas not covered in paragraphs (a) to (c) of section 2(5).
Amendment agreed to.
I move amendment No. 17:
In page 7, subsection (5)(c), line 13, to delete “arrangement.” and substitute the following:
"arrangement, or
(d) any understanding, expectation, circular or instrument or other document.".
Amendment agreed to.
I move amendment No. 17a:
In page 7, between lines 13 and 14, to insert the following subsection:
"(6) Notwithstanding the foregoing provisions of this section, payments which are not reckonable for pension purposes are not to be liable for pension levy deductions under this section.".
So many amendments have been ruled out of order, I am surprised this was accepted when resubmitted. Rather surprisingly some amendments submitted by the Opposition were allowed while others were ruled out of order for reasons about which we are in discussion with the Ceann Comhairle and the Bills Office. It may be that we have been allowed to resubmit this amendment. The purpose of this amendment is to provide that the levy does not apply to public sector income which is not reckonable for pension purposes, such as overtime and other such payments.
I have also pointed out the anomaly where members of An Garda Síochána and the Defence Forces have a shorter period for entitlement to pensionable service because of the nature of the employment. They often retire earlier than most on a full pension. As the Minister is aware, many members of An Garda Síochána and Defence Forces carry out dangerous duties. This entitlement was a social provision in recognition of the dangers faced in these occupations.
If people have income that is not reckonable for pension purposes and the measure before us refers to a pension levy, why should they be obliged to pay a proportion of that income in the form of a levy? This goes back to the earlier argument that, in effect, this is a special tax on public service employees. The levy will be particularly onerous on those who are paid overtime, bonuses or other allowances which are not reckonable for pension purposes. Whatever about income on which people will be ultimately paid a pension or part of a pension, it is simply not fair to impose the levy on all of their income. The purpose of the amendment is to address that anomaly.
I and others informed the Minister earlier that this country is facing into a spring and summer of industrial discontent. We do not want a situation to arise that would be similar to that which obtains in France, where people take strike action every second week in respect of public services. Enough damage has been done already to Ireland's reputation as a result of what happened with the banks and what the Financial Times referred to as “cosy Irish capitalism”.
If Ireland's name is going to be up in lights in respect of continuous waves of public sector strikes, this will not help in the context of rebuilding our image, credibility and, above all else, our capacity to borrow cheaply on international markets. In this year alone, the cost of the interest payments on the public sector borrowing will increase by approximately €2 billion. While some of this increase relates to higher borrowings, the vast bulk of it is due to the fact that we are now paying interest rates way above those which apply in respect of Germany. If the Minister persists with a strategy which ensures that the country's name will be up in lights for 30 seconds, 60 seconds or two minutes on the Bloomberg channel or some other business channel as a result of strikes taking place here, the cost of borrowing will continue to increase.
We again ask the Minister to consider adopting a strategy that is fair, that will lead to people in different parts of the public sector being treated equitably and under which the greatest burden will be borne by those with the largest earnings. In his interview on RTE radio this morning, the general secretary of the Irish Congress of Trade Unions, David Begg, made it clear that the trade union movement is willing to enter into negotiations with Government in order to reach a fair settlement on this issue. We recognise that this is an emergency and that we find ourselves in difficult economic circumstances. By not applying the levy fairly, the Minister is going to cause industrial havoc. The cost of the latter will be that Ireland will be obliged to pay far more for its borrowings than the Minister will save by means of this levy, which contains a number of inappropriate and unfair elements.
Deputy Burton's contribution was interesting and constructive. The Government would be prepared to re-engage with the social partners in respect of how the burden of adjustment which we must all shoulder — there is no point pretending that one or two individuals can carry it — might be fairly distributed. One of the crucial elements in reassuring friends of and investors in Ireland from overseas that we are in charge of our affairs is to show that we can, as a Government and a Parliament, send a clear message that we are prepared to bring public expenditure under control and stabilise it. Any change in the measure before the House would send out an entirely wrong signal regarding the determination of the Government to effect savings in respect of the public sector pay bill.
Non-pensionable payments represent a significant element of the public service pay bill. In light of the absolute necessity to reduce public pay costs by approximately €1.35 billion in a full year, they cannot be ignored. If we were to remove non-pensionable pay from the equation, we would be obliged to increase the deduction from the pensionable elements proportionately.
Amendment put and declared lost.
Section 2, as amended, agreed to.
NEW SECTION.
I move amendment No. 18:
In page 7, before section 3, to insert the following new section:
"3.—Funds received from the deduction under section 2 shall be paid into a fund under this section, to be known as the Emergency National Pension Levy Fund (separate from the National Pension Reserve Fund), the principal purpose of which is to pre-fund public service pensions.”.
The purpose of this amendment is again to seek to insert an element of fairness into the structure of this levy. The mechanism to which the Bill relates is referred to as a pension levy imposed in the context of financial emergency measures in the public interest. As stated earlier, the Tánaiste and Minister for Enterprise, Trade and Employment suggested on radio this morning that the difficulties relating to the public finances have been largely resolved. I do not know what brand of cornflakes she eats but they are obviously different from those consumed by everybody else in the House. It would be difficult to find too many people who would agree with the assertion that we are out of the woods financially. However, we possess the ingenuity, talent, skills and propensity towards hard work necessary to extricate ourselves from our current difficulties within a few short years.
The amendment proposes that the pension levy be paid into an emergency national pension levy fund, the money from which could be then used for Government spending. When a return to better financial circumstances occurs, this fund could be then used to pay public service pensions. The Minister will state that the National Pensions Reserve Fund is somewhat similar to what I am proposing. Some years ago, Fianna Fáil Ministers objected vociferously when the Labour Party suggested that part of the latter might be used, on the basis of clearly identified returns, to finance certain public service projects. However, one of the Minister's predecessors, Mr. McCreevy, was such an ideologue that he could not conceive of the National Pensions Reserve Fund being used other than as a way to invest either in the equities markets or in cash and Government securities. The consequence of this has been that the National Pensions Reserve Fund has been obliged to pay in excess of €20 million to invest in equity markets throughout the world and, as a result, the value of the fund is now significantly lower.
The amendment is couched in general terms because if the Minister accepts the general principle behind it, his officials will redraft it in a form to give effect to what we are proposing. Public servants are realists. The Minister is calling this mechanism a pension levy. When people pay such a levy or make contributions to a pension fund, it is implied that there will be a build up of funds which will be earmarked or hypothecated for the purposes for which the levy was raised. If public servants surrender this money, they want to rest assured that it will be available for the State to meet its pension commitments. If such an assurance is not forthcoming, they will wonder, having paid out their money, whether the State will meet those commitments.
It is unlikely that Fianna Fáil will be returned to power after the next election. However, it may come back into office in approximately 14 or 15 years' time. Will it decide at that stage that it does not want to pay public service pensions? On foot of what the Minister stated earlier, public servants will probably pay this levy indefinitely and will certainly pay it for the remaining three and a half years of this Government's term of office. It is estimated that this measure will raise €1.4 million gross per annum. This means public servants will contribute approximately €5 billion in the three and a half years left in the life of the Government but will not have a claim on the Exchequer to have this money utilised when the economy recovers. I firmly believe the economy will recover for the reasons I have outlined.
If the Minister wants equity and fairness, it would be sensible to create a funded contribution and allow the proceeds of the fund to be paid out immediately for government purpose. However, the fund would, in American terms, be an earmark; in other words the Government would be required to return the money to the public service pension emergency fund as and when funds became available in the future. As a result, the fund would constitute a core funding element for public service pensions.
The proposed levy confuses two issues, namely, how and at what rate public servants should contribute to and pay for the relatively generous pension arrangements many of them enjoy. With the exception of those at the top of the public service, pension arrangements for public servants are not as generous as those available to company directors in the private sector. As the Minister is aware, the contribution to company pension funds by way of tax relief is by and large far in excess of what many public servants will earn over a five-year period.
The Labour Party seeks equity and asks the Government to give a commitment to public servants that it will guarantee, through the device set out in the amendment, that when times are better it will allocate the moneys raised from the pension levy to a fund for public service pensions. Equity would foster social solidarity as people would believe everyone is contributing.
Lower paid public servants in particular will be heavily taxed under the proposed pension levy. Many of these employees are aged between 25 years and 45 years and will have bought a house at the height of the Celtic tiger. They will have mortgages of €1,400 or €1,500 per month and may have two or three children. They were encouraged by the banks we are bailing out to have two or three credit cards. Given the financial commitments they have as a result of the debts they have incurred, they face a severe decline in income. While it may be argued that it was unwise to incur so much debt, we should bear in mind that the former Taoiseach, Deputy Bertie Ahern, called on young people to buy houses on the basis that prices were set to rise, said he would buy bank shares if he had money and advised those who talked down the economy to commit suicide. Many young public servants took their cue from the former Taoiseach who continuously advised people to borrow, spend and buy as well as invest in bank shares. Public servants are having to pay the price of this profligacy and mismanagement of the economy.
The amendment proposes to make the levy a funded contribution and would go some way towards restoring equity. The proposed measure is cost free in the context of the likelihood of strikes and the damage they will do to our international reputation. If it is accepted, it would constitute a Government promise to public servants that when times improve they will get something in return for the sacrifice they are making, namely, a higher level of pension funding. It would also help to kick-start a debate on public service pension reform, a broader, complex issue which needs to be addressed. Notwithstanding a number of Green Papers and discussion documents, the Government has failed to address this issue.
I understand Deputy Burton's position on this issue and there is merit in addressing how exactly we will approach public service pensions in the longer term. I believe the Deputy is putting down a marker that the contribution under the proposed levy should be treated as a longer term approach. Another concern in this regard is whether the levy will pre-empt a longer-term approach. While I do not know what is the Government's agenda for funding public service pensions in the longer term or whether hybrid pensions, an idea mooted in other sectors, is on its agenda, it would be interesting to hear the Minister's views on how this emergency measure, which he does not regard as temporary, interacts with the longer term pension reform programme.
The Minister and his predecessors have consistently refused to countenance any changes in the Finance Bill on tax relief for pension contributions for the low paid on the ground that the Government awaits the great day when a comprehensive programme will be delivered. This has not, however, precluded it from producing the proposed pension levy. I ask the Minister to comment on the longer term public service pension reform agenda and on how he envisages the pension levy will interact with it.
Public sector employees regard the pension levy as unfair and want to know whether the moneys raised under the levy will be allocated to a public service pension fund. The National Pensions Reserve Fund was established by former Minister for Finance, Mr. Charlie McCreevy, to fund public sector and social welfare pensions from around 2025 onwards. The problem with the proposed pension levy is that it appears to be a revenue collection mechanism and there is no indication that it will be used to fund pensions in the long-term. We have a pensions time bomb and the Minister must clarify the questions raised by Deputies Bruton and Burton.
The frustrating aspect of the proposed levy is that while the theoretical objective of the measure is to support the cost of pensions, non-pensionable income such as overtime and allowances will be subject to the levy. Even income generated prior to the introduction of the legislation will be subject to it. The Minister must clarify his position on these issues and what measures will be taken to address the issue of pensions. As he indicated, the levy will not apply to certain semi-State companies, even though the State is liable for pensions which must be paid in that sector of the economy.
Many people would have accepted in principle the introduction of a pension levy if it was proposed to use the fund to finance their pensions in the long term. This is not the case, however, and many people will be frustrated to learn that the income levy will be paid on the pension levy, which amounts to another form of double taxation. Those who pay the pension levy will not derive any benefit from it.
A wide range of issues arises from this amendment. The effect of the amendment would be to put aside the proceeds of the levy in a fund which would be separate from the National Pensions Reserve Fund. In moving the amendment, however, Deputy Burton appeared to suggest that the fund would be more in the nature of an accounting device and the funds in it would be available to the Government for expenditure purposes in the current year. There is no intention at this stage, I take it, to invest the proceeds of the levy and use them to pre-fund public service pensions on an ongoing basis.
The National Pensions Reserve Fund was established in 2001 to meet as much as possible of the cost to the Exchequer of social welfare and public service pensions to be paid after 2025. We will have an opportunity next week to discuss this issue at greater length. I do not propose to set aside the proceeds of the levy in an investment fund. The NPRF represents a strong response to the likely increase in the cost of social welfare and public service pensions in the medium to long term, with an amount equivalent to 1% of GNP paid into the fund each year. In many years to date we were in the happy position of having a surplus from which such a sum could be paid.
Not now.
Not this year, but in previous years we were in that position. This gives the lie to the constantly repeated accusation that the Government wasted all the money during the era of the Celtic tiger. In fact, it saved money, which is highly unusual in international terms. When there is no surplus available for investment in the NPRF, the State borrows the money to pre-fund the investment. That is an issue I have no doubt we will be discussing next week.
I acknowledge that the return to the fund in 2008, as with pension funds generally, was most disappointing. However, an appropriate investment strategy for a long-term fund can lead to short-term volatility, especially in difficult market conditions such as we have experienced in the last year. The commission has stated many times that in seeking to meet the fund's objective it has adopted an investment strategy primarily focused on building a diversified portfolio of equities, cash and other real assets. Such an asset allocation offers the prospect of superior long-term returns but can expose the fund to high levels of short-term volatility. One of the critical factors underlying the commission's investment strategy is the fund's long-term investment horizon. With no draw-down before 2025, it can afford to accept periods of volatility as a trade-off for achieving a long-term return that will make a real contribution to future pension costs and the sustainability of the pension system. It is unclear how the amendment would assist in that objective. Given the current emergency conditions, I do not believe it is possible to earmark the fund at this stage, but it does raise a question on which we can reflect in due course.
We drafted the amendment in very general terms because the establishment of such a fund would be complicated and require bipartisan discussion with all parties in the House. What I am putting to the Minister is the principle behind the idea, which is that if the Minister calls this a public service pension levy and asks public servants to accept an extraordinary level of sacrifice — it is a big sacrifice for many of them, particularly the lower paid — the least to which he could agree is that when the economy returns to better circumstances, the Government will repay, by putting it into a fund for public service pensions, the amount deducted which over a three-year period — the Minister's officials will have the figure — will probably amount to about €5 billion, or slightly less if there is a pay pause. The Minister suggested the gross figure would be €1.4 billion a year. It is to be hoped three years is the maximum period before the country begins an economic recovery. We may still have a deficit for up to five years; we know this from the figures the Minister has submitted to the European Union under the Stability and Growth Pact. He should remember, however, that people pay PRSI which is added to what is called the social insurance fund. A rough count is kept of what goes into the fund and the amounts paid out in unemployment benefit and so on. I mentioned the Beveridge report, according to which the contributory principle is a fundamental aspect of modern social and Christian democracy. Under this principle, people contribute to society through taxation. In respect of particular headings such as pensions or against the possibility of becoming unemployed, they make positive contributions which give them entitlements if they become unemployed or ill or when they retire. In other words, they take back some of what they have contributed. It is part of a social contract between the citizen and the State.
General taxation is different in that it is put to the purposes the Government which is elected by the people decides. Next week or next month the Government may decide it is in the interest of the State for Ministers to go abroad for St. Patrick's Day. This is funded from general taxation. However, an individual's PRSI contributions are earmarked for social welfare in order that if the unhappy day comes when one becomes unemployed, one is entitled to an unemployment payment. If one does not have social welfare contributions, one must undergo a means test to qualify. What I am suggesting is the creation of a funding concept that would mean public servants would be assured by the Government and the other parties in the House that they would have some entitlement to draw down their public service pensions. We can argue later how much of a contribution this constitutes with regard to the various public service pension benefits, but it would be the beginning of a funding idea, particularly for lower paid workers in the public service. It would help to remove some of the unfairness from the levy structure the Minister is imposing. In economic terms, it is a tax that is only being levied on the public service and in an unfair way because those who are lower paid will in some instances pay more than those who are higher paid.
We consciously left the wording vague in order to offer the amendment to the Government in a bipartisan way to address the fundamental equity issues. It would also be useful in dealing with the public service unions. "Strikes in Ireland" will go up in red lights on news ticker displays — Bloomberg and so on — for 20 seconds, which will affect our rating as a country. I disagree with the Minister's statement made a few minutes ago that if he were to tweak or make amendments to the levy in order to implement it in a fairer way, the international markets would downgrade Ireland. That is a load of rubbish. It would not take from the money being levied but would constitute a hypothecation of what public servants who pay the levy would gain by way of entitlements. The international markets would not interfere in a scenario in which the Minister made the levy fairer but which perhaps retained the same revenue-raising capacity. That would be an internal matter. I would go further and say that if we do not have widespread public sector strikes, the international markets will think a lot better of Ireland.
We offer the amendment as a strategy for the Minister but are open to negotiation on the matter. The Taoiseach constantly challenges the Opposition to be positive. The challenge is to the Minister to respond positively to the amendment.
On a related issue, is there any possibility the levy could be imposed prior to the enactment of the Bill? It has been pointed out to me that the salaries of certain civil servants are paid in advance and fears have been expressed that the money will be taken before the legislation is passed. I presume that will not be the case but ask for confirmation from the Minister.
I understand the levy will be imposed on non-pensionable income, including overtime payments and allowances. The 1% levy applies to income that may have been generated prior to 1 January. I ask whether income generated before 1 March but paid after that date will be affected by the pension levy.
To reply to Deputy Tuffy's question, I understand the legislation will be in force by 1 March, from which point contributions will be in force——
For the month of March.
——on income received during March but not in February. It is the Government's intention to table an earlier signature motion in the Seanad in order that the legislation will be signed by the end of the month, although I am advised that the financial resolution passed last night would secure the necessary payments in early March. Deputy Naughten is correct that overtime payments fall within the scope of the contribution.
On the issues raised by Deputy Burton, I regard the tabling of the amendment as a constructive move in that it signals the need for clear thinking on how we pre-fund public service pensions. It has always been the Government's policy to construct such a fund but, while we were able to do so during the good times, the borrowing now required for its continued funding gives rise to other issues. Equally, it is unrealistic to believe we could at this stage constitute as a fund the moneys which will accrue from this contribution.
The Government will be empowered under the legislation which we will be discussing next week to invest in ordinary shares and take share warrants in the three banking institutions in the State listed on the Stock Exchange. The State will be in a position to make investments in these institutions which will inure to the future benefit of public service pensioners.
We will await the introduction of the legislation to which the Minister refers because, as he will be aware, the markets have become very averse to the notion of warrants and dividend income on preference shares. That is likely to produce a more negative response from the markets — if one follows them. Other governments have begun to change their arrangements in that regard, as I am sure the Minister's officials are aware. I wonder whether we will see interest of 8%.
We will have an opportunity to debate these issues next week in the context of the legislation mentioned. I take it that the Deputy is anxious that the taxpayer and pension fund beneficiaries of the future are safeguarded in any recapitalisation arrangements with the financial institutions.
Amendment put and declared lost.
I move amendment No. 19:
In page 7, lines 14 to 16, to delete subsection (1).
Amendment put and declared lost.
Question proposed: "That section 3 stand part of the Bill."
I understand the 1% income levy applies to income also subject to the pension levy. Depending on when the income is taken, there can be an element of double taxation. I ask the Minister to clarify the matter.
Section 3 provides for regulations for calculating and collecting the pension levy. Why are semi-State companies such as the ESB, RTE, Bord Gáis and VHI not covered? It causes significant frustration among public servants that some people will be subject to these rules whereas others will not.
The income levy applies to gross income, as Deputy Naughten outlined. The 1% levy, in the typical case, is taken from gross income. Marginal relief is available for income tax purposes on the pension contribution.
It is, therefore, a form of double taxation.
I do not accept it is a form of taxation. We had that discussion earlier.
A double levy then.
The semi-State companies to which the Deputy referred are commercial in character. They make their own pension arrangements and the pensions of their staff are not funded by the Exchequer. Deputy Burton raised the interesting question of why a certain financial institution was not listed in the Schedule.
Anglo Irish Bank is neither in nor out.
It is not listed because, while the institutions listed in the Schedule have their own pension schemes, they are approved by the Minister. To date, no pension scheme has been approved by the Minister at the institution in question.
It is my understanding semi-State body defined benefit pensions are guaranteed by the State.
That is why we sold Eircom to plug the pensions hole.
We had to make provision for pensions when we dealt with previous legislation providing for the sale of semi-State companies. If the State is guaranteeing the moneys, they will fall within the terms of the Bill.
Particular legal or political understandings may have been arrived at in respect of individual State enterprises but in general it is not correct to say the Exchequer funds these pensions.
Where such understandings obtain, should the enterprises not be caught for the pension levy?
The circumstances to which the Deputy refers are very particular in character.
Peculiar or particular?
Question put and agreed to.
Section 4 agreed to.
SECTION 5.
Amendments Nos. 20 and 21 are cognate while amendment No. 23 is related. Amendments Nos. 20 to 23, inclusive, will be discussed together.
I move amendment No. 20:
In page 8, subsection (1), line 27, to delete "contractual arrangement" and substitute "employment, office or position".
The purpose of this and the following amendment is to bring the section into line with the definition of "public servant" which will include categories of people who hold office or other positions but are not covered by the term "employee". An example would be a board member or a Secretary General. Amendment No. 21 has the same purpose as the previous amendment. I understand the Leas-Cheann Comhairle has also asked me to discuss amendment No. 23.
The Minister has moved amendment No. 20 but he can speak to amendments Nos. 21 to 23, inclusive. We will come to amendment No. 21 in due course.
Progress reported; Committee to sit again.