There has been a wide-ranging discussion on the Bill and I appreciate the time and thought put into the contributions on all sides of the House. There is disagreement on the approach that has been adopted by the Government in this case. It is a blow to hard-working public servants. They may feel singled out but this is not the case. Reducing pay rates for public servants is not done lightly by the Government. On the contrary, all avenues were explored before this approach was adopted.
The Government was criticised for entering discussions with the public service unions on how to deliver savings to the payroll for 2010 and beyond. I disagree with the criticism fundamentally. Any responsible employer seeks agreement with their staff on the way in which to make savings from pay. It is unfortunate that the proposals of the trade unions did not meet the Government's aims. They did not save enough money. Despite the figures that have been bandied about since, the proposals that were put to the officials would have saved, at most, €750 million. Any savings proposed were not permanent and only for 2010.
The Government was rightly concerned that compulsorily curtailing the working days of public servants, even within constraints imposed by management, would have an impact on services to the public at a time when demand has never been higher because of our increasing population and the effects of the economic downturn. We had to cut the public service pay bill because it amounts to a third of Government spending. Quite simply, we cannot afford to continue to pay public servants at current rates. This is not a Government plan to reduce pay rates in the country generally, as some commentators have suggested. The cost of the public service pay bill has increased greatly over recent years.
In his contribution yesterday, the Minister for Finance compared some salary figures over the years. The public service pay and pensions bill has doubled over the past decade, both because of increased numbers and higher salaries. Simply put, it is no longer sustainable given the state of the country's finances.
While budget 2010 may have involved the biggest adjustment, it is well known that further savings from expenditure will need to be made over the course of the next few budgets. Significant savings from the public service pay bill could be achieved through changed work practices and by eliminating outdated customs and procedures. The public service unions accepted that fact and argued strongly during the course of discussions with officials that significant pay savings could arise from modernisation. Public servants will benefit from modernisation. The number of public servants will continue to fall because of the effect of the moratorium on recruitment and of retirement in the normal course of events. The remaining public servants will need to adapt the ways in which they deliver services if service levels are to be maintained or improved, which is the basic demand of all citizens from their public service.
The public service unions are concerned about redundancies in the public service. It is, therefore, in their interest, and the interest of management, that a public servant whose current post is no longer required can be redeployed to an area of greater need.
I invite the public service unions to consider the position calmly. We appreciate they may be aggrieved over the failure of the talks process. This is not a time for industrial action. Ultimately, as with any industrial dispute, we will have to talk to each other about how we can ensure the employer's financial good health. The Government believes dialogue should start sooner rather than later.
A number of issues have been raised about the scope of the Bill. The difficulty when drafting a Bill providing for a reduction in the remuneration of public servants is that, of necessity, it must have a wide application given the size of the public service pay bill. By taking the widest possible definition, the Government is able to spread the burden of the €1 billion reduction in the overall pay bill and take a smaller amount from each of the 350,000 workers in the public service. Therefore, a wide definition of "public service body" was used in the Bill. However, this created potential for some individuals to be defined as public servants although they would not regard themselves as such, nor would their employers regard them as such. This is because the State helps to pay for the employment of thousands of people by a myriad of bodies and through a wide variety of funding mechanisms to do valuable work in the community.
The simplest way in legislation to define public service employees and distinguish between them and private sector employees whose employment is helped by State funding is to use the approach taken when applying the pension-related deduction to link their employment to their current or potential access to a public service pension scheme. In order to pin this issue down, the Minister for Finance published amendments last night to the draft Bill that will clearly define who is affected by the pay reduction by linking it to access to a public service pension scheme. The rule of thumb will be that if one is affected by the pension levy, the reduction to the rates of pay will also apply. The amendments will be discussed later today.
A number of questions have been raised in the debate on Anglo Irish Bank and the NTMA not being covered by the Bill. The general intention is that the reductions in pay will apply to the groups covered by the pension levy. Neither Anglo Irish Bank nor NTMA is subject to the levy. The former does not come within the definition of a public service body covered by the Bill as it does not have a public service pension scheme. For the reasons explained in the Minister's Second Stage speech, the provision is not intended to cover commercial bodies.
NTMA is not a commercial body but the pay of its staff is determined in the same way as applies to staff of commercial bodies without direct ministerial control. It is appropriate, therefore, that it be dealt with in the same way as commercial bodies not covered by the Bill.
Mention was made of the absorption of voluntary salary deductions of 10% by Ministers, Ministers of State, Secretaries General and some others for 2009. The Minister for Finance asked the Review Body on Higher Remuneration in the Public Sector to examine the pay of the groups covered by its terms of reference, including Ministers and Secretaries General, by reference to comparable positions in the private sector and those in other countries, and by taking account of the current state of the economy. This exercise was designed to consider a more permanent position in regard to the pay of these groups.
The review body recommended permanent reductions in the pay of those it examined, ranging from 8% to 15%, and 20% in the case of the Taoiseach. It is important to note the review body recommended specifically that the reductions it proposed should replace the voluntary reductions already made and that these should then cease. Ministers are now taking a permanent reduction of 15% and the Taoiseach is taking a reduction in pay of 20%. As mentioned by the Minister for Finance in his Second Stage speech, Ministers of State will take a permanent reduction of 10% although, on foot of the review body's report, the reduction for other groups at similar salary levels will be 8%. The Secretaries General of the Department of the Taoiseach and the Department of Finance have volunteered to take a reduction of 20% although a cut of 15% was recommended by the review body.
Some speakers have attempted to suggest these reductions do not involve a significant change by referring to the voluntary reductions. This ignores the major difference between a temporary reduction and an ongoing permanent reduction in pay. It is ironic that those who showed leadership by taking a voluntary reduction in pay are now having that used against them in an attempt to mitigate the significantly greater reduction now applying to them.
It was asked whether the Minister would exempt persons earning less than €30,000. If a reduction did not apply to the first €30,000 of salary, there would be a very substantial decrease in the savings to be achieved in the order of €450 million. This reflects the fact that approximately two thirds of public servants have salaries of €60,000 or less and that the average salary is approximately €50,000. The reality is that, in order to achieve the required savings, reductions must be applied at these levels. There would be difficulties and anomalies if any attempt were made to apply an exemption to persons with salaries under €30,000. It would cause anomalies for those with salaries a little in excess of €30,000, who could be worse off than those with a salary under €30,000, or for persons on incremental scales, whose increments could bring their salaries over €30,000 and worsen their position.
The question of possible pay cuts in the commercial State-sponsored bodies was also raised. The pay reductions of public servants have a very specific purpose, that is, to reduce the burden on the public purse of the public service pay bill by approximately €1 billion. Pay cuts in the commercial State-sponsored bodies such as Bord Gáis and ESB will not have that affect because the pay of those bodies is funded generally through their commercial efforts. Due to their nature they have a large degree of autonomy in regard to pay. With the exception of chief executives, the Minister for Finance does not control the pay of the staff of these bodies. They have not been covered by the public service element of pay rounds in the past and have taken an independent approach to controlling their pay bills, as happened in RTE where voluntary reductions were agreed by the staff and in the ESB which has had several voluntary redundancy schemes.
While these companies must be allowed to act commercially, and in accordance with the normal industrial relations process, the Government believes pay restraint in these companies fulfils the long-term national interest, namely, ensuring competitive pricing for energy and other goods. It is the market and the regulators, however, that will impose that discipline on those bodies.
The exception would be the pay rates of the chief executive officers of these bodies. The Government is concerned at the top pay rate levels across the economy. While this Bill addresses the pay of top public service posts, the Government also proposes to have the arrangements governing the pay of chief executive officers of commercial State-sponsored bodies reviewed.
I wish to address why the lowest paid public servants are not excluded from this Bill.