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Semi-State Sector Remuneration

Dáil Éireann Debate, Wednesday - 4 July 2012

Wednesday, 4 July 2012

Questions (7, 8, 9)

John Browne

Question:

7Deputy John Browne asked the Minister for Public Expenditure and Reform his views on the breach of the €200,000 salary cap in respect of the appointment of the new chief executive of the VHI; and if he will make a statement on the matter. [32467/12]

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John Halligan

Question:

14Deputy John Halligan asked the Minister for Public Expenditure and Reform the reason the pay level set by the Government in respect of the starting salary for the chief executive of a commercial State company was breached for in the incoming chief executive of the VHI; and if he will make a statement on the matter. [32497/12]

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Richard Boyd Barrett

Question:

17Deputy Richard Boyd Barrett asked the Minister for Public Expenditure and Reform the reason the pay level set in 2011 for the starting salary for the chief executive of a commercial State company was breached for in the incoming chief executive of the VHI; and if he will make a statement on the matter. [32449/12]

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Oral answers (22 contributions) (Question to Minister for Public)

I propose to take Questions Nos. 7, 14 and 17 together.

Since taking office, the Government has significantly reduced the salary rates paid to the chief executive officers of commercial State companies. These measures on salaries have included the introduction of a general pay ceiling of €250,000 per annum in the case of all newly appointed CEOs in commercial State companies, along with reductions to similar appointees in each state company with salary maxima below the ceiling of €250,000 per annum. This has had the effect of reducing the salary levels of all newly appointed CEOs in a proportionate manner while maintaining the established weightings of the commercial State companies.

Provision exists for a CEO appointee to be placed above the base salary applying to the particular post concerned subject to the submission of a business case to me by the relevant organisation. Such a business case was made to me in respect of the chief executive officer of the VHI, which, on consideration, I was prepared to accept. The newly appointed CEO was accordingly assigned a salary above the base salary of €191,014 per annum but below the general pay ceiling of €250,000 per annum applying in the commercial State company sector. There has therefore been no breach of the general salary ceiling applying in this sector in respect of the CEO of the VHI.

I thank the Minister for that information. The gentleman appointed is receiving a salary of €238,727 per annum. Many people felt the general pay scale ceiling was about €200,000, with a small number of chief executives getting more than that. I can think of more than 200 staff currently employed in various bodies, including the NTMA and the Central Bank, along with academic medical consultants, university heads, academics and the chief executives of Coillte, Bord Gáis, Bord na Móna, EirGrid, the VHI, the HSE, the NRA, the ESB, An Post, RTE and Dublin Airport Authority, who are on more than €200,000.

The salary cap is €250,000.

Five or six of them, including the chief executives of An Post, CIE, RTE and Dublin Airport Authority, earn more than the cap of €250,000. The Minister is allowing the cap to be breached, but it was the Minister who made an issue of the caps and decided to introduce them in the first place. When he introduces a cap, he should stick to it. Every Sunday the papers contain reports of the cap being breached, often with the personal approval of the Minister. That undermines the principle. I do not want to attack individuals - I will not even mention anyone by name - but the Minister made a rod for his own back by saying he was introducing a cap and then allowing it to be breached. Had he not done that, we would not be having these questions.

The Deputy has misunderstood. The cap for the commercial semi-state sector is €250,000. I have appointed no one above that except the ESB chief executive, and I explained that to the House. We had to offer a multiple of that to get someone to run ESB.

I am anxious to significantly reduce top-level pay and I must do it in a structured way. We looked at the Hay rates and reduced them proportionately to maintain the differential between the different State companies. Without disrespect to Bord na gCon, the chief executive of Bord na gCon is not being paid the same as the chief executive of Bord Gáis Éireann or the ESB because their responsibilities are different. However, the Hay rate was not a fixed point; there was flexibility. I have always said that if a business case is made to me in an individual case and it is in the public interest for a company facing significant challenges to get the right person, I will adhere to that. We must have a debate on the issue. It amuses me when I read one newspaper in particular that pays fantastic sums to its chief executive commenting on the pay of people who are running extraordinarily complicated companies within the State sector. We saw one departing chief executive of a newspaper recently getting an enormous sum of money and regarding that as acceptable and yet being able to comment on salaries in the State sector.

Thank you, Minister.

I wish to make a final point on the matter. I will give some detail if the Deputy wishes by way of a further supplementary question of the reasoning in this particular instance why I thought a compelling case was made.

I agree with the Minister on the last point - the nauseating hypocrisy of Independent Newspapers. I do not mind naming it. The company was previously owned by one tax exile and is now owned by another tax exile and is paying executives obscene amounts of money and then attacking other people who are earning far less. That is sickening in the extreme.

The context for most people for this question is the tens of thousands of people who have lost their jobs, cannot make mortgage repayments and are affected by cuts in social welfare allowances and child benefit. They are literally nailed to the wall and they wonder from week to week whether they can make it through the month. Then they find that the new chief executive of the VHI is not satisfied with earning five times the average industrial wage but that in order to take up the job he must earn six times the average industrial wage. That is nauseating also for people because they simply do not understand it.

One must wonder what sort of abilities, talent or business case anyone can make in stating that €191,000 a year is not enough but that they must have €238,000. It is pretty sickening. Are we openly advertising those posts and asking if anyone is out there who could do the job who is willing to work for the limit we have set? I do not think it can be justified for someone to insist on getting approximately €50,000 more than what is already an extremely generous salary by anyone's standards.

The Deputy will be surprised to hear that I do not disagree with much of what he said. Ministers work for considerably less than the original threshold, as opposed to the extended rate. A business case was made for a company that has real challenges. We need the right person to drive it and it is important for the health service to have a functioning VHI that does the business well as we migrate into universal health insurance. I accepted the business case for it but there are high salaries not only in the public sector but most certainly in the private sector. In the banking sector, particularly abroad, we have seen unimaginable salaries being demanded and paid. The former CEO of the VHI was paid €312,000.

The basic salary was €312,000. Deputy Boyd Barrett is talking about the final salary with add-ons and bonuses, which I suppose I should add in to be accurate in the total quantum of money. As the Deputy is aware, we are not paying bonuses to anyone in the State sector now. This is a work in progress. We are making decisions. We must have a debate about it. I am under pressure regularly from State companies who identify people, often working abroad for multiples of what we offer, who could add value and drive a State company. We must decide whether we want such persons or if we want to employ those who will work for the pay grade. Unfortunately, that is the international market in which we compete.

Thank you, Minister.

It is a worthy issue for debate. Perhaps we will have an opportunity to debate it in the Oireachtas Joint Committee on Finance, Public Expenditure and Reform.

I call Deputies Fleming, Boyd Barrett and Wallace in that order.

I am pleased that the Minister has acknowledged the injustice people feel at this decision, and how it is inexplicable to most people that someone would demand a €50,000 increase above and beyond €191,000 for doing the job. What does not satisfy me about the Minister's response is why we have allowed it. I do not see what special abilities or talents can justify the decision or that there was no one else who could have done the job that this person will do for the VHI for €191,000.

Given that the person's name is O'Dwyer, they must be Irish – perhaps I should not say that - but they do not seem to be showing a hell of a lot of patriotism given what everyone else is going through, that they cannot operate on a very generous cap of €191,000. What case did they make and could we not have got other people?

I call Deputy Wallace.

Deputy Wallace should be careful in talking about salary levels.

I can explain that much better than the Minister knows only I have not done so yet.

I have every confidence in Deputy Wallace.

I thank the Minister. I am well aware that three quarters of public servants in this country earn less than €60,000. I do not agree with people bashing the pay of public servants on low and middle incomes. That is outrageous. Like the previous speaker I believe that in the current climate, given how difficult it is for those in the most difficult circumstances that there must be more burden sharing by those earning in the region of €200,000. It is difficult to justify those salaries.

The Minister made the point that it is unlikely that anyone would go from the private sector into the public sector and get an increase in pay. For his information, I know some people who worked in banking and real estate and when they moved to NAMA they got an increase in salary. That is not very impressive. There has not been much accountability or transparency in how NAMA has done its business in that regard. I do not know how much control the Minister has over it but it leaves much to be desired. In the current climate and given all the cuts endured by people who are hurt most by the austerity to give this individual more than €200,000 is not good enough.

I do not wish to focus on any individual. I wish to speak about the general principle, namely, that we must have moderation at a time of great difficulty for a huge swathe of the population. That applies to all of us. I do not wish to make any comment about Deputy Wallace but all of us must be mindful of how our actions are perceived. I am conscious of that when I make decisions on pay rates. It is a constant battle in terms of deciding whether it is an appropriate thing to do and whether it will solve the challenges of any organisation of State. I can list the challenges facing the VHI currently. They are probably the most daunting set of challenges the company has ever faced. One must ask whether we will get someone of ability to drive through the challenges. I must take cognisance of whether the person is right and the pay rate is appropriate. That is a judgment.

I have decided not to sanction pay rates in the past that probably ensured that we did not get people who would have applied for the job had the pay rate been higher. We are in an international market and companies in the commercial semi-State sector are supposed to have a commercial mandate. I am a supporter of the commercial semi-State sector. The alternative would be to move away from commercial semi-State companies, let everything be in the private sector and then the market would determine pay rates. That is not good. As I stated in a previous reply to Deputy McDonald, the way to deal with high pay is not to look at salaries exclusively in the public sector or the private sector but to consider having a progressive taxation system so that wherever one gets one's money, whether it is from dividend payments, playing the markets, being a chief executive of a State company or wherever else, one is taxed at an appropriate rate in a time of difficulty.

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