Dáil Éireann díospóireacht -
Tuesday, 17 Nov 1987

Vol. 375 No. 4

Adjournment Debate. - Public Service Redundancy Package.

Mr. Noonan

(Limerick East): I thank the Chair for allowing me to raise this matter on the Adjournment. On a number of previous occasions I raised the issue of the £120 million which will be necessary to fund the lump sum element of the redundancy package announced by the Government last July. I raised it on the Estimates and during the course of the debate on the Bill which made modifications on how the local loans fund will be accounted in the national debt. I raised it on the Order of Business on a number of occasions. I sought to raise it by means of Private Notice Question and this morning I sought to raise it under Standing Order 30 so as to have a three hour debate here on the issue. I am grateful that the Chair has allowed me to raise it on the Adjournment. Though I regard this as a most unsatisfactory way of raising such a serious issue, at least the matter is before the House and I hope I can get answers from the Minister.

The answers to date have been unsatisfactory. When Finance questions were taken on Thursday, 5 November, the Minister outlined in great detail the elements of the redundancy package. He said he was not really in a position to cost the redundancy package and that the costs of these payments would be influenced by the volume, the nature and the timing of the redundancies. The implication of that was that he could not put a figure on the cost of the redundancies. The Department of Finance and the Minister did not seem to have any difficulty in putting a cost on the extra pensions which would be necessary to be paid to those who become redundant. The Department of Finance and the Minister did not seem to have any difficulty in deciding the total payroll in the public service next year, and to arrive at that figure they had to allow for a certain number of people taking redundancies and calculate the net figure. To calculate the cost of pensions in the public service in 1988 it is necessary to know the grade of those retiring, the length of service and the numbers involved. That is exactly the information which the Minister requires to calculate the size of the lump sum payment also. The Minister should not come back and tell me that because he does not know the volume, the nature and the timing of the redundancies that he cannot say how much it costs. The Minister has already in the Book of Estimates clearly implied that he knows the grade, the length of service and the numbers of people involved.

The cost of the public service pay deal negotiated by the Government for next year is £70 million. Curiously enough, the Minister said to Deputy Boland in reply to a Written Question that he intends to save £70 million by means of the redundancy package and by not filling vacancies in the public service. It seems to me that the calculations of the cost of the pay came first and then the Minister decided that since that would come to £70 million he would have to get £70 million through the redundancy package and through not filling vacancies. As long ago as last July the Minister intimated that some mechanism which involved the Central Bank would be used to fund the redundancy element. In the Book of Estimates there is reference to the fact that it does not contain any figure which would go towards payment of redundancies, but that the Minister would make an announcement later.

I cannot understand what is delaying the Minister. What are the Minister and the Government hiding on this occasion? If it is as simple as we are let to believe why has it taken from last July until the middle of November to get a satisfactory answer to this question? I am reliably informed that the Central Bank have now sanctioned £120 million over a certain period of time to fund the lump sum element in the redundancy package being put in place by the Government. I want to know over what period this sum of money will be drawn down. I want to know if this is being offered interest free. Does it have to be repaid by the Government and, if so, over what period?

I understand that the redundancy package is destined to run for three years. Does that mean that £40 million a year will be drawn down and that that £40 million will have to be repaid each year for the succeeding three years? If that is so, we are involved in trick-o' the-loop financing, off balance sheet financing, and we are drawing revenue from the future into the present which will have to be paid for by taxation starting in three years' time and running for the three consecutive years. If that is the position I would like the Minister to state it. It is totally inappropriate that this kind of off balance sheet financing should be involved in a current expense by the Government.

It is also totally inappropriate that the Minister should make references to the mechanism which was put in place to rescue ICI by the previous Government. If the Central Bank should do anything with their profits they should fulfil their primary role. One of their primary roles is certainly to act as a rescue agency for any bank as the need might arise. If the money is now being taken into current spending by the Government does that mean there will be less reserves in the Central Bank to fulfil their role as a banker's bank with responsibility for rescuing banks which are in trouble? It certainly does not inspire confidence.

With the Book of Estimates published and debated and with Private Notice Questions going through the House every week, which are contingent on this redundancy package, we do not know yet the total extent of the amount for which the Minister is in the process of raiding the Central Bank. We do not know how he will show that in the Government accounts. In the final analysis we do not know whether it will be paid for out of income tax in three, four or five years time. It is most unsatisfactory and the only explanation we can come up with at present is that the Central Bank are a very unwilling partner in this arrangement. The Central Bank are being squeezed to put up money which the Government should provide out of their resources and the Central Bank are putting up a fairly strong resistance. The Minister is not prepared to announce the mechanism because he is not yet sure of what the mechanism is. The arrangement is not in place even though the constituent elements are all there. The volume, the nature and the timing of the redundancies are available to the Minister's Department.

I know there is also a discrepancy in answers to Written Questions which are coming from different Departments. The Minister should monitor the questions which are coming from Departments concerning the cost of the pay agreement — the redundancy pay element — because we are ranging now from people getting information to people saying they have not got the information to give us. I would like to hear what the Minister has to say in five minutes. If I do not get satisfactory answers I will be raising the matter again and again until we get the cards on the table and until we know where and how the money is arising.

Minister for Finance (Mr. MacSharry):

I am at a loss to see why Deputy Noonan persists in trying to make political capital out of the Government's efforts to tackle the problems of the public finances and implying that there is something wrong with seeking the assistance of the Central Bank in the financing of the voluntary redundancy package. Of course, I should not be at a loss because I know what is really troubling Deputy Noonan is the success we are having in tackling those public finances which were left in such a state after his four and a half years in Government when we had nothing but trick-o'the-loop type financing which has been——

Mr. Noonan

(Limerick East): Answer the questions.

Mr. MacSharry:

——totally forgotten about over the past nine months. I am glad to say that the voluntary redundancy package represents a major effort to reduce the numbers employed in the public service and to make a lasting contribution to cutting public expenditure. I have already explained to the House on a number of occasions—during my closing speech in the debate on the 1988 Estimates on 25 October and, more recently, in my reply to a number of parliamentary questions on 5 November and subsequently — the approach which the Government are taking.

I pointed out that the cost of the lump sum redundancy payments was not taken into account in the recently published Estimates volume and that the cost of these payments would, of course, be influenced by the volume, nature and timing of the redundancies. I also informed the House that the Government were discussing with the Central Bank arrangements for meeting these exceptional costs and that when the total cost had been determined and the financing arrangements had been finalised, I would present the full details to the House. As far back as last July I made that position quite clear and that is the reason Deputy Noonan continues to raise the point. When he suggests anything other than openness in this regard and talks about trick-o'the loop, it is nonsensical because it has been raised by me as far back as——

Mr. Noonan

(Limerick East): I want the Minister to tell us——

Mr. MacSharry:

When it is worked out and the details are known the Deputy will be told. Given the exceptional nature of the costs involved, it was quite appropriate that the Government should make an approach to the Central Bank in the matter. The bank for their part have adopted a constructive attitude, unlike what the Deputy is saying, consistent with their statutory functions and responsibilities and bearing in mind the resolute measures which the Government are taking to deal with the imbalances in the public finances.

I want to make it clear that, contrary to what Deputy Noonan suggests, there is nothing unprecedented in this approach by the Government to the bank for assistance. The bank provided funds to finance the Exchequer borrowing requirement on a number of occasions in the past when they considered that the circumstances warranted this. These funds were provided by way of the purchase of Government securities by the bank. The bank advanced £20 million in this way in 1965 which was repaid in 1969, £28 million in 1974, £50 million in 1975 and £100 million in 1979, in all a net total of £178 million. Also since 1974 the bank provided normal overdraft facilities to the Exchequer.

The Minister for Finance also borrows from the Central Bank in the normal course to meet Ireland's subscription payment to the capital of the European Investment Bank, the World Bank and the International Finance Corporation. As at 19 August 1987 the total amount borrowed under these headings was £22 million. Furthermore, as late as 1985 the bank make available to the Minister for Finance a loan of £100 million for a period of 15 years for on lending to the insurance compensation fund in connection with the funding of the administration of the Insurance Corporation of Ireland. This loan involves no net payment for the Exchequer. There is, therefore, ample precedent for the provision of assistance by the Central Bank to the Government in special circumstances.

Discussions with the Central Bank are continuing and I can assure the House again that when the cost and financing arrangements have been finalised I will report the details to the House. Further to other questions raised by the Deputy I will give him the reply to a question put down on 10 November by Deputy John Boland:

Mr. Boland asked the Minister for Finance the criteria employed, such as, age profile, length of service, grade in order to assess the additional ongoing pensions costs arising from redundancies which will be a consequence of the expenditure reduction measures referred to in page V of the Estimates for the Public Service 1988.

Minister for Finance (Mr. MacSharry): The allocations for additional superannuation costs arising from the reduction in public service numbers next year were determined globally on the basis of expected trends for each of the major public service groupings taking into consideration that the reduction in numbers will be achieved to a significant extent by natural wastage, retirements, career breaks, as well as through acceptances for the Government's voluntary redundancy package. The redundancy package, the details of which I circulated in the House last week, is being offered (i) in those areas of the public sector where staff surplus to requirement has been identified and (ii) to all other personnel aged 50 or over in the Civil Service, health and non-commercial State bodies.

All of the information that was available in relation to this question has been made known to this House by myself on numerous occasions. Whether or not Deputy Noonan or others like it, because we are making great progress and because we are in control of the public finances generally and seeking the co-operation of all concerned, including the Deputy on occasions, we are having success. There is no point in trying to label openness as trick-o'-the-loop or trying to hide something because that is not the case. If the Deputy raised the issue here every day he will not get anything other than the openness that I have adopted, and which this Government have adopted, since 10 March this year.

Mr. Noonan

(Limerick East): A very bad performance by the Minister.

The Dáil adjourned at 9 p.m. until 10.30 a.m. on Wednesday, 18 November 1987.