I move:
That a sum not exceeding £10,000,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1987, for the payment of lump sum and related payments resulting from early retirement in the public service.
During last summer, the Government, recognising the need to make savings in all areas of public expenditure, undertook a rigorous examination of all public spending programmes. The decisions we made during the examination were reflected in the 1988 Abridged Estimates Volume which was published in October and which involved reductions of £485 million below the amounts which would have been required to maintain services at their existing levels.
No Government can tackle the problem of the public finances without looking critically at the full range of services hitherto provided to the public and at the size of the public service workforce which has been built up to provide those services. The problems inherited by this Government compelled them to decide upon significant changes in certain public services and on the consequential changes that should take place in public service numbers.
It was clear from an early stage in the life of this Government that reductions on the scale required in the numbers employed in the public service could not be fully effected by reliance on natural wastage and partial bans on recruitment. It was necessary for us to go further — in a direction normally adopted by private employers when their needs and resources are curtailed. Experience in the private sector had demonstrated that many workers, because of their personal circumstances or the suitability of their skills to new career paths, welcomed the option of early retirement. We believe that in a workforce as large as the public service there are many people who wished to quit that employment but who, because of superannuation practices, would be left for varying periods without income.
The Government, therefore, decided to facilitate the early departure of such people from the public service by providing in the form of new voluntary early retirement arrangements attractive and immediate inducements to such people to go.
Initially we confined the terms of those offers to people working in areas where developments had made particular groups of staff surplus to the needs of the public service. More recently the scheme has been extended to the over 50s in most areas of the public service. The vacancies which will arise in the case of posts which are not surplus to need will be filled by redeployment. In the Programme for National Recovery negotiated between the Government and the social partners, the Government emphasised their belief that the necessary reductions in public service numbers could be brought about on a voluntary basis. The scheme we have introduced is on a voluntary basis.
The terms of the offer have already been explained to this House. In brief, they offer to public servants outside the scope of the social insurance scheme a bonus of up to seven additional years service for superannuation purposes or a severance payment of up to 18 weeks pay in addition to immediate pension and lump sum to which their actual service entitles them. In the case of public sector staff on full PRSI, their superannuation benefits are integrated with existing entitlements under the social insurance and redundancy schemes.
As I indicated in a reply to a parliamentary question earlier this week, the early retirement package has been offered to about 13,500 public servants of whom about 900 have accepted and will be leaving during 1987. The lump sums and related payments due to them, and payable in 1987, will amount to £10 million. It is only the frontend costs, that is to say, retirement lump sums, short service gratuities, employers' liability under the Redundancy Payments Acts, and additional severence gratuities, that will be met from this Vote. The cost of pensions will be met, in the usual way, from the appropriate Votes.
Of the 13,500 public servants who have been offered the early retirement package, many have indicated that they will accept and will leave in 1988. It is, however, not possible at this stage to estimate the total number of people who will take early retirement during 1988. As I have previously explained to the House, some public service employers such as health agencies and local authorities have not yet decided on the appropriate level of staffing in 1988, in the light of their 1988 allocations so it is not known how many redundancies they will be seeking. In the education area, it is envisaged that offers of the early retirement terms will be made before the end of the 1987-1988 school year. The precise numbers involved are currently being examined.
As I also indicated in reply to a recent parliamentary question, the Board of the Central Bank have approved of arrangements under which the bank will make advance payments of surplus income to assist the Exchequer in meeting the exceptional costs of the redundancy programme. These arrangements are in accordance with section 63(7) of the Currency Act, 1927, which provides that the Central Bank may at any time pay into the Exchequer such sums on account of surplus income as may be agreed upon by the Minister for Finance and the Central Bank.
Each year, the Central Bank pays over to the Exchequer the surplus income it has earned in the previous year, after having made certain appropriations to reserves. The surplus income is taken into the Exchequer as non-tax revenue and is shown separately in the White Paper on Receipts and Expenditure published at the start of each year.
Under the arrangement I have just outlined, the Central Bank will advance to the Exchequer not later than 31 December 1987 an amount equal to the issue from this Vote to cover lump sum payments made this year. As I have already indicated, this represents an advance payment to the Exchequer of surplus income by the bank in addition to the amount which would otherwise have been paid.
The result is that the exceptional costs of the redundancy programme will be financed by the additional surplus income from the Central Bank and will not add to either the current budget deficit or the Exchequer borrowing requirement.
The advance by the Central Bank will be repaid over a period of four years, after a moratorium of one year. The repayment will take the form of four equal annual deductions by the Central Bank from the normal payments of surplus income.
I am confident that the scheme will lead to Exchequer savings. As Deputies will appreciate, the precise gains and costs to the Exchequer depend on the age, salary and length of service of those who leave within the scheme.
The bulk of the lump sum payments will fall to be paid in 1988 and will also be financed by an advance of surplus income from the Central Bank. Since this is a voluntary package, we cannot be sure of the numbers and grades of staff who will opt for it, and since the lump sum due to each individual depends not only on his or her salary level but also on length of service, it is impossible to give a firm estimate of the lump sum costs for next year. It is tentatively estimated that the amount required in 1988 will be in the region of £80 to £100 million.
It has been suggested that this arrangement with the Central Bank represents "off-balance sheet financing". It is nothing of the kind. The payment from the Central Bank will be brought in to the Exchequer as non-tax revenue and will be shown as such in the Exchequer accounts. Payment of lump sums to public servants on departure will be from this special Vote which must be approved this year and next by the Dáil and which will be audited by the Comptroller and Auditor General.
I commend the additional Estimate to the House.
