It is important to deal in facts when speaking about important issues. No Government or employer takes lightly the need to reduce the wages and salaries of its employees. However, in the context of where we are and with the budget deficit we were faced with, it was critically important, first and foremost, to stabilise the public finances. It has been suggested that this budget was aimed at bond markets and that it was an economist's budget to satisfy those people who lend us money. The harsh reality, however, is that Ireland's international reputation is of critical importance to the country on several fronts. First, we are borrowing huge sums of money and if our international reputation is damaged——
Financial Emergency Measures in the Public Interest (No. 2) Bill 2009: Second Stage (Resumed).
I am sorry to interrupt the Minister of State, but is he sharing his time?
No. That is being addressed.
The Minister of State is quite capable of doing it himself.
I would not mind sharing my time. It was not that I harshly wanted 20 minutes to myself, but the Minister of State, Deputy Martin Mansergh, will contribute at a later stage.
Our international reputation is of critical importance because we are borrowing large sums of money. It would be very expensive for bond markets and lenders to get the insurance to lend money to a country with a damaged reputation. It would place an onerous task on taxpayers to try to fund long-term lending in that context. More importantly, Ireland's reputation must be protected at all costs. First and foremost, we attract a great deal of foreign direct investment. Some 136,000 people are directly employed by companies that are located here as a result of foreign investment. It is critically important for Ireland Inc. as a location to attract such investment. If we did not take the necessary measures to correct a spiralling budget deficit we would be failing in our duty to portray Ireland abroad as a positive place in which to invest. In discussing foreign direct investment, we are speaking about real, high-end and high quality jobs throughout the length and breadth of this country. Any Deputy would support the Government in the context of trying to protect the country's international reputation.
This budget has sent out clear signals. It is a difficult budget and many people's living standards will suffer because of it. Members on the Government benches do not take that decision lightly, but from necessity. We must also address our competitiveness. Why do we have a budget deficit of more than €20 billion?
We all know the reasons.
The Minister of State should enlighten us.
If Opposition Members take a simplistic view that all the mistakes were made by internal decisions, they would not be able to address the problem.
No one ever said that.
The Minister of State without interruption.
The simplistic view is that all this was due to internal decisions.
No one ever said that.
When I hear commentaries inside or outside this House, by and large, that simplistic view is put across.
Is the Minister of State saying that it is all due to external measures?
I am quite happy that Deputies can correct the record at any time when they stand up to deliberate here this evening.
We lost competitiveness during the sustained period of an economic boom. That is an accepted fact. We paid ourselves increased wages, which undermined our competitivenessvis-à-vis our European counterparts and further afield. There was a property bubble, but I did not see anyone on either side of the House ever say that the construction industry would bring this country to its knees.
Deputy Richard Bruton said it.
Deputy Richard Bruton said it consistently.
Everybody was quite happy to see employment opportunities for young people leaving school. Many others came from abroad to work here. Everybody on all sides of the House welcomed that. In fact, many of the budgetary proposals being put forward by the Government at the time to try to deflate the property bubble were opposed.
The Minister of State should highlight them.
I can cite stamp duty as a very simple one. The Opposition said it should be abolished, which would have inflated the housing market even further.
That was for first-time buyers.
I will make my contribution and then I will listen intently to other speakers.
On competitiveness, we must readjust how we pay ourselves. If we do not, we will lose more jobs and it will further erode our competitiveness. In recent times, labour unit costs in Ireland went down by about 4% and rose in other European countries by between 2.5% and 3%. That in itself has made us more competitive, but there is a great deal more to do. The simplistic view being put forward that we can tax our way out of this difficulty, had been shown historically to be a failed policy. If we continue to burden the private sector in a difficult time — when there is huge vulnerability along with job losses steadily increasingly, up until quite recently — we will further exacerbate the problem. We must try to stabilise the public finances and do nothing that would make our private sector less competitive. At the end of the day, most job creation opportunities will arise from the small and medium-sized business sector, and will then move on to export companies.
Over many years, Enterprise Ireland and IDA Ireland have been very successful in bringing foreign direct investment to Ireland and in promoting Irish companies abroad through Enterprise Ireland's trade and technology board. We are acknowledged worldwide as being one of the most innovative people on the planet. In addition, we are willing to deal with difficult decisions when they arise. Looking back at the history of what has been done, particularly since 1987, hugely important Government decisions built a sound financial footing for the economy to evolve and become innovative with a highly motivated and flexible workforce. That has benefited us no end. Equally, our investment in education is acknowledged around the world. We have the best and brightest coming out of our colleges at the moment. However, if we put our heads in the sand and do nothing to rein in the public finance deficit, we will deny many of our finest people the right to work here and develop this country.
It is also important to get a stimulus package into the economy. It has been said that there is no such package, but Deputies opposite should examine the budget's stimulus package of well over 5% this year. There is a commitment that there will be such stimulus packages right through to 2014 and beyond. That gives us the confidence to know that school building programmes will be continued, as will the motorway programme. In addition, there will be investment in water and sewerage schemes, as well as research and development, including broadband and other key areas outlined in theSmart Economy document published last year. That document was ridiculed then, but it is now accepted here and abroad as a positive blueprint for investment in research and development, science and technology and the idea of the innovation island. That is critically important in attracting overseas companies to locate here. Likewise, when we promote Ireland abroad we can say we have a strategy for continued investment in key areas to create competitive opportunities and a dynamic to ensure that we can increase the labour market in the years ahead.
Obviously there are major pressures on families at present. No Government or employer takes lightly a decision to reduce wages or salaries, but it is very necessary. If we did not do it today, somebody could quite possibly do it for us in the very near future. That is not an idle threat. Some people may say that could never happen, but it has happened in many countries over the years. The IMF has arrived in some countries heretofore and is currently trying to address budgetary problems faced by some European states. The greatest signal we could send from this Chamber is that we are resolutely determined to deal with the difficulties in as fair and compassionate a manner as possible. It is very difficult, however. I have yet to hear from the Opposition benches a method whereby one can reduce public sector pay by more than €1.3 billion, which is being advocated by Fine Gael and which has also been acknowledged lately by the Labour Party benches. Yet when it comes to the specifics, they will continually oppose them. Nobody wants to take €1 billion out of any social welfare Vote, but it is fundamentally necessary because that is a huge annual cost to the Exchequer. We had to address that also, but when it comes to the specifics the Opposition will oppose every measure. Some of the Fine Gael proposals state that even more should be taken out of various areas and theNew Era document will provide the stimulus to address all our difficulties. There are many flaws in it. However, this measure is part of an overall strategy and it is simplistic to look at it in isolation. We have reduced substantially in recent times the costs of running the State and more than €8 billion has been taken out of the economy since the slowdown. The pension levy was introduced and it in itself was a heavy burden on the public sector and Civil Service. We now have to make the decision to rein in public pay.
It has been suggested that we could tax our way out of the difficulty. The Labour Party, in particular, seems to believe there is a pot of gold elsewhere. One thing I know is that if we send out a message that we are not capable of addressing the budget deficit and that we will tax our way out of it, investment into the country will dry up in a very short time. Other people are campaigning for their countries to be seen as hot spots for foreign direct investment. The Singapores of this world are competing with Ireland on a continual basis. Now, with increased competitiveness and an adjustment in how we deliver services to people, we have a golden opportunity to send out a message that Ireland is very much open for business.
The view has been put forward, particularly by the Labour Party, that our international reputation is in turmoil. Anywhere I go internationally as Minister of State with responsibility for trade and commerce, it is acknowledged that our financial services centre is one of the finest financial services centres in the world and that the regulation of the sector is up to scratch. There have been difficulties with our internal banking system, but that should not be confused with the financial services centre. We have 26,000 people working in the financial services centre, which is of huge importance to our economy. Therefore, it is wrong for people to come in here and throw out an opinion that our international reputation is shattered. It is far from shattered, but it is certainly undermined when people cast aspersions in the Chamber without having the facts. That does a disservice to the people in the sector.
These are difficult times, but for people to try to portray those on this side of the House as people who do not understand what the public is going through is disingenuous and wrong. Fianna Fáil, in its many years in Government, has funded and expanded the number of employees in the public sector and expanded the services it provides for the people. We have been very proud of what we have achieved. It is with a very heavy heart, as the Minister for Finance said, that we must now make these decisions. We do not take these decisions lightly, but they are necessary. I hope that over the next number of months we will replace despair with hope and see opportunities creeping back into the economy. Hopefully, by the time we are discussing the budget next year, we will have reached our targets, will have growth in the economy and will have provided hope and opportunity for the people.
I wish to share my time with Deputies Tom Hayes and Pat Breen.
Is that agreed? Agreed.
The Financial Emergency Measures in the Public Interest(No. 2) Bill is the topic of debate tonight. The key issue for any government is what choice to make. All parties, including Fine Gael, were in agreement that we needed savings in the area of public sector pay. The choice facing us was how this could be achieved in the fairest possible manner. The Government has tackled the issue crudely and now, regardless of the income of public sector workers, the income cut will apply from the first euro. This is unfair. Fine Gael believes the first €30,000 of income of public servants should be exempt from the cut so that anyone on less than €30,000 would not suffer a pay cut. Anyone earning more than €30,000 would suffer a 5% cut on what they earn over the €30,000 threshold, with the percentage cut increasing as the earnings level increased. This would mean the lower paid would suffer a lesser burden. Many public servants on less than €30,000 a year are young people who obtained mortgages from banking institutions and building societies. These people were seen as having gilt-edged security and were regarded as people whose repayments would be guaranteed. However, they have suffered a reduction in income of between 10% and 15% in the past two years.
What we require of the measures to be applied is to be fair. Fine Gael agreed there should be €1.2 billion of a saving, but it would have applied direct pay cuts of only €567 million and would have exempted all income below €30,000. Fine Gael would have sought savings from efficiencies in local payrolls. The budget fudges the hard decisions. It is a divisive budget that has pitted the public sector against the private sector. This is the wrong approach. Fine Gael realises from its dealings with people on the ground that both sectors are under extreme pressure, but that all realise the critical state of the economy. Deputy Kelleher said the crisis was not all internal. No-one denies that. However, the ESRI has informed us that up to half of the Government deficit has been driven by unemployment. Almost 25% of our GDP was related to the construction sector, but a sustainable percentage should be in the order of 6% or 7%. The Government allowed this happen unchecked. The Governor of the Central Bank appeared before an Oireachtas committee today. With regard to the banking sector, he stated much of the crisis was due to a lack of proper regulation. The fault for this lies with the Central Bank and the Government of the day. We needed an economy that could withstand external shocks, but our problem was that because we suffered internal shocks also we could not withstand them.
The Government fudged the hard decisions in terms of making proper efficiencies within the public sector, dealing with quangos and finding savings in these areas. The Fine Gael policy document tackled those areas. The Government went for the soft target. It decided to hit public servants, hitting particularly hard the lower paid workers in the sector. It hit carers, widows, the disabled and vulnerable groups such as the blind. There is no method in that. Deputy Kelleher referred to the capital programme. The Government cut €1 billion from the capital programme this year and will do the same next year. This is not a courageous budget. It is a budget that aims to balance the books just for the short term, but it is doing that in a divisive way.
The issue of competitiveness should have been tackled. Our exports were growing until 2003, but that year they decreased. At the same time, the residential market went out of control. We are a small open economy, but we became extremely uncompetitive during the Celtic tiger period. Much of the decline in competitiveness happened in areas over which the Government had control. However, the only measure introduced in the budget to deal with this is an exemption from employers' PRSI for new employees taken on in SMEs. One of the main concerns currently is existing employees. What does the Government propose to do for people who are hanging on by their fingernails in terms of keeping small businesses running and keeping people in jobs? The SME sector cannot access credit. I heard of a case today where the banks closed the business account of an individual because he missed one repayment on a loan. We need to support people in the SME sector because that sector can help turn around the economy. However, it is not getting support. Fine Gael proposed a proactive measure to deal with this issue, namely, to cut by half the lower rate of employers' PRSI, from 8.5% to 4.25%, and to cut by 2% the upper rate, from 10.75% to 8.75%. That would benefit enormously employers who are trying to survive. It would cut the cost for the employer while maintaining the minimum wage for the hard-pressed employee.
Deputy Pat Breen organised a meeting with Aer Lingus today on the travel tax. The Minister of State, Deputy Mansergh, is a representative of the region affected by it. The travel tax brought in a relatively small amount of revenue and decimated the tourism sector. Fine Gael believes it should be abolished to allow an air-travel stimulus in the affected region.
The Government reversed the VAT increase, decreasing the rate to 21%. This is to be welcomed. We felt the lower rate of VAT should have been cut from 13.5% to 10% until the end of 2010. This would have provided a major fiscal stimulus in labour-intensive areas. Although the Government produced a budget, it does not restore competitiveness or fuel a capital programme. It is divisive. The role of the Government is to lead all people in the same direction, not to exploit people's fears.
There is not a huge difference between the public and private sectors. Employees in both sectors are under major pressure with regard to children in school. The Government cut child benefit by €16. It is the only universal payment to the child. The cut affects both public and private sectors. It hit those in the public sector, particularly the lower paid, in a very draconian, harsh and cruel way. Next January, when the wage cuts are implemented, parents who will have bought presents for their children and who will have tried to have a good Christmas will find their pay reduced by 5% and upwards. This will be in addition to cuts to benefits for carers, widows, the disabled and the blind. The cuts will affect people's ability to repay their mortgages.
Fine Gael favoured a more progressive measure, namely, to exempt from the cuts the first €30,000 earned by any public servant. I hope the Minister will take on board our suggestions on Committee Stage. The proposed exemption would give some leeway to the lower paid and to everyone working in the public sector. The measure proposed is fair and balanced and deals with the need to make savings in public sector pay; yet, in its place is a crude device that will set up a winter of discontent and put people under enormous financial pressure. There is nothing in the budget to provide a proper job stimulus package.
I ask the Minister to take on board our reasonable suggestions on Committee Stage tomorrow. They are fair and deal with the financial circumstances of the State while recognising the difficulties being experienced by, and the pressure on, public servants.
I welcome the opportunity to speak. Public sector employees and welfare recipients have become the latest victims of the Government's blame game. There is a saying that a good leader takes a little more than his share of the blame and a little less than his share of the credit. The kernel of the problem in this country is that we do not have leadership. The Government is bereft of ideas and has no plan. It has no idea how to get us out of the economic crisis and that is why, in recent weeks, spin doctors were diverting attention from the Government to the public service workers and social welfare recipients. They were easy targets.
Before the budget last week, at the 11th hour, the talks between the public service unions and the Government broke down. We must ask why they broke down. There are rumours of a frosty relationship between the Taoiseach and the Minister for Finance. Why did the Government walk away from the offer of the unions? Media reports last weekend suggested there was to be a radical overhaul of the public service. The union members were willing to make a sacrifice and that is the most important point. They were willing to sign up to cuts that would effect a reduction in the public sector wage bill of €1 billion.
There is no doubt that the issue of unpaid leave ended the talks and pay cuts are now being imposed universally across the public sector. Unfortunately, there is still no commitment to reform. I understand the unions were seeking redeployment of staff across the public sector; the centralisation of functions concerning payroll and human resources; the introduction of an extended working day in the health service covering the period 8 a.m. to 8 p.m.; and the provision of community-based health and social care services at night and at weekends. All these changes had been agreed to.
The moratorium on employment and the failure to invest in the public service has already affected services. In my area, with which Deputy O'Donnell will be familiar, the HSE's idea to centralise the emergency and acute surgical services of the hospitals in Ennis and Nenagh is having a huge effect on the accident and emergency services in Limerick Regional Hospital. The nurses at the hospital have balloted on industrial action on foot of the failure of the HSE and the Minister for Health and Children to live up to their commitments and invest in the centralisation of the services.
The diversity of operations in the public service is complex and a uniform approach will never work. I have spoken to many public servants in my constituency recently. They are extremely angry that the first €30,000 of their salaries is to be cut by 5%. One girl to whom I spoke, who is earning approximately €30,000, said she has borne her fair share of the burden by paying the pension and income levies. She felt she had accepted these cuts in the national interest and said that, although she did not create the problem, she was paying a very high price.
The reality is that public sector workers experience their share of problems. Many bought houses at inflated prices. There is a perception that many in the public service are very well off but this is not the case, as we know. Ultimately they are in a similar position to many of their counterparts in the private sector.
Where are we going from here? There is no way at this stage the Government will be able to negotiate a radical package to reform the public sector. The curtailment of services and the reduction of budgets, be it in respect of health or education, are putting severe pressure on the various sectors and they are unable to cope. Staff morale is at an all-time low and we are facing a long period of uncertainty. Strikes are on the cards. Nobody wants to go down this road but it is not easy to see an alternative. The Government is only interested in the blame game. As Deputy O'Donnell said, we hope that, on Committee Stage, the Government will listen to the Opposition and put reform on the cards again to get the country back on its feet.
No one doubts that this was a difficult budget to put together as we are living in extremely difficult economic times. I have no doubt the Government intended doing the best it could but the way it went about it poses many questions. Workers in the public service are concerned, demoralised and unhappy with their treatment and the large amount of criticism meted out to them. It is very important to have a good public service, as every country needs one, but there is very little hope among public service workers.
Yesterday, the Minister of State, Deputy Mansergh, and I visited South Tipperary County Council offices. One could see the worries on the officials as they tried to do their work. Later when I visited a patient at South Tipperary General Hospital, I met hospital staff concerned, first, about the hospital and, second, about their mortgage repayments. Nurses, teachers and other public sector workers calculated their mortgage repayments on the basis that their salaries would rise incrementally and not be cut back. Many of them are now under financial pressure.
Public servants are also the butt of much criticism unfairly meted out to them. Many of them are committed, dedicated and loyal to the public service. They chose to work in it and give a service to their communities and people. The Government has underestimated the scale of the problem it will have in dealing with the demoralisation of the public service. No one would want to work in a position in which they are not valued. The Government must, therefore, send out a clear signal that it wants a good and efficient public service. Public servants' efforts must be recognised and they should be given hope for the future.
The very fact the Government's cuts went below the knee and hit the lowest paid in the public service is wrong, unjust and unfair. There were other ways these savings could have been achieved instead of hitting those who earn less than €30,000. This was a total miscalculation on the Government's part.
I do not disagree with the sentiments expressed by Deputy Tom Hayes about the quality of our public service. However, I disagree with him on some other parts of his analysis. I have spent all of my adult life either working in public administration, lecturing on it or dealing with civil servants. There are high standards in our public service. That is why most of the recent debate has been quite hateful in its orientation and in the attempts to create a divide between the public and private sector.
The economic reality, however, is very different. The Exchequer deficit to November was just over €22 billion when last year it was under €7.9 billion. The tax take of €30.8 billion was almost €1.36 billion under target. Income tax receipts were €575 million behind budget expectations. We are borrowing at an unsustainable rate to fund current services. A high proportion of the funding from borrowing is public sector pay. At the end of December 2007 our national debt stood at €38 billion; this year it will be twice that.
The cost of servicing our debt rose from €1.6 billion last November to €2.7 billion for the first 11 months of 2009. Every extra €1 billion spent servicing the debt is the equivalent of 21,000 teachers' salaries or a 6% cut in social welfare. We must make the right decisions now.
All the major political parties agree with the Government that the size of the adjustment to be achieved must be between €4 billion and €4.3 billion. However, all differ sharply on how it can be achieved. Fine Gael wants headline salary cuts in the public service, a move I acknowledge as being courageous for an Opposition party.
There was a difference. We would have exempted the first €30,000 earned.
Labour, however, opposes such a move with its solution of raising €2.3 billion in additional taxes. That, as all members know, is not sustainable.
Fine Gael claims one cannot tax one's way out of recession, a point with which few would disagree. Clearly, the two Opposition parties are poles apart on strategy, however.
The Labour Party's position is quite extraordinary. Its public representatives are intelligent and dedicated, as most of us are in this House, and they want the best for us. However, the party's spokesperson's contribution to this debate is perhaps best summarised by a recent piece in theSunday Independent:
It is quite amazing that [Deputy] Joan Burton is still living in a world where party politics takes precedence over the national interest. So what we have here is the opposite of the Tallaght Strategy, a situation whereby the opposition is actively working against the Government's efforts to save Ireland.
That judgment is harsh but not inaccurate.
What is novel in the current circumstances is that there are clear divides in Fine Gael. I admire the fortitude and courage brought to this issue by Deputy Bruton. More than any other Member in this House, I pored over the Fine Gael policy document released the Friday before the budget. While a courageous document, it demonstrates the internal divisions in Fine Gael on strategy. It proposes, for example, PRSI hikes that are savage, will kill jobs and slash take home pay.
Deputy Richard Bruton, to his credit, accepts there must be a cut in public expenditure of a net €4 billion now. Deputy Lee, the economic guru who gets so much media time and space, disagrees, however. I concur with the former Fine Gael leader, Alan Dukes's comments that Deputy Lee's contribution at this year's MacGill Summer School was far wide of reality. Specifically, Deputy Lee rejected the view that the national deficit should be brought to within 3% of GDP by 2013 when Deputy Bruton had already called for the deficit to be addressed by 2012.
The Fine Gael pre-budget document itself has some examples of voodoo economics. The Fine Gael proposal to abolish PRSI relief on employee pension contributions will force €185 million in additional costs on businesses. The proposal to abolish the ceiling on employees' PRSI will raise €120 million is in effect a substantial hike in taxes for workers who have already been hit with increases in taxes. Another proposal is to remove the employee weekly PRSI allowance which will reduce take home pay of all workers, by €350 million. It takes courage in politics to lay down the unpalatable.
The proposals on carbon credits are simply wild. This effectively means one would claw back the value of carbon credits in the energy sector. These proposals would shove up electricity costs for business and households. There is no doubt in my mind the proposition would be the subject of legal challenge because when Minister for the Environment, Heritage and Local Government, I introduced the arrangements. If that legal challenge were to be lost the Deputy would be €200 million short in his calculations.
That is the windfall tax.
Yes, that is what the Deputy is calling a windfall tax. If the Deputy thinks about the Kyoto agreement——
It is already being charged to the consumer.
No, that is not quite the point. However, I will not get into dialogue on it with the Deputy. I simply make the point that it is another problem in his calculation. The Deputy has figured into his calculation a cost of €20 per tonne. The tonnage price has varied dramatically since 2006, when it was €22. It then reduced to €7 per tonne in 2007. Today carbon costs approximately €10 per tonne not the €20 per tonne factored into the calculations.
Tax the rich is another popular view. It is always a good one for a headline. To be fair, it is not the policy being argued by Fine Gael but by the Left. We have a problem in this country in that we have an extremely narrow tax base, in particular in the area of personal taxation. Changes in taxation over the years have been highly progressive. Currently 4% of earners pay 48% of all income tax in this country. Almost 50% of earners pay no income tax and the top marginal rate is now approximately 52%. Those politicians who argue inside and outside this House that somehow or other there is a treasure trove out there to be plucked are not being truthful with themselves, their constituents or the country. The question that must be asked of those who suggest that raising taxes is the way forward is — how sustainable is that proposition? If we cannot raise taxes and cannot increase borrowing we have only two options, namely, cut services or cut the cost of supplying those services. Nobody in this House wants to cut public services any further. This is where the Bill before us comes in.
The highest single element in the cost of public administration is payroll costs, which we all accept. There are only two ways to address payroll costs, namely, let people go or reduce the rate at which staff are paid. That is where we are at the moment. I have never heard a politician argue in this House that we should seek redundancies, in particular involuntary redundancies, in public administration. This is not the time to do so. It is not the proposition that is made. I note that in the Fine Gael document there is a suggestion that 10,000 jobs in the public sector be shed.
That is 7,000 jobs by normal attrition and 3,000 voluntarily.
Yes, I accept that. I am certainly not suggesting for one moment that Fine Gael is suggesting anything other than that.
Several economists agree with the proposal.
None of us in this House wants to cut public service numbers. That is not the way forward, leaving us with only one option, namely, to start operating on pay rates. The biggest single element in the cost of public services is payroll costs. It is deeply regrettable that we face such harsh realities. Sadly, that is where we are.
Is it fair?
I have listened with dismay to the polarisation of the debate in the past few weeks. That polarisation is something I utterly deplore. It is counterproductive. We, as a society, must hang together or we will most definitely hang apart. To demonise public administrators or public servants, as has happened in the debate in the recent past is simply counter to the public good.
The Government certainly did.
I agree with the Minister for Finance, Deputy Brian Lenihan, who said in his speech that we have all experienced the excellence and dedication of the public service. I have been in the public service. Half my adult life was spent working in public administration. I started my employment as a post office clerk and worked up the ranks until I became Assistant Principal in the Department of Finance. I must say, in all of my years in public administration I came across people who were genuinely patriotic, who had a genuine concern about their country, who work hard and who are not paid princely sums. That needs to be said. Many public servants are deeply offended at the commentary about them and the work they do.
And the money they are being paid.
It is foolhardy for a nation——
The Minister of State should deal with the pay cuts.
I will deal with the pay cuts.
Deal with the issue at hand.
The people will not believe a word from the Minister of State.
With respect, I do not need direction from the opposite side.
The Minister has——
We do not want to listen to waffle from the Minister of State.
With respect, what the Deputy should do then is skulk out of the House and wait outside until it is his turn to contribute.
I am here and I have the same rights as the Minister of State.
I have listened——
The Minister of State might believe he has a superior reason for being here.
Have some respect and listen to the Minister of State.
The Minister of State is full of it.
With respect, I have listened to all that has been said on that side of the House. With respect, the Deputy does not deserve respect.
The Minister of State will not tell me to leave this House——
The Minister has also said that the cost of public——
——nor will anybody else on that side of the House.
Listen to the waffle.
I can assure the Minister of State that nobody will put me out of this House.
Deputy Roche certainly will not do it.
If the Deputy could have a little bit of forbearance and a tiny bit of manners it would allow me to do what his patient colleague has asked me to do.
The Minister of State thinks he is superior.
Perhaps the Deputy's colleague could silence him.
He thinks he knows it all.
I am sorry Deputy——
I ask that there be no further interruptions from any speaker, please.
——the one thing I know more than anything else is that I do not know it all.
I know that.
I know discourtesy and bad manners when I see it.
Deputy Connaughton, please allow the Minister of State to continue without interruption.
It was something for which I was never known.
Every time the Deputy walks into this House he exemplifies discourtesy and bad manners.
I know my place unlike the Minister of State.
Deputy Connaughton, please allow the Minister of State to continue without interruption.
Shame on you.
On a point of order——
Shame on the Minister of State.
To return to the point raised by Deputy O'Donnell, of course I accept that this is a new position. People at the clerical and sub-clerical grades in particular are on modest salaries. I, too, understand the burden the pay cuts will place on public servants. Of course, I do. Many of my constituents are public servants. Unfortunately, I simply do not see that the cuts in pay levels can be avoided. That is the reality for the very reasons I outlined before the loud Deputy joined us. The review body on higher remuneration in the public service——
The Deputy is from Galway.
We have been joined by another——
I am Deputy Connaughton by name. Here longer than the Minister of State.
The Minister of State is not dealing with the matter at hand.
I would do so if the Deputy's two friends could be a little patient.
The Minister of State does not like to be heckled.
The Minister of State is labouring at length.
The Deputy is correct, I do not like to be heckled. I do not heckle and believe it is discourteous to the House.
Allow the Minister of State to continue without interruption, please.
On a point of order——
Unfortunately, I simply do not see——
Unless I am allowed additional time for the minutes I have lost I will not yield the floor to anybody.
On a point of order, the Minister of State is not dealing with the issue at hand.
Can I take it that I will be allowed the additional minutes?
The Minister of State is not dealing with the issue at hand. We are discussing public service pay.
The Opposition's heckling is pathetic.
Yes, the heckling is pathetic.
Last Friday saw the publication of the report of the review body on higher remuneration in the public service. Last Friday also saw the publication of the report——
What about the low paid?
This report deals with the issue of pay.
It deals with the highly paid. What about the low paid civil servants in the Minister of State's constituency who are earning €30,000 per annum and have large mortgages?
An important element in the review was that salary levels in the ranks that are benchmarked against rates for similar posts in other countries are on a comparable scale. If anybody knows anything about public administration they will know about the relativity of all salary scales within public administration.
The view adopted by this report makes sense. Previous benchmarking in this regard was deficient. To be seen ultimately as fair these arrangements will have to be applied across the board. For that reason, I believe the decision, for example, of hospital consultants to agree a 15% reduction must be acknowledged as an important step. While it is not among the grades examined by the review body, it is important that their pay be assessed on the same basis as that of other groups on comparative salaries.
I want now to turn to two other specific areas of public service pay, one of which is the Judiciary. I would have thought that the Judiciary more than any other group would have appreciated that there must be equity and fairness in matters, including in their pay. To their credit the Chief Justice and Presidents of the courts have urged all judges to pay the pension levy. The Minister has said that he will make provision in the Finance Bill to facilitate these payments. However, there needs to be a greater adjustment than this. Our Constitution rightly precludes——
What about the quangos?
——the Government or the Minister from cutting the pay of a judge. This is to protect the independence of the Judiciary.
How does one do that?
When this provision was being framed by those who drew up our Constitution, I do not believe they had it in mind that the matter of pay for judges should be put outside the considerations that apply to the population as a whole, that judges be considered as a particular class beyond the considerations that apply to other citizens or that the pay of all judges should be exempt from the considerations that apply elsewhere. The Government has decided that, in the light of the findings of the review body, there will be no increase in judges' pay during the lifetime of the Government. I, for one, would have hoped that a way to apply those considerations that will be applied to the clerks in the courts and to the clerical and other support staff in the courts could have been found.
I also want to make reference to the debate on State-sponsored bodies. The Minister referred to the recent public discussion about pay rates in the commercial State-sponsored bodies and he outlined the manner in which the pay arrangements in these bodies are determined. In our current context it is important that here, too, those who determine pay levels are conscious of their responsibilities. While the pay of the employees of the commercial State-sponsored bodies may not come from taxation, their costs are passed on to customers, citizens and businesses. It is my belief that the pay levels at the top of the commercial State-sponsored bodies need separate review. The argument is made that curtailing pay in these bodies would drive talent away. I do not believe that argument has any sustainable support.
On the general issue, another issue which, to be fair, has been dealt with by Deputy Bruton for which I give him credit and one area where I fully agree with him, it is 40 years since a radical reform of public administration in this country was proposed in the Devlin report. Regrettably, many of the changes proposed in that report have never been applied. In another life, I wrote and lectured extensively on the Devlin report and on the subsequent reform proposals,——
Where is public sector reform in the budget?
——and on where we, as a nation, had failed in successive Administrations made up of all of the major political parties in this House.
It is not possible to serve the needs of a progressive outward looking Ireland with an administrative system that goes back to the days when Queen Victoria was a girl.
One does not put public service reform into the budget.
Where is public sector reform in the budget?
Public service reform must be dealt with.
Where is it?
If the Members on the other side bear with me, they will here it.
No more than decentralisation.
The concept of ministerial responsibility that we so slavishly adhere to is an expensive mythology that stymies public administration and stultifies political life in this country.
It is very rare.
A predecessor of the Deputy on the bench opposite in 1973 balked at this. I do not blame him because of the arguments that were put against him. I will send Deputy O'Donnell a copy of something I wrote on that.
There has been much talk across the benches in this House about reform in public administration. I do not for a moment question the sincerity of what has been said about culling quangos — I agree with it——
The Minister of State does not really.
It is about choices.
——or introducing more appropriate accounting systems or budgets that relate to performance.
Does the Minister of State think what the Government is doing is fair?
All of those things would be improvements in themselves, but real reform will only come to public administration in Ireland when we address the myth that lies at the heart of the way we do our business here, in the Civil Service and the wider public service.
I will tell Deputy O'Donnell from where public service reform must come. It must come from each one of us in this House working together.
Deputy O'Donnell is more intelligent than that. He knows full well, as I do, that if we are to introduce the root and branch reform that we need,——
No. I deal in practical realities. I am not dealing in theoretical matters. I am dealing in finding savings.
——we must take a long hard look, particularly at the Ministers and Secretaries Acts, where successive Members on both sides of this House——
Why did the Government not do it before now?
The problem is that we all perpetuate the myth, particularly when we get into Opposition.
Deputy Roche could do with a period of it.
Blaming the Opposition.
What there must be to achieve real public service reform, and to change, in particular, the concept of ministerial responsibility, and to free the talent that is in the public administration,——
Where will that get savings?
——would be a cross-party agreement in this House to curtail that.
Deputy Roche can have it.
It has never been there. Deputy Varadkar, who may not be familiar with this, should go back to the difficulties experienced by the then Minister, John Boland, when he tried to introduce these changes.
Unfortunately, a great opportunity was lost.
It is a pity we do not have another half an hour of wisdom and fortitude.
Perhaps at some stage, if those who are interested in listening as opposed to coming in and showing how silly they can be,——
Wisdom and fortitude.
The Government never properly discussed it.
——if we were ever interested in having a real debate on public service reform, we could put aside time as a group of politicians to face the reality that Victorian legislation does not serve us.
The Minister of State is in power and can make the decisions.
We all can make that decision.
I wish to share time with Deputy Varadkar.
Is that agreed? Agreed.
I thank the previous speaker for the wisdom and fortitude that he has bestowed upon the Dáil in the superior role he has when he comes in here.
Exactly, a true enlightenment for all the persons who may not have got such wisdom from his world.
Every party in the Dáil fully understood the financial consequences that beset our economy last week. No matter how one looks at it and no matter what spin the Government will put on it, in fairness to Fine Gael and the Labour Party, all the Opposition parties came to the table last week with well costed and researched proposals,——
I understand that many economists who looked at it since have given it the green light, that there were two or three other measures that could have been taken in difficult circumstances.
My big problem with the budget is that while it is one matter to take out €4 billion, and there had to be severe cuts, the idea that the Government would cut its way, through this mechanism, out of trouble leaves me and everybody else baffled. There was no spark of sunshine in all of what the Government did last week to give any hope or confidence to anybody that they would ever get a job in the next couple of years. That is where it failed us.
There was nothing but gloom and doom. When the Taoiseach got up to speak, he reminded me of another day. If the Minister of State, Deputy Roche, wants a history lesson, I remember the day former Minister, Charlie McCreevy, presented a budget which we criticised. His pivotal message that day was decentralisation even though it had nothing to do with the budget, in the same way Deputy Roche states public service reform has nothing to do with the budget. The then Minister, Charlie McCreevy saw nothing wrong with——
To correct the Deputy, the budget is not the place to achieve public service reform.
I thought Deputy Roche stated a while ago that it was only rude Deputies who interfered.
Deputy Connaughton is probably the most.
Deputy Roche is the type of a guy who cannot bear anyone to speak only himself. He speaks and he listens to himself.
Not at all.
He is in a fantasy world of his own, as everyone knows.
Deputy Connaughton is a past master at ráiméis.
He never listened to anyone in his life.
Deputy Connaughton without interruption.
Could the Acting Chairman stop that man from rudely interrupting me?
Deputy Connaughton without interruption. Deputy Connaughton, you have the floor.
Deputy Connaughton could give master classes in rudely interrupting.
Having been so rudely interrupted by a very rude Deputy who does not understand his place,——
Absolutely, and a past master across the room from me.
——can I just say——
Deputy Connaughton has lost his tongue.
I have not. Thanks be to God, I am blessed with a wonderful memory.
So am I.
Deputy Roche has a superior one. He always believed that. He knows what I mean.
A vital chance was missed last week here in the Dáil. It was missed because there was an unfairness in that budget. One fact I have always known about Fianna Fáil — I must admire that party for many of its actions — is that fairness is not its middle name. It displays fairness for its own crowd, but not for the people of Ireland.
The major plank Fianna Fáil had was that the bill for the public service had to be reduced, and we all accepted that. I refer to those who earn a lowly €30,000 per year. That is the amount paid to many public servants, including those who work on the roads of Galway County Council and who clean the schools. Such people all earn less than €30,000. It is outrageous to suggest they should carry a 5% cut, which is effectively a cut of €1,500 for next year. I do not care how long Fianna Fáil will remain in Government. I realise the Government has done a deal with the backbenchers, the Independents and the Green Party. They were bought over for the next 12 or 18 months, whatever the deal. However, a person that works every day of the week for approximately €30,000 or less per year will never forget the 5% cut, even if they live to be 100 years of age. They will remember last week in the Dáil and they will wait to get this Government. I have no idea for whom such people will vote but it will not be Fianna Fáil. Of that I have no doubt.
As I remarked earlier in the Fine Gael Private Members' motion, it is very difficult to understand how from budget cuts amounting to €4 billion, the Government managed to cut €108 million from the carers and disability allowances and the blind pension, which affects the very people unable to see it. Some €108 million was taken out of €4 billion. Is the Minister suggesting the money could not be found anywhere else?
I refer to a matter my colleague Deputy Varadkar raised on several occasions. There was no word about quangos in the budget. During the year, the Government make a great effort to highlight what it would not do with quangos, all of which were to be reduced and rationalised. It appears the Government became afraid of them in the run up to the budget for whatever reason. Perhaps it was because those the Government appointed on behalf of Fianna Fáil have become so embedded in whatever quango with which they happen to be associated. Nevertheless, many people in such State establishments or quangos have worked to the best of their ability. However, there is an issue with the overall culture and there is no doubt the number could be reduced greatly. In this area alone there would be no problem with attaining the €108 million savings and this has been clearly identified by Fine Gael. If there were a rationalisation of the quangos alone without any other measures, it would yield in excess of €108 million by the time the exercise was finished. Such a measure would have made a great difference to the disabled, the blind, the carers and all those in society that everyone declares they wish to help.
There is downward pressure on costs in the economy. We have been told continually that wages account for 70% or 80% of the actual cost of most services. This has been the mantra from the Government down through the years. Since there has been a reduction in pay, will we see cheaper ESB, telephones and garbage collection costs? When the doctor or the vet comes will he or she be cheaper? Is that what all this is coming down to, or will it be the case that those who, unfortunately, must live, work, rear a family and pay a mortgage on something less than €30,000 will be nailed during the coming years while everything else continues as it was before? Will the Minister of State address this point when referring to fairness in his summing up? If people realised the services for which they must pay are decreasing at the same level as pay, they might realise they are approaching a stage at which we would become more competitive. The goods and services we produce here could then be sold abroad, the end result to which we all aspire. However, I do not believe the route taken by the Government last week will ever achieve that aim.
In so far as the farming community is concerned the meek effort to introduce an off-colour cousin or substitute for the REPS, rural environmental protection scheme, is not welcome. Many farmers are very upset by the measure because they realise exactly what is taking place. They are aware that in the heel of the reel this will be simply a faint image of what the REPS once was. I trust the people who will qualify for the so called €5,000 maximum payment will not have to jump through costly hoops associated with REPS to become eligible for the modified REPS. I hope farmers will not be subjected to the same rules and regulations.
I apologise for the delay earlier. I have lost my script but I remember what I have to say.
My party has discussed the issue of public sector pay for a considerable period. In 2003 we stated that we were not in favour of benchmarking unless it delivered real reform. The pay increases were introduced at a cost of €14 billion over seven years, but not the reform. It is something I have discussed a good deal. My party was the first to call for the national wage agreement to be suspended and was among the first to indicate that pay cuts would be necessary in the public service. I have no wish to pretend otherwise. Many of my comments on public sector pay and the public service have offended people. Sometimes this was because I spoke the truth before people were prepared to hear it and at other times I said things that were unfair and harsh; for this I am sorry.
I believe in the public service and I come from a background of public service. Before I came to the House I worked as a junior hospital doctor in public medicine in the public sector. I did not treat private patients. As a Member I am a public servant, my sister is a nurse and my mother a retired nurse. The public service is something in which I believe very much. I do not believe those against reform in the public service really believe in the public service; they believe in self service. The pension levy was necessary but the way in which it was done was not fair. However, pensions must be paid for and as someone who now pays 16% of my gross salary for my pension I do not object to it. However, I hope the pension will be in place when I retire in 2041. This is why we must ensure we have a sustainable pension system. It is in all our interests, especially those of younger public servants, to ensure there is a sustainable pension system which does not run out of money in 20 years' time.
A reduction in the payroll was necessary. It is a testament to the strength, honesty and decency of the two Opposition parties, Fine Gael and the Labour Party, that we were willing to say as much and to sign up to €1.3 billion in payroll reductions. I note that Opposition parties in the UK or the USA have not done so. Some people may be critical of our politics but it is a strong reflection on the Opposition in this State that we have not played the populist card on this issue.
There were choices for the Government. The choices it made on budget day were unfair to people on low pay, especially those earning €30,000, such as clerical officers and cleaners. It was not necessary to cut their pay and this remains the case. The schedule we proposed provides an alternative. It proposes increments should not be paid for one year. They should be deferred and although it would affect people on low pay, at least their pay would not be reduced. It would remain the same for a year. This could still be done.
The cuts were especially unfair on young people. Let us bear in mind that those who will take the greatest cuts will be those earning €40,000 or €50,000 who are young and probably have young families and mortgages. They will be in serious trouble. It is very unfair that a retired school principal earning €60,000 from a pension was untouched, but a young teacher earning €45,000 with a mortgage and two kids to look after took a pay cut. It is unfair that a retired Taoiseach earning €150,000 without a mortgage did not receive a pay cut but the pay of a Senator earning €70,000 with a sizable mortgage and two kids has been cut. That was also unfair. I understand why it was done for political reasons but it is unfair. It was also unfair to state that the pay cuts would be permanent because they need not be permanent. This is the key difference with the proposal put forward by Fine Gael. Our proposal is consistent with the position we have always put forward, that is, benchmarking should be delivered only in return for real reform. That is our view now. Effectively, it is reverse benchmarking. These pay cuts may be necessary but need not be permanent and can be reversed upon the delivery of real reform which could be done on a sectoral basis. In education, for example, when teachers negotiate, agree and sign up to a new contract pay cuts can be reversed. When we agree a new pension system we can amend the pension levy to reflect that by not applying it to non-pensionable income, one of the absurdities that exists now. When there are new agreements in the health sector and radiologists and radiographers sign up to new contracts that allow X-ray departments to be used properly, during weekends and evenings; when nurses and doctors sign up to contracts that allow clinics to be open in the evenings when people finish their day's work, and on Saturdays; when such issues are agreed and we get real reform that actually matters to real people then the pay cuts can be reversed.
The same applies in the Civil Service and local government and even in the Houses of the Oireachtas. For example, the pay cuts applied to Deputies and Senators could be reversed when we reduce the size of the Dáil and reduce the size of or even abolish the Seanad. The same would apply for the emergency services. That is the model I put forward and I believe it stands up to scrutiny.
What the Government did in the pay talks with unions was very wrong. The 12 days leave was never going to fly and I do not understand why people ever thought it would. It shows how out of touch the Government and union leaders are in that regard. When one studied many of the concessions we were led to believe had been offered they had been offered before. We were led to believe that increments would be linked to performance but that is already the case, or is supposed to be. In reality it is not and has turned out to be a sham. The extended working day in the health services that was supposed to be agreed is already in the programme, Towards 2016. Having open recruitment and getting rid of the common pool were supposed to have been agreed before, also in Towards 2016, as was promotion by merit. Sometimes when I hear union leaders speaking they seem like old rope salesmen, offering us the same things in return for this deal they offered during benchmarking and Towards 2016.
What needed to be there — as some was but much was not — was an agreement on redeployment. It appeared to have been there but it was not a single public service in which all public servants would be part of the Irish public service, with no more divisions between State agencies, civil servants and local government and all that nonsense. There was no rationalisation of the quangos and there was nothing on dismissal. We need to have arrangements to dismiss people who are not performing. It is not fair that we have set up our public service in such a way that a young person who is doing a good job and is on a temporary contract is the first to lose a job while a person who is not performing, not doing a good job, who may not even be interested in that job is given tenure and protection for life. That is the kind of reform we need.
We also need to agree a new pension system. For the reasons I outlined we need to ensure there will be pensions for young public servants when they retire in 20 or 30 years time. Under the current system there will be no pensions for anybody. Ironically, the people who are paying the pension levy are those who might not get a pension. That is why we need pension reform.
We also need to address the issue of semi-State bodies. One very strange aspect of this Bill, as was mentioned by others, was the exclusion of some areas. I can understand why the commercial semi-State companies were excluded. I do not understand why the Railway Procurement Agency or the Central Bank were excluded. I understand the Central Bank has agreed to impose the pay cuts in any case, but what about Bord na gCon and the Railway Procurement Agency? Such bodies are State agencies or quangos, not commercial entities and I do not believe they should have been excluded.
There must be some treatment for semi-State companies and it need not involve pay cuts. These are commercial entities and if they are making a profit there should not be pay cuts. No company that is making a profit should exploit its workers by imposing pay cuts but many of the profits semi-State bodies make are not genuine. They arrive because of subsidies given by Government, because of protection from competition also given by Government and because of ridiculously high prices imposed by regulators. For people who are facing pay cuts and paying higher taxes, the very least the Government should do is ensure their ESB and gas prices will go down and that train and bus fares and other Government regulated and semi-State body-imposed charges are brought down. Nobody wishes a pay cut on their neighbour but it is reasonable that such prices should come down and if those semi-State bodies have to make efficiencies subsequently, so be it.
I point to the difference between my party and Fianna Fáil. I hope at some point trade unions and public service workers will come around to the view that they have friends in Fine Gael and we are not out to get them. What we now offer and have always offered are better terms and conditions, pay increases — or, in this case, the reversal of pay cuts — in return for real changes that will deliver better public services for real people. The difference between that and what we got from Fianna Fáil is very clear. We had an enforced pay cut, which three Ministers said was permanent and we had the threatening, bullying and menacing words of the Minister for Finance who effectively told public servants they had better "suck this up", to quote the Minister's brother, who said if people do not like this and protest their pay will be cut even more. We will make no progress in this country either as a common collective or in public service reform if we engage on that basis. What we need is a new Government and a union leadership that are serious about public service reform. I believe we have neither but I hope for the future.
The Minister of State, Deputy Mansergh, is sharing time with Deputy Michael Kennedy, with ten minutes for both.
An interesting detail of this Bill is that it defines Oireachtas Members as public servants. Therefore, we are discussing something that affects us as well as tens of thousands of others.
This legislation is not based on any hostility to public servants. In my own case, rather like the Minister of State, Deputy Dick Roche, I first entered the public service 35 years ago, on a good starting salary of £3,000 per year. Public servant is the title of which I am most proud as it is a unifying thread that joins up a number of different roles. My experience of the Civil Service has been a very good one. It contains many good, able and highly motivated people who have played an enormous role, for example, in negotiating and sustaining our EU membership, maintaining and vindicating a peaceful solution to the problem of Northern Ireland and also as a motor of social partnership, which last I regard as having been mainly a good thing even though it may be in difficulties at present. They have worked at streamlining the tax system and, most recently, showed their involvement at local level in the emergency co-ordination with regard to flooding. These included officials of the OPW, the Army and Civil Defence, gardaí, community welfare officers and volunteers. There are of course also excellent teachers, nurses and Oireachtas workers.
Change, reform and economies are needed on an ongoing basis. However, at most levels and by most international comparisons our public servants are well rewarded. In approximately ten years their numbers increased from significantly more than 200,000 to significantly more than 300,000. It is worth quoting some salary figure progressions between 2000 and 2009. I shall quote the original currency of the Irish pound for 2000 and the euro for 2009. One can change the punt into euro. Lower tier county managers earned £56,000 in 2000 and €136,000 in 2009. A staff officer earned the equivalent of €23,000 and now earns almost €37,000. This refers to the starting point of the scale. A Secretary General earned the equivalent of €121,000 in 2000 and now earns €221,000. Engineers grade 3 are up from €22,000 to €32,000, a rather smaller increase of 45%. A clerical officer, standard scale, earned €15,227 and now earns €23,174.
The salaries of Deputies may interest us in this House. In 2000 the starting figure was £39,000 or €49,000; today it is €100,000. Senators earned £24,000 and today earn €70,000.
The Minister of State is leaving out one column.
Ministers' salaries increased from the equivalent of €116,000 to €231,000.
How much tomorrow?
Therefore, there were significant real increases at the bottom of the scale and something of a pay bonanza in the upper reaches, and the scale of adjustments in this Bill at the higher end reflect that. Benchmarking and higher remuneration were part of the process.
The perception ten years ago was that the private sector was powering away but those who worked in the public sector, although their outputs were less tangible, believed they were doing work just as valuable and productive. However, the private sector is more volatile. There have been job losses and income cuts. There is no guaranteed income beyond the minimum wage and if one is self-employed or a small farmer there is no guarantee of even that. Private pension provision, which was once quite generous for most people outside the very wealthy and fiscal stratosphere, is now a poor cousin of public service provision.
When the country was, to use the mantra, awash with money, we over-committed ourselves——
The money was washed away.
——and awarded salaries that we are not now in a position to sustain. I agree with Deputy Tom Hayes that there has been hurtful and unfair criticism, mostly from people outside this House, against civil servants but the salaries we were awarding ourselves in some instances would correspond to the second highest nominal GDPper capita, which is what we boasted of having, but not to the real world.
While some public service members may be very resentful of what the Government is doing now, the decade of the "noughties" up until 2008 was the best decade public servants are ever likely to have in terms of income and advancement. Our circumstances now require some claw-back sacrifice, and greatest from those who have benefited most. I accept it is tough on most people who are over-committed and over-borrowed on the basis of what was, until recently, reasonable expectations but it is vital we maintain our economic independence and sovereignty, that we make our own decisions, that we show we can cope and that we are able to cut down on borrowing if we are to continue paying bills and not throw in the towel and ask somebody else to do it for us.
As the Taoiseach said in his speech on the budget, there is a psychological element in this. We have taken and accepted pay cuts in the past but they were disguised by inflation and devaluation. We are now paid in a strong currency which does not lose value and in pay terms we are simply going back a few years but not to where we were ten years ago.
The Minister of State is not dependent on a medium size salary.
Social partnership was conducted in good faith over 22 years. It is regrettable but understandable that we have not been able to reach agreement, and I understand how difficult it is for trade union leaders to concede things they have painfully negotiated over a period of time, but the logic of eurozone membership is that if we lose competitiveness we have to adjust downward cost and incomes. That is the only way that will save jobs.
As the Minister said in his contribution, excluding the lower paid earning under €30,000, most of whom would not be subject to tax if married or with children, unless single and barring levies, that would, at €500 million, cost half the saving required and that is not practicable. We must show the outside world our ability to take and stick with reasonably tough decisions——
What about our old people?
——that are tough on ourselves. Most of the messages I am getting are from people earning well above that €30,000 income level. I am hearing most of the protests not from people starting out on their careers but people mid-career who have accumulated a lot of commitments.
Consensual public service reform is the preferable way forward——
The Government had its chance but it blew it.
——and there is a need for everyone to put their shoulder to the wheel. I do not believe there is any real appetite for militancy which would worsen the situation and delay recovery.
Is that a request?
Social partnership is not dead but an incoming Government will not be able to offer public servants a better deal.
Yes, we will.
Public servants will never have a better deal than——
There is a better way.
——than the one they have had since the late 1990s but as a wise person once said, if we want to keep things as they are we have to be prepared to change.
I welcome the opportunity to speak in this debate. I thank the Minister of State, Deputy Mansergh, for sharing his time with me.
Along with the Taoiseach, Ministers and all the people in my party, it does not give me any pleasure to come in here to talk about cutting the pay of public servants, or indeed anyone, but we must recognise that we are facing a serious financial situation. With a deficit of €22 billion this year, a greater one likely next year and the fact that we are borrowing €420 million per week it behoves us to take corrective action and I believe the public at large, including our public servants, recognise that we must take that action.
I have great admiration for those in the public service. I have many friends, and some relatives, who are teachers, etc., and I admire their professionalism and their dedication. When one considers the broad range of the public sector, whether it is teachers, gardaí, the Army, firemen, nurses, doctors, civil servants or public servants, by and large they do a fine job and are a credit to their organisations.
We should put on record, and I want to do it now, that some of the comments in the media recently have been over the top. As in any organisation there is a minority of people who do not pull their weight and bring the organisation down. The critical comments about the public service are over the top because the vast majority of people do a committed job in a very professional way and give value for money but we must recognise the serious budgetary constraints we face. In making the cuts I acknowledge that the Government, Ministers and Deputies have taken their share of the pain. That is only right. It would be neither appropriate nor acceptable if we were to say we should not take cuts. We took our share of the pain last year with the levy and, equally, our pay will be cut this year in line with the public service. In making those cuts we must recognise that we are doing it for the good reason that we do not have any other option.
I am of the opinion that all of us must share in the pain. When one reflects on our budgetary position, one cannot be over-selective. There are sectors in our society that are not paying their share. I cite the Judiciary. Last year I issued press statements asking the judges to voluntarily take a pay cut if it could not be done through a legal mechanism. I do not believe that judges who are paid more than the Taoiseach should be able to take those salaries, particularly when taxpayers' money is paying their salaries and pensions.
I appeal to those judges who have not agreed to the voluntary deduction to do the honourable thing and make that cut. As I have stated publicly previously, if they are not prepared to do so, I believe the Government should hold a referendum. I welcome the support of Deputy Shatter, who introduced a Private Members' Bill on this issue. I believe that a referendum probably will be held on the issue of children's rights in the future and equally, a referendum should be held on judges' pay unless they make voluntary cuts. I believe this to be reasonable and certainly, among those from the public services who have contacted me by telephone or written to me by e-mail, a common theme is that judges and people in the semi-State bodies should share in this pain. I do not doubt but that there are people in the semi-State organisations who believe they should do so and should cut back on their salaries.
Likewise, reference has been made to bankers and it is ridiculous that banking institutions that are receiving aid via the State should be in a position to pay bonuses. While I recognise the Government has capped the upper limit in respect of senior bankers, ordinary banking officials should not be in a position to receive a pay increase next year when others throughout the country are taking pay cuts. This is how this issue of fairness must come about. Moreover, I certainly believe that partnership is not dead. In the past couple of days, many of those who have contacted me have made the point that their unions are willing to return to negotiations. The recognition that €4 billion in cuts must be made both this year and next year is acknowledged by all parties in this House and by the unions. It is the mechanism as to how one achieves it that is at issue. However, the people with whom I have been in contact, from teachers to civil servants, nurses etc. all have stated that their unions are willing to re-engage and to show the Government how €1 billion in savings can be achieved.
It is too late.
I do not believe it is too late for this to happen.
It is the 11th hour.
Deputy Costello will have his chance later.
I appeal to the unions to meet the Government and to put forward their proposals. They have acknowledged that reforms are necessary, antiquated work practices must be changed and redeployment must be allowed to take place because these are the very issues that have caused us to be unproductive and uncompetitive. As I noted earlier, a small minority of people across the board are the difficulty. They are not pulling their weight and we are suffering in respect of both service levels and the pay bill. I ask the Minister of State, Deputy Mansergh, to use his influence to induce the Government to get these talks moving again and hopefully to achieve an agreement on how the cuts can be made.
I wish to refer to the reputational issue that some people appear to dismiss. All economic reports emanating from Ireland, Europe, New York or elsewhere come out with a single constant theme, namely, that countries suffer if they do not get their finances in order. It is indicative that last Thursday and Friday, both Moody's and Standard & Poor's came out with a reduced credit risk rating for Ireland after this tough budget had been introduced. It proves the point that had the Government not been prepared to take corrective action, we would be in a serious position. I wish to mention a report on Greece I read in last Friday's edition of theThe Irish Times. The German chancellor, Angela Merkel, urged the European Union to tackle the problems in Greece because clearly the European Union is concerned that Greece is in a serious financial situation. However, it needs to take corrective action, which thus far it has refused to or cannot do. The German chancellor has suggested that the European Union should do it for Greece. The end result is that if the European Union is unable to do this, one other organisation will, the International Monetary Fund.
I wish to conclude by noting that we should not live in a cloud cuckoo land in which we continue to borrow and spend money. Annual expenditure of €55 billion when in receipt of €30 billion in taxes is not sustainable.
The next speaker is Deputy Costello, who has a 20-minute slot. I understand Deputy Costello will speak for five minutes and will share the rest of the time. I will of course provide the Deputy with as much protection as I can.
The Deputy will need no protection from me.
I would not have expected less from the Deputy from Tallaght. I wish to share five minutes and ten minutes with Deputies Sherlock and Ferris, respectively.
It was a little rich to listen to Deputy Kennedy exhort the trade union movement that it now is time to come into the Government's parlour to sort out these matters or that everyone was agreed that there was €4 billion to be sorted out and that people could sit down to do so. I am afraid it is too late for that. The die is cast, the trade unions were shafted and the rug was pulled from under their feet. They were in negotiations, were prepared to do a deal and were prepared to save €1.3 billion. It was all there on the table and the Government decided to reject it.
Clearly, it was not.
This is the reason Members are debating this legislation today. The Government will ram it through tomorrow by using the guillotine and that will be that.
It was not on the table.
Deputy Kennedy has had his turn. Were he sitting in the Chair, he would do the same. Deputy Costello should proceed.
I believe these constitute savage cuts on the entire public sector. They will decimate and demoralise the public sector and it will be difficult to expect the public sector to come back, take it on the chin and provide the service the Government expects of it, having been given such a sucker punch again on foot of having been already hit recently. What is worse is that all public sector workers, from the poorly-paid clerical officers, labourers, those in part-time employment, young men and women in their first employment or those on the minimum wage, will be hit from the very first cent they earn. When one combines this with the reduction in social welfare for the blind, the deaf, the disabled and carers, as well as the cut in child benefit, it is clear the Government has deliberately targeted the weakest and most vulnerable in our society, that is, those who can least afford to take such savage cuts. The Minister of State knows as well as do I that both the Cabinet Handbook and the Lisbon treaty require that all legislative proposals should be poverty-proofed and should be assessed in respect of their impact on the people and communities affected to ensure they do not inflict damage on them.
Earlier today, Deputy Gilmore outlined in the House the figures in respect of two parents with three children who work in the public sector and who earn €30,000 each. Their total reduction in pay per week was €70 or approximately €3,600 per annum on foot of the 2010 budget. I will provide a similar figure for two people earning €25,000 each. If one breaks down the figures, the loss in net income of €774 each by two people is €1,548. The loss of child benefit will be €384, the loss of the early child care supplement will be €996, which comes to a total annual loss of €2,928, or €56 per week.
That is very substantial for a couple on very low income. Along with that, such a couple is likely to be hit by exorbitant interest rates, mortgages and the new proposed carbon tax which will be imposed on home heating oil, gas, peat and coal. If a couple has a car they will be hit by taxes on petrol and diesel. The average hit on the public sector has been 13% this year. With a minimum of 5% on top of that, it is a substantial hit in the space of 12 months. It is 20% higher for some. The lowest of the low are being hit by these cuts.
It is a harsh, mean, cynical and cruel budget which targets the weakest in our society. What compounds the problem is that the public sector which has been targeted comprises 350,000 of a total workforce of 1.8 million. The banker, the developer, the speculator, the well-paid and those in the semi-State sector are specifically excluded from the cuts. This is undoubtedly an uncaring Government and it has now gone a step further and divided Irish society. It has not been so divided since the civil war in 1922, something which the Minister of State, as an historian, would appreciate. It will leave a similar legacy, namely, a legacy of bitterness which will last for a very long time.
This Bill was drafted by a generation of politicians and mandarins who have their mortgages paid and have, for the most part, reared their children. It shows blatant disregard for people of my generation who will end up being saddled with the burden of the economic morass in which we find ourselves for the rest of their working lives. If we are to inject some equity into the process of economic recovery, it must be done on the basis that everybody will take the pain equally.
One cannot take €1,500 from somebody in the public sector who is earning €30,000 or €1,875 from somebody who is earning €35,000, while introducing a carbon tax which will affect the ability of such people to get to and from their place of work on a daily basis. Such people will also be affected by the impact on them of the potential mortgage increases they may incur in the future.
I have a short time in which to speak on this issue. It is a sad indictment of this Parliament that we cannot debate these measures in a proper fashion with real discourse. The strike by the public sector was ill-timed, in that we all had to buy into the idea that there would be a reduction in the public sector pay bill. I also believed in the bona fides of a Government and a trade union hierarchy to hammer out a deal that would ensure those earning incomes of less then €50,000 would not incur any further pain as a result of measures which might have to be implemented and those earning between €50,000 and €100,000, would have a minuscule percentage cut in their salaries and they would be benchmarked against cuts in the private sector.
We have a situation whereby a single person who earns €52,000 per annum in the private sector incurs no cut to his or her salary, but somebody who earns €50,000 in the public sector will incur a cut of €3,000 or 6%. There is no equity in such a situation. If anybody in the Government tells us that everybody has to incur pain, the proof of that view is not evident in such budgetary measures. I am quoting from the very document the Minister for Finance, Deputy Lenihan, laid before the House when he announced his budget last week.
All we are asking for is a review of the cuts to people on the lower end of the public sector wage scales. One cannot expect a single female clerical officer who works in a local authority, has taken out a mortgage in the past three years and now has to pay increased charges for her petrol to get to work to incur a cut of €1,500 to €2,200 in her salary. It is completely inequitable. I know it and the Minister of State, Deputy Mansergh, in his heart of hearts, knows it. I believe his words are correct, he told us to reverse the cuts would cost the Exchequer €500 million.
He never examined the quasi-autonomous non-governmental organisations. He did not adequately examine those earning more than €250,000. It is time the Government looked equitably at those who will now bear the brunt. The new poor now exist in our society. A person who incurs a cut of €1,500 will not be able to survive in real terms and the Government should not patronise such people by telling them it has reduced the cost of living by 6% because that will not wash.
Like all of us in this House, I am certain that the Minister of State, Deputy Mansergh, each of his party colleagues and the Green Party Deputies have received dozens of e-mails and phone calls from members of the public services who are the subject of the legislation we are debating and which is required to facilitate the second pay cut inflicted on those workers this year. That the proposed cuts would lead to so much anger, disappointment and despair should have come as no surprise given the one day strike which took place several weeks ago and the ongoing representations made by public sector workers and their unions in the run up to the widely predicted cuts which were announced here by the Minister, Deputy Lenihan, on budget day.
However, he chose to ignore all of this and we had the charade of an alleged Fianna Fáil backbench revolt over the proposals from the public sector trade unions, which in themselves would have entailed another steep cut in the earnings of public sector employees. The truth of the matter however, as the Minister of State, Deputy Mansergh well knows, is that what we witnessed was not a popular uprising by old age pensioners, the unemployed and ordinary workers demanding that teachers, nurses, gardaí and those who work in Departments should have their wages cut again but, rather, a well-orchestrated campaign by business interests and the right wing pundits in the media.
I received several e-mails claiming to be from small business people here which in fact were sent by the Irish subsidiary of a major overseas brokerage firm. IBEC and ISME organised their members in what was an effective lobby. Fair play to them. That is the way politics works. However, as we know all too well from Fianna Fáil's history with big business in this country — we need look no further than the tent at the Galway races — it has a huge advantage when it comes to influencing the action those in power take. Some parties, and Fianna Fáil in particular, have been compromised by big business, something which did not happen today or yesterday. The old saying of "he who pays the piper calls the tune" springs to mind. One of the main themes in the e-mails I have received from teachers and others in my constituency and from every other county is the perception that those who are on low to medium wages are being saddled with the main blame for the current financial crisis and the main burden for its solution.
There are people in this building for whom the cuts this year mean that they are little better off than if they were claiming social welfare. Indeed there are people working in this building and in other branches of the public service who are earning a weekly wage that entitles them to family income supplement which makes a mockery of any pretence on the part of the Minister that he is taking on some protected well healed section of the community. What a pleasure it must have been last week for them to see the hangers-on of the Minister's party swanning around the Dáil bar and restaurant celebrating that the people guiding them around, and serving them pints and food and working for their Deputies were having their incomes slashed while some of those doing the swanning around are among those who have done very well indeed from the so-called Celtic tiger. By all appearances they are not suffering too greatly from its demise.
The financial crisis was not brought about by the staff in the Dáil bar or restaurant, or the ushers or secretarial staff but by the friends of the Minister's party who, through their greed and incompetence, have saddled this State with a massive debt that will be visited on the sons and daughters and maybe even the grandsons and granddaughters. They are being presented with the bill for the end of the great party to which none of them was invited.
It is sickening to listen to some business spokespeople and right-wing pundits who are seeking to give the impression that all of those public sector workers currently having their incomes slashed in an unprecedented way were living the high life over the past ten years or so and in doing so they created the current mess. Was it teachers, nurses, Dáil ushers or secretarial assistants who speculated on land banks and pushed up the prices of houses? Was it council workers who created the mortgage inflation? Was it the hospital cleaners who charged or rather demanded to be charged exorbitant rents for houses and apartments? Was it firemen who increased the prices for hotels, and food and drink even while workers in those sectors were receiving only modest increases or no increases at all? It was not. Their only part in all of that, in common with the vast majority of people in the State, was to have to pay a much bigger share of their income for housing and accommodation and just about everything else.
It is ironic then to listen to spokespeople for those sectors claiming that the attacks on the public service will somehow lead to economic recovery. I wonder have they pondered that there will be fewer people to overcharge now. Have they considered the certainty that their stupidity in reducing income will not help to sustain or create jobs? What was most telling was one business spokesperson last week who said that the budget would lead to a revival in overseas investment and that this would allow Irish business to piggyback on all of that. I use the word "telling" because it describes accurately enough much of what went on in the Celtic tiger years. The real economy was largely dominated by multinationals and this led to most of the real growth. Benefiting most from that and from the nominal increases in workers' wages were the type of people I have referred to who saw it as an opportunity to dip their beaks and extract a disproportionate share in rents and mortgages by increasing them whenever they felt like it.
In saying that I am not criticising the many genuine domestic enterprises which have sought to contribute to employment creation and the economy. It is no accident that they have been treated extremely badly by the banks in comparison with the incompetent speculators who have gifted us NAMA, and a potentially worse disaster down the road.
Another aspect of the assault on ordinary public sector workers has been the apparent popularity of this strategy among other sections of workers. Although I suspect — if for no other reason than that many private sector workers are married or otherwise related to low and middle-income public servants — that this does not reflect reality. However, any private sector worker inclined to celebrate the attack on teachers, nurses, firemen, gardaí, and people working in this building and Departments ought to beware because as sure as night follows day they will be next. The private sector has already seen cuts in wages and the undermining of jobs and conditions but the defeat, as it is regarded in business circles, of the unions on public sector pay will be followed by further attacks on workers' living standards.
Apart from the issues of fairness in all of this and that many people's lives will be made considerably worse, Deputy Morgan last week made other points as to why these cuts are a bad move. They will not encourage economic growth as they will take a large amount of money out of circulation. In saying that however, the Government is at least consistent as its entire strategy is negative and militates against any economic stimulus. Other countries have rejected that strategy and are showing signs of recovery.
The days when a Fianna Fáil leader could claim to be the leader of a party that represented the people of no property are long gone. The days when a Fianna Fáil leader can claim to be the leader of the people as Taoiseach may not be too far behind.
I wish to share my time with Deputies Brian Hayes and O'Mahony.
Is that agreed? Agreed.
The hypocrisy of the Minister for Finance this evening when he introduced the Second Stage of the Bill was difficult to understand. He said:
All of us in this House, in both our professional and our personal lives, have experienced the excellence and dedication of public servants. We all know, for example, the difference a good teacher can make not just to the lives of our children, but also to the morale of an entire parish or community.
What do they get for such lavish praise? In the case of teachers it is a 17% cut in salary across the board. The Minister further stated that the majority of public servants are on a low salary relative to the highest available to them. At the same time those on salaries of up to €30,000 will receive pay cuts of 5%, with a further 7.5% cut from the remainder of the salary for a teacher. The consequence is that the morale of teachers, along with that of the nurses and gardaí, is at an all-time low. It was bad because of the previous cuts, but it has now reached a very serious low, which will have serious consequences for the delivery of services.
Emanating from Ministers and their spin doctors, there is a vilification of certain sections of the public service, in particular teachers, nurses and gardaí. This evening all sides of the House have acknowledged the excellence of public servants who are delivering services to the public, whether in education, security or the health, together with the Departments' own services in social welfare and elsewhere. However, for all of that and the hard work those people do, they are now the targets of the harshest cut ever given. The Minister of State, Deputy Mansergh, said earlier that he expects the unions to return to the table. He cannot expect to humiliate more than the Government has already done by walking away and turning its back on them prior to budget day. In order to get the transformation in practices in the public service, the Government will want all those in the public service, and the unions representing them, back at the table. It has as much chance of getting that as it does of winning the national lottery.
As it is 10.30 p.m., I must interrupt the Deputy.
That is a pity.
I apologise, and I wish the Deputy well tomorrow.