I thank the Members for facilitating the Bill.
This Bill seeks to implement the provisions agreed in the Public Service Stability Agreement, PSSA, 2018-2020, of earlier this year. As such, it continues the pay restoration that began two years ago with the Lansdowne Road agreement and with the Financial Emergency Measures in the Public Interest, FEMPI, Act 2015. This Bill provides a roadmap for the full and orderly unwinding and repeal of FEMPI over a number of years.
Many Members here will have been in the Seanad for the FEMPI 2015 Act; some of them will even have been here for the first FEMPI Acts, in 2009. Whether a Senator was here or not, he or she will be aware of the enormous impact that this emergency legislation has had, both on individual public servants and on the Exchequer. Nobody will need convincing that it has entailed considerable sacrifices from public servants and their families, from pensioners and from contractors. However, those sacrifices were necessary to secure the fiscal survival of the State at a time of crisis and the contribution made by public servants must be acknowledged and saluted.
The FEMPI Acts were an extraordinary suite of measures necessitated by an extraordinary set of circumstances but, remarkably, what they were designed to do has almost been achieved. Therefore, I am pleased to say that we are today in a position to set out how we will exit FEMPI, once and for all.
Essentially, there are three interlinked aspects to the Government's strategy in this area. There is the PSSA, which builds on and extends the Croke Park, Haddington Road and Lansdowne Road agreements to the end of 2020. This agreement has been ratified by the public services committee of ICTU. There is the Public Service Pay Commission, the first report of which earlier this year was key to the PSSA, and the second phase of the work of which has now begun. This second phase will examine recruitment and retention issues, where they exist, across the public service. It will conclude by the end of next year, with its first findings, on the health service, due by mid-year. Finally, there is this Bill itself, which I will now discuss in more detail.
At this juncture, I am required by Standing Orders to state that this is a money Bill containing measures which have already been provided for in the budget and it provides for the repeal of emergency legislation.
As such, the Bill, with the full agreement of the Dáil’s Business Committee, has not been the subject of the usual pre-legislative scrutiny. I would also ask the House to note at this point that both the Central Bank and the European Central Bank have been formally consulted in respect of the Bill and that the latter has published its opinion on its website. As a result of those consultations, the Government made some technical amendments on Committee Stage in the Dáil to ensure the independence of the Central Bank.
This is substantial and complex legislation. The majority of the measures are of a financial nature. It is divided into seven parts. For the benefit of Members, I will now outline its main provisions.
Part 1 is a general introductory section setting out the basic terms that will be used throughout, including "covered" and "non-covered" public servants. It also provides for the repeal of the 2009 Act, so that the pension-related deduction will cease to apply to public servants as of 1 January 2019, as from that date the additional superannuation contribution shall apply.
Part 2 is the most substantive part of the Bill. It provides for pay restoration for all public servants, supplementing the increases under the FEMPI Act 2015. By the end of the process outlined in this part, all of the FEMPI pay cuts will be undone. Chapter 2 provides pay increases for all public servants covered by the Public Service Stability Agreement, as set out in that agreement. There will be a pay increase of 1% on 1 January 2018 and a further 1% on 1 October 2018. Where the person’s salary does not exceed €30,000, there will be 1% increase on 1 January 2019. For all public servants under the Public Service Stability Agreement, there will be a 1.75% increase on 1 September 2019. Finally, where the person’s salary does not exceed €32,000, there will be 0.5% increase on 1 January 2020 and, for all public servants under the Public Service Stability Agreement, there will be a 2% increase on 1 October 2020.
In Chapter 2 there is also a new section which was added on Committee Stage in the Dáil. It provides that the Government shall, within three months of the Bill’s enactment, lay a report before both Houses of the Oireachtas on the equalisation of new entrants’ pay. In light of the concerns raised by Deputies, the Government agreed to this measure, although it should also be noted that there is already a process in place to examine this issue as part of the Public Service Stability Agreement.
Chapter 3 provides for the same pay increases for those not covered by the Public Service Stability Agreement, but at a slower rate. Specifically, they will receive every pay increase I have just outlined exactly nine months after their covered counterparts. In addition, as section 21 sets out, they will not receive any incremental increases for the duration of the agreement. It is the Government’s ambition that every public servant will be covered by the Public Service Stability Agreement. The vast majority of public servants have subscribed to the collective approach agreed with their representatives and must be prioritised when it comes to further pay restoration.
Chapter 4 outlines how the measures I have just outlined will interact with the pre-existing commitments under the FEMPI Act 2015.
Chapter 5 deals with those public servants for whom the pay measures in the Public Service Stability Agreement will not have fully restored pay to pre-FEMPI levels. The vast majority – those earning up to €70,000 and who make up about 90% of the total public service – will have had their pay fully restored by October 2020. However, for the minority I am speaking about here, this chapter will complete that process over a further time period. There are two different cohorts covered by this chapter: those earning between €70,000 and €150,000 and those earning over €150,000. In both cases, the Bill provides that an order must be made by the Minister for Public Expenditure and Reform specifying a date after 1 October 2020, the date of the last pay increase, by which full restoration is to have taken place. For those earning less than €150,000, this date must be no later than 1 July 2021. For those earning more than that amount, it must be no later than 1 July 2022.
I remind Senators of three factors relating to these measures: first, the legal entitlement of these individuals to this restoration; second, the fact that these individuals were proportionally much more severely affected by the pay reductions and are having their salaries restored at a much slower pace than those at lower salary levels; and, third, that while their gross pay will be restored, the additional superannuation contribution, which I will outline in a moment, will act to reduce take home pay on a permanent basis. Finally, in relation to this part, section 20 specifies that all members of the Government will be altogether excluded from this further restoration. Moreover, the Government has decided to waive all of the restoration due under the Public Service Stability Agreement.
Part 3 is shorter and concerns pensions. As well as those currently working, the FEMPI Acts affected many public service pensioners. Just as there is pay restoration and a legal imperative to complete it, there must be further amelioration of the public service pension reduction, PSPR, for those still liable for it. This is done through the phased raising of thresholds, continuing the process which was begun under the FEMPI Act 2015. By the end of 2020, the vast majority of public service pensioners will no longer have any reduction to their payments. For those still liable for the PSPR, the Minister for Public Expenditure and Reform must make an order by 31 December 2020 specifying when it will cease to apply.
Part 4 is also about pensions but in this case it is about how public servants contribute towards their pensions. Since the first FEMPI Act eight years ago, public servants have paid a pension-related deduction, PRD, on all of their earnings. This will continue until the end of next year, as set out in the FEMPI Act 2015. However, the Bill repeals the original FEMPI Act 2009, so that no PRD will be charged after that date. Instead, as provided for under the Public Service Stability Agreement, the majority of public servants will pay an additional superannuation contribution, ASC, from 1 January 2019 onwards. This secures substantial funding towards the cost of public service pensions, amounting to approximately €546 million per annum from 2020 onwards and it will be in addition to some €700 million already contributed on an annual basis. This permanent source of revenue will help to defray the cost of providing pensions for public servants into the future and is necessary to place public service pensions on a more sustainable footing in light of the significant accrued liabilities. Unlike the PRD, the ASC is only chargeable on pensionable pay.
The additional superannuation contribution will apply differently depending on whether a public servant is a member of a standard accrual scheme, a fast accrual scheme or the single public service pension scheme. For those who joined fast accrual schemes before 2013, the ASC rates that will apply will be the same as the PRD rates. For those in standard accrual schemes, the ASC rates will be more favourable than the PRD rates as the threshold will be raised in 2019 and again in 2020. For those who are members of the single scheme, namely, all new entrants to any part of the public service after 2012, the ASC rates will be more favourable again. This reflects the fact, as the report of the Public Service Pay Commission found, that this scheme is already on a more sustainable basis than those that preceded it. For those not covered by the agreement, a larger proportion of their salaries will be subject to ASC compared to covered workers until 2021. However, from 2021 onwards the same ASC rates will apply to both covered and non-covered public servants.
I am sure Senators will appreciate that this is complex. It is difficult to present in the time available all of the information regarding percentages and thresholds, which is far better conveyed and understood in tabular or in written form. It is enough, however, to say at this juncture that the effect of the ASC becoming a permanent feature of the pay and pensions landscape is that public servants will henceforth pay a fairer contribution for the pension they will eventually enjoy upon retirement. That is what this part of the Bill achieves.
Part 5 places certain provisions of the FEMPI legislation on a permanent, non-emergency footing. These provisions relate to the power to vary the fees paid to contractors, mainly health professionals, for services and goods rendered. The exercise of such a power would of course only be possible where a contractual right to vary exists.
Parts 6 and 7 deal with transitional arrangements and miscellaneous provisions, including transitional arrangements for the payment of professional fees. As part of these transitional arrangements and in the context of exiting the FEMPI legislative framework, the Minister for Health has announced that he intends, in consultation with the Department of Public Expenditure and Reform, to initiate a process of engagement in 2018 with relevant representative bodies on service delivery, contractual reform and associated fees.
This process will aim to conclude a multi-annual approach to fees, commencing in 2019, in return for service improvement and contractual reform in line with Government priorities for the health service.
The orderly repeal of the financial emergency legislation is an important milestone in the history of the State, just as the achievement of the medium-term budgetary objective was in the recent budget. Future historians or economists might see this recovery, from their detached perspective, as in many ways a rapid turnaround, relatively speaking. However, the Minister for Public Expenditure and Reform, Deputy Paschal Donohoe, and I are conscious that it may not feel that way to those who have lived through it. In fact, they will not feel that way. After all, by the end of the agreement it will have been almost 12 years since the first FEMPI measures were introduced. Notwithstanding that fact, given the fiscal constraints we operate within and the overriding priority for stability and sustainability in the public finances a careful and gradual unwinding of these reductions is the only sensible way to proceed.
This approach is about balancing these requirements with our responsibilities to restore pay for the public servants who contributed so much to the economic recovery from which we are currently benefiting. It is on that basis that I commend the Bill to the House.