Select Committee on Finance, Public Expenditure and Reform, and Taoiseach díospóireacht -
Thursday, 13 May 2021

Public Service Pay Bill: Committee Stage

Vice Chairman

Apologies have been received from the Chairman, Deputy John McGuinness. I have been asked to remind members that their mobile phones should be switched off, and I hope mine is. This is important because it causes serious interference with broadcasting. For the purposes of the Official Report, I have been asked to identify members when they are called to speak.

I welcome members and viewers who may be watching our proceedings on Oireachtas TV to the public session of the Oireachtas Select Committee on Finance, Public Expenditure and Reform, and Taoiseach. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise, or make charges against a person outside the Houses of the Oireachtas or an official either by name or in such a way as to make him or her identifiable. I also remind members of the constitutional requirements that the members must be physically present within the confines of the place in which Parliament has chosen to sit, namely, Leinster House in this case or the convention centre, as may be, in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. Members are asked to confirm that they are present within the parliamentary precincts. Are all members present with the precincts? They are.

Due to Covid-19 restrictions, the meeting must conclude within two hours. I hope it will not take that long because there are few amendments to consider. On behalf of the select committee, I welcome the Minister for Public Expenditure and Reform, Deputy Michael McGrath, and his officials. In attendance with the Minister is Mr. Andrew Condon of the Department of Public Expenditure and Reform.

To provide for the smooth running of the meeting, any member acting in substitution for a member of the committee should formally notify the clerk now if they have not already done so. Divisions may be taken as they arise. Members must attend in person in the committee meeting room for divisions, although they can attend the meeting remotely.

Members attending this committee, in accordance with Standing Order 106(3), should be aware that, pursuant to that Standing Order, they may move an amendment but cannot participate in voting on that amendment.

I now invite the Minister to make his opening remarks. There is a technological hitch that we are trying to resolve. Technicians are being called in from all over the globe in order to address the issue. Unless we can hear each other, we cannot proceed. I will suspend for two minutes, in the hope that the light of technology will shine on us and we will be released from this restriction as soon as possible.

Sitting suspended at 12.35 p.m. and resumed at 12.38 p.m.

Vice Chairman

I again call on the Minister to deliver his opening remarks.

Minister for Public Expenditure and Reform (Deputy Michael McGrath)

I thank the Vice Chairman and hope we will be okay from now on. I thank the select committee for the invitation to attend the meeting today. I welcome the opportunity to present this legislation to the committee.

Before dealing with the specific provisions of the Bill, I would like to emphasise that it is a key enabler for the new public service pay agreement, Building Momentum, and allows for a range of reforming pay matters, including implementation of aspects of Sláintecare. Over the period since March 2020, the public service has stepped up to the challenge of the Covid-19 crisis and has delivered a world-class response. Public servants have adapted and readjusted the way in which services are delivered so as to minimise the negative impact of the pandemic on the public.

In that regard, Building Momentum recognises the value of the work of our public servants during this pandemic and provides for affordable increases with pay adjustments weighted toward those on lower incomes. The agreement also sets out a reform agenda. Each sector will produce and publish reform plans that will demonstrate delivery each year and payment of a 1% sectoral fund will be conditional on the delivery of actual reforms.

As noted, the Bill will also enable progress on a range of pay reform matters, including Sláintecare. A key objective of the Sláintecare implementation process is to remove consultant private practice from public hospitals. Central to implementation of this reform is a move to public-only consultant contracts and to tailor that contract to align with wider Sláintecare reforms.

The new contract, noting the significant reforms involved, is to offer an increased pay level. A consultation process with the medical unions on the new contract has commenced. Members will have heard the Minister, Deputy Stephen Donnelly, speak about that earlier this week.

These measures, which support reform, recruitment and retention in particular areas of our public service, cannot be progressed to payment under existing FEMPI Acts. This underscores the need for this amending legislation. In summary terms, the Financial Emergency Measures in the Public Interest (No. 2) Act 2009 provides that no change can be made in the pay of a public servant without legislative amendment, a court order or a determination that there is a legal entitlement to a pay increase. While it is possible to set a pay rate for a new grade or post, it is not possible to change the pay of an existing public servant in post. This Bill, therefore, provides for amendment of those restrictions on increases to public service pay introduced by the Financial Emergency Measures in the Public Interest (No. 2) Act 2009.

I will now outline the details of the legislation. Section 1 sets out a definition of the Financial Emergency Measures in the Public Interest (No. 2) Act 2009 as the "Act of 2009". Section 2 amends section 4 of the Act of 2009 to provide that in addition to changes to pay arising from an Act of the Oireachtas, an order of the civil courts, an order of the Labour Court or a determination that there is a legal entitlement to a pay increase, the Minister for Public Expenditure and Reform may sanction increases in the pay or allowances of public servants.

Section 3 amends section 5 of the Act of 2009 to provide for retrospective application, up to the date on which this proposed Act is enacted, of a provision allowing for amendment of contracts of employment to increase pay. Section 4 amends section 16A of the Ministers and Secretaries Act 2011 to ensure that where a contract of employment is amended in accordance with section 4 of the Act of 2009, as amended by this proposed Act, no further ministerial sanction is required under the Ministers and Secretaries Act 2011. Section 5 provides that the Short Title of the proposed Act is the Public Service Pay Act 2020.

Prior to this Committee Stage consideration, section 5 of the Bill provided for amendment of section 24(3) of the Public Service Pay and Pensions Act 2017 to align the date for repeal of section 5(1) of the Financial Emergency Measures in the Public Interest (No. 2) Act 2009 with the date on which this proposed Act is enacted. However, the Public Service Pay and Pensions Act 2017 provided for the repeal of section 5(1) of the 2009 Act on 1 January 2021. Section 5 had been included on the basis that the Bill was drafted and published in 2020, in advance of the date of 1 January 2021 and to avoid inconsistency in the removal of restrictions on pay.

Noting that arising from the passage of time, section 5(1) was repealed on 1 January 2021, this element of the Bill is moot and an amendment is proposed to remove same, remove a reference to the 2017 Act in the Long Title and renumber the Bill accordingly. It is a purely technical amendment which we can discuss when we come to it.

Vice Chairman

I will allow opening remarks from any members of the committee who wish to speak.

Deputy Mairéad Farrell

Gabhaim buíochas leis an Aire as teacht os comhair na coiste seo. We have already spoken at length about this on Second Stage in the Dáil Chamber. As I said at the time, it was good that an agreement was reached and that members of the different trade unions had the opportunity to vote on that. That is a decision for the trade union members. As the Minister clearly outlined, public sector workers have been at the front line during the Covid pandemic and we owe them enormous gratitude. Having this kind of public service pay Bill is, of course, extremely important. I hope that line of communication and that good relationship continue.

Will the Bill return bargaining to pre-FEMPI conditions? I do not have many other questions on the specifics of the Bill because we have gone through it in detail in the Dáil Chamber.

Deputy Michael McGrath

I thank Deputy Farrell for her support for this important legislation. When she mentions bargaining, is she referring to how pay will be agreed in the future, future collective bargaining agreements and so on?

Deputy Mairéad Farrell

Yes.

Deputy Michael McGrath

This agreement, which has been adopted by the public services committee of congress and which we are giving effect to in law today, takes us up to the end of next year. I anticipate that in advance of that we will again engage with the trade union movement on a possible successor agreement. We are reverting to a more normal era of industrial relations and hopefully agreeing pay deals into the future. It is in the interests of all concerned if we can do it in an orderly way and give public servants certainty about their own pay. From the State's point of view, having stability and certainty in our overall public service pay bill for a period ahead is also an important part of managing the public finances for the future.

This is a relatively short agreement, shorter than some previous agreements in recent times. That is appropriate because we are coming through a time of enormous change. As the Deputy acknowledged, public servants have stepped up to the mark over the past 15 months or so. They see this as a transitional agreement. The expectation would be that in advance of the end of next year, we will be talking again. Considerable work remains to be done in giving effect to this agreement.

As the Deputy knows, we have the sectoral bargaining process, which is innovative. We are in the process of establishing the sectorial bargaining units and we hope that can help to address issues that would be regarded as outstanding by the trade union representatives. That is a new innovative process. We have provided for an amount equivalent to 1% of the overall pay bill. In addition to the 1% increases this October and next October, there are also proposals related to the Haddington Road agreement. We have appointed Kieran Mulvey as chairperson, and the independent trade union members of that committee. That work will be getting under way. We have allocated €150 million to make progress on recommendations arising from the output of that group in due course.

Deputy Mairéad Farrell

Yesterday, the IMF outlined the need for increased public investment here. It referred to the deficit we have in housing and public infrastructure. Our public infrastructure was creaking in the run up to the Covid-19 pandemic which put us on the back foot, with Ireland having the largest class sizes in Europe, etc. I would be interested to hear the Minister's viewpoint. We have had many discussions on capital expenditure and I know he believes it is very important. With the IMF highlighting that we are lagging behind our European counterparts, can the Minister outline his vision in respect of increased capital spending?

Deputy Michael McGrath

I very much welcome the concluding statement from the IMF team who conducted the mission. The Minister, Deputy Donohoe, and I met them at the beginning of their work and we met them at the end of the process to discuss the outcome and their findings.

We welcome the statement they have issued.

I share the Deputy's ambition with regard to the public capital investment programme. We have a budget this year of €10.8 billion, including the carry forward from last year. That compares well relative to our European counterparts in that it is in excess of 5% of GNI*.

We are now at an advanced stage of the review of the national development plan. We have published much of the material that has been completed so far. The phase 1 report has concluded and has been published. We are now working through the detail of the preparation of the plan with the line Departments.

We published the stability programme update in April. This was a technical document and based on no policy change. It set out in current and capital terms an increase of approximately 3.5% in core public spending, as distinct from Covid-19 or emergency expenditure in future. That sends a message - albeit on a no-policy-change technical basis - that the dramatic increase we have experienced in public expenditure on capital projects in recent years is going to be maintained. Despite the major challenges we will face in our public finances we are going to maintain an elevated level of public expenditure on capital projects. We will be bringing forward the completed review of the NDP in July.

Deputy Mairéad Farrell

I wish to ask specifically about what the IMF has said. I heard the ESRI said something as well although I did not read it so I cannot say for sure. However, I understand the ESRI mentioned in recent days increasing capital expenditure. How does that relate to what the IMF has said? Does the Minister believe what is being proposed now is in line with, as ambitious or as largescale as what the IMF was talking about? Is what we are projecting for the future or anticipating for public expenditure in terms of capital investment as much as it needs to be according to the IMF?

Deputy Michael McGrath

At the moment it is at an all-time high. The first challenge is to maintain that level of public expenditure on capital projects and then, where appropriate, to increase it. We also need to spend it in the right areas. We have to ensure that the content of the national development plan is aligned with the priorities in the programme for Government. As members know they are in housing in particular and climate action measures. We have to ensure the national development plan is consistent with Project Ireland 2040. That is also a key requirement. Then when it comes to spending on individual projects, we have to ensure we are getting value for money. We are now in an era of significant construction inflation. We have introduced reforms that will come into effect in the period ahead whereby we are bringing in a major projects advisory group to support the work of my Department. We will also be advertising shortly in an open public competition for external members to join the Project Ireland 2040 delivery board so that they can complement the skills and experience of the Secretaries General who are currently serving on that board. We have updated the public spending code in recent times to strengthen the oversight of public spending. It is not always about the quantum. The quantum is important and will be ambitious. It will be confirmed in the new national development plan that we will publish in July. We will lay out what each Department will be getting for the next five years and, in addition, what the overall amount is out to 2030.

We will see a re-prioritisation in line with the programme for Government. That is appropriate because we are publishing a climate action plan shortly. We have the legislation before the House at this time. Binding five-year rolling carbon budgets are being introduced. We have to ensure all Government policy is pointing towards the achievement of those overall objectives. There is a great deal of work ahead but I am pleased with the progress we are making in respect of the review of the NDP. I know this is an issue the Deputy has taken a keen interest in and I welcome that. I hope that over the course of June we can complete the content and agree on what the ceilings are for the coming years. I am satisfied that it will match the ambition the IMF has called on us to meet.

Deputy Mairéad Farrell

While we are at an all-time high now in terms of capital expenditure, the reality is that we were lagging so far behind and we have had a significant infrastructural deficit in this State for so long. It has been decades-long. I welcome that the IMF has said this and that the penny has dropped in the sense that we need to grow out rather than have austerity.

Many people are raising another question with me at the moment. It is of deep concern for people. It relates to the pandemic unemployment payment and business supports. The Minister and the Taoiseach have said there will be no cliff edge. The Minister has also said that we will know the outline in the coming weeks. There is, however, a problem for businesses. I have been speaking to the people involved. They do not have the luxury of waiting for several weeks to see what will happen. They are concerned. Businesses, including hotels and so on have to plan for the coming year. People need to know whether they can pay the rent or mortgage next month. It is of deep concern to people.

Can the Minister provide more clarity? Can he provide assurance to people that this will go on longer term? Does the Minister see this going on? The Minister says there will be no cliff edge and is talking about tapering off. Is he talking about tapering off pre-budget? Are the changes referenced pre-budget? Will it go on longer to the extent that it would it be included in the next budget?

Vice Chairman

I will add a question or two - it is too inviting to allow the occasion to pass. I presume this Bill will address any outstanding issues arising from the financial emergency measures in the public interest legislation. To what extent does it address the issues arising from FEMPI throughout the public service?

My other question relates to capital spending in future. To what extent will essential infrastructure be identified as an area for special mention and investment? What will the chief pillars of that development be? Will rail and housing be regarded as integral parts of our vital infrastructure?

Deputy Michael McGrath

I will take the Vice Chairman's questions on FEMPI first. As committee members know, under the 2017 Act the pathway for the unwinding of FEMPI cuts was laid out. There are complexities but in simple terms people earning up to €70,000 at this point have had full restoration. Those earning between €70,000 and €150,000 under the 2017 Act are to have restoration by July this year. Then the remainder of the FEMPI tail, as it is called, is to be dealt with in 2022. I can provide further detail on those issues if committee members wish.

One issue I have been looking at is the overall need for retention of the FEMPI legislation given that we are now in the process of unwinding the reductions imposed under the FEMPI Acts. Some provisions in the FEMPI Acts will now become defunct but other provisions are still valid and needed. These relate to a legal basis for the benefits of the public service agreements up to 2020, a legal basis for pay restoration to continue to 1 July 2022 and several definitions in the FEMPI Acts relating to public servants, public bodies and so on. I can provide a more technical briefing on that point if people wish. In broad terms we are well down the road of unwinding the FEMPI cuts. It has been completed for those up to €70,000. We regard those above that level as the FEMPI tail.

The Act lays out what needs to be done in 2021 and 2022. They are issues on which I have been engaging with the Attorney General in regard to legal advice and so on. There will be further restoration later this year in respect of the FEMPI.

On infrastructure, we will look right across the span of Departments and sectors. As I signalled earlier, the core priorities will be housing, climate action, transport, education and health. All the areas will be dealt with as part of the NDP review. We will give Departments certainty as to their budgets for the next five years because it takes time to plan the delivery of projects through the pipeline. We will then lay out the overall capital budget for each year beyond that, that is, for the second half of the new ten-year plan.

To respond to Deputy Farrell in regard to the continuation of the supports, the position remains as we have outlined. We are working through the detail and examining different scenarios. We expect to come to a conclusion in the next two to three weeks and will then lay out the plan for the supports beyond the end of June. I restate there will be no cliff edge or abrupt end. We are deeply conscious of the importance of those supports for people who remain unemployed because of the pandemic. For many of them, their jobs will not have come back by the end of June and I have said publicly we will have to take account of that. Not every sector will have had an opportunity to reopen fully, so we are conscious of how vital that form of income is for people who lost their jobs through no fault of their own.

Equally, on the issue of the business supports, there are decisions to be made on the employment wage subsidy scheme, the local authority rates waiver and the Covid restrictions support scheme. The third issue will kind of work itself out, depending on whether businesses will be allowed to open. The key one is the employment wage subsidy scheme, which is supporting the employment of more than 300,000 people. It comes at a cost, of close to €400 million a month, but we need to be very careful in the changes we make because we do not want to result in people moving from the wage subsidy scheme to the PUP. We believe the retention of the connection between employer and employee is vital. The scheme has been a lifesaver and will have a role to play into the future. Any changes we will need to make will be laid out in the next two to three weeks.

In overall terms, these supports are temporary in nature. We cannot continue indefinitely with emergency-level expenditure. The stability programme update, on a technical basis, sets out the full unwinding of Covid-related spending by the end of next year, but it will be for the Government to make decisions in the weeks ahead that take account of all the issues the Deputy raised.

Deputy Steven Matthews

I am conscious we are here to debate Committee Stage, with one amendment proposed to the Bill, but as the Vice Chairman said, it is an opportunity to discuss the national development plan and, to a greater extent, infrastructural investment over the coming years. I am glad to hear the Minister outline areas such as public transport, health and housing. The retrofitting of houses will create significant long-term employment and investment in such areas, not to mention offshore renewable which has potential for the creation of jobs through electrifying transport and how we heat our houses. There are good long-term prospects for sustainable and clean jobs, which is really good, and there is a high-multiplier effect from investing money wisely in that. The Minister will recall that when he appeared previously before the committee, he mentioned the European recovery and resilience fund but we did not have an opportunity at that stage to discuss it. That fund will have a very positive impact. He covered much of the infrastructural investment and we are all aware of where we would like that to go.

Digitisation is also a part of that recovery fund and will be very important. We have seen the reliance on the digital communications in the country and where the deficits are. People who have been working from home have struggled in cases where they do not have good communications infrastructure, such as Wi-Fi, broadband and so on. I met representatives of National Broadband Ireland recently and am quite impressed by the fibre-to-door design being rolled out. There is no limit on fibre. The limit is the receivers and transmitters and they are always upgradable. Fibre-to-door is a decades-long investment that will really pay back.

In many urban areas where we thought there was high-speed broadband, excessive loads were experienced during the day when everybody was working from home. There were digital patches and blackspots in urban areas and contention on the line where it was not the single fibre to the door that everybody has. That is an area we need to prioritise. Obviously, rural broadband has been left behind for many years and I fully support accelerating the roll-out of that to everybody, but there is work to be done in many of the urban centres too. I hope part of the recovery and resilience fund will be used for that.

Deputy Michael McGrath

I strongly agree with the Deputy's sentiments on the importance of issues such as retrofitting. There is a commitment in the programme for Government that a large share of the proceeds we get from increases in carbon tax to 2030 will be ring-fenced for that purpose. I have been working closely with the Minister, Deputy Eamon Ryan, to get the infrastructure right. For example, we greatly enhanced the capacity of the SEAI in decisions we made in the most recent budget because it will be a significant undertaking to achieve the critical mass of coverage that we need in retrofitting. That will be an important part of the new national development plan.

The Deputy touched on public transport. It goes without saying that will be vital in the new NDP. I agree there is considerable potential in the area of offshore renewables. The new marine planning Bill and the new marine framework being introduced are critical. We need to modernise the regulatory, approval and licensing regime that governs that area to ensure that projects can commence and get through the various stages because it takes too long at present. I look forward to seeing the progression of that Bill through the Oireachtas as soon as possible.

On the recovery and resilience plan, we are in the final stages of our engagement with the European Commission and expect to lodge the formal plan very soon. It involves a range of exciting projects, in both the green transition space and digitisation. There has been much progress in the past year or so in the provision of public services online and there will be further investment in that area. We have been working closely with the Office of the Government Chief Information Officer on projects that can be delivered through the national recovery and resilience plan. We will receive grants, in today's value terms, of about €915 million over this year and next year and it will have to involve a balance of investments and reforms. We are at a very advanced stage. The Vice-President of the Commission, Commissioner Dombrovskis, wrote to me recently commending Ireland on the work we are doing and encouraged us to continue to work with the Commission. I expect we will submit that plan soon and, once it has been formally approved, it will involve the release of significant funding that will allow us to support some really exciting projects in further and higher education, digitisation, transport, retrofitting and a range of environmental measures. I look forward to discussing them in more detail.

Sections 1 to 4, inclusive, agreed to.

SECTION 5

Question proposed: "That section 5 be deleted."

Deputy Michael McGrath

This is a technical proposal. We had anticipated this Bill would have been signed off last year but that did not take place so it is now going to be in 2021. I will repeat the formal note. Prior to consideration at the select committee, section 5 of the Bill provided for amendment of section 24(3) of the Public Service Pay and Pensions Act 2017 to align the date for repeal of section 5(1) of the 2009 Act with the date on which this proposed Act is enacted. However, the 2017 Act provided for the repeal of section 5(1) of the 2009 Act on 21 January. Section 5 had been included on the basis that the Bill was drafted and published in 2020 in advance of 1 January 2021, and that was to avoid inconsistency in the removal of the restrictions on pay, so noting that arising from the passage of time, section 5(1) was actually repealed on 1 January 2021 by virtue of the 2017 Act. This section is no longer required and, therefore, it is proposed to remove it, removing a reference to the 2017 Act in the Long Title also and to renumber the Bill accordingly.

It really is a technical proposal to take account of the passage of time since the Bill was published.

Question put and agreed to.

Section 5 deleted.

Section 6 agreed to.

TITLE

Deputy Michael McGrath

I move amendment No. 1:

In page 3, lines 7 to 9, to delete all words from and including “, the” in line 7 down to and including “2017” in line 9 and substitute “and the Ministers and Secretaries (Amendment) Act 2011”.

Amendment agreed to.

Title, as amended, agreed to.

Bill reported with amendment.

Deputy Michael McGrath

I thank colleagues on the committee for their support. This is in an important day in that it removes the restrictions on pay set out in the financial emergency measures in the public interest, FEMPI, legislation and gives effect to Building Momentum, which has a very significant reform element and embeds many of the flexibilities that have been demonstrated by the public service over the course of the pandemic. That is a good achievement. It also provides for increases that are weighted towards those at the lower end of pay in public service terms and that is something to be welcomed. It also addresses the issue of the Haddington Road agreement hours, putting in place a process with money behind it. Also, the sectoral bargaining fund is a very innovative initiative which will hopefully go well and will help to deal with outstanding matters, some of which have been there for quite some time. I look forward to working with all the stakeholders involved to bring about the implementation of that.

Vice Chairman

That concludes Committee Stage. Do members have any questions or comments on the Bill before we conclude? They are all silent. That is a good thing as it indicates satisfaction.

The Minister has made many remarks already. Does he have any further closing remarks?

Deputy Michael McGrath

I add one point for the joint committee to consider, which the Vice Chairman might pass on to the Chairman. I wrote to the committee in the last day or so on the general scheme of a protected disclosures Bill. I would like the committee to conduct pre-legislative scrutiny of that Bill. I highlight that it transposes an EU directive and there is a deadline of 17 December for that transposition and the implementation of the Bill. It is a Bill which will attract much interest and I know the committee will be very keen to engage. If the committee can find a slot in the diary to allow it to conduct pre-legislative scrutiny of that Bill as soon as possible, I would be really grateful because it would allow us to go ahead and draft the full Bill. Hopefully, we can then bring it to the Oireachtas for Second Stage as soon as possible. I ask that request be passed on to the Chairman and other members.

Vice Chairman

That was actually discussed at yesterday's meeting of the committee.

Deputy Michael McGrath

Okay.

Vice Chairman

Provision is being made insofar as the committee is required to do so.

Deputy Michael McGrath

I thank the Vice Chairman.