THE GOVERNMENT has to borrow €4,500 this year “for every man, woman and child in the State”, the Minister for Finance said as he introduced the controversial public sector pension levy legislation which comes into effect on March 1st. Brian Lenihan told the Dáil that “we are now fighting for our economic future” and the scale of the threat to the public finances was such that “painful decisions must be implemented as a matter of urgency”.
Paying interest on the national debt will cost €4.5 billion this year, some 12.5 per cent of total tax revenues. “Dead money that should be going to pay for the public services we need,” he said.
“Over a quarter of our current bills including pay will have to be paid for by borrowed money,” he said as he opened the debate on the Financial Emergency Measures in the Public Interest Bill, which deals with a number of cost-cutting measures to achieve the €2 billion target in cutbacks.
The 7.5 per cent pension levy on all public servants will save €1.16 billion this year and €1.35 billion in a full year.
Reductions in fees for professional services will save €67 million this year, while the early childcare supplement cut from €1,104 to €996 a year and the reduction of the age limit to five, will save €51 million in 2009.
Mr Lenihan predicted that “three successive years of economic contraction are in prospect, something we have never had to face before in our history”.
The “nature and scale of what confronts us are such that painful decisions must be implemented as a matter of urgency. Failure on our part to act now would lead to an unsustainable level of public debt”.
The Minister acknowledged that “the measures we are taking hurt, but they hurt far less than other measures including across the board pay cuts, large tax increases and redundancies”.
Mr Lenihan said that he and his Government colleagues “are aware of the important role played by the public service and are conscious of the very natural concerns of public servants in relation to this measure. However, we all have to be prepared to contribute.”
The Minister stressed it was “clear that the Bill calls on a number of sectors within the economy to make a contribution to the adjustment measures which are now so urgently required. It is not just the public service which is being asked to contribute – the burden is being spread more widely”. He said the Government “expects that the public service will be willing and able to play its part in the overall economic recovery”.
Calls had been made for the levy not to apply to non-pensionable pay such as overtime and allowances but “we have taken the decision that it must do so in order to achieve the public expenditure savings this country needs”.
“I want to stress that no additional pension benefits arise from the deduction, but of course this decision does not alter the pensionability of these elements of pay.”
Public service pensions “are secure, particularly when seen against the recent severe loss in value suffered by many private sector pension plans”.
Defending the cuts for pensions, he said: “The claim has been widely made that the pension deduction is unfair, that it fails too heavily on the lower paid, but the deduction is progressive.”
The Minister said the Bill would also affect TDs and Senators, MEPs, Ministers and Ministers of State, the Attorney General the Ceann Comhairle and Leas-Cheann Comhairle. He reiterated that “under the Constitution” the President and judges cannot be levied.
