Statement on FEMPI by the Minister for Public Expenditure and Reform, Paschal Donohoe TD

8th July, 2016

I am pleased to have this opportunity to discuss the Financial Emergency Measures in the Public Interest legislation that has been the subject of much discussion in recent weeks and indeed years.


As Deputies are aware, last week, on the 29th of June, I laid the Annual Review of the operation and effectiveness of the FEMPI Acts before the Oireachtas. The report confirmed the continued necessity of the Acts.


I would like to start by outlining some key facts that led me to make that important decision.




Taken together, the measures under these Acts have reduced the pay and pensions bill by some €2.2 billion, playing a considerable part in the stabilisation of our public finances. For this I want to thank the contribution of public servants to our economic recovery. Without their contribution we would not have exited the bailout programme.


But we are not clear of all danger.


Our economy, though growing strongly, is still vulnerable to economic shocks, particularly international shocks such as those posed by Brexit.


Since the beginning of the year, only 7 months ago, Sterling has dropped by 14%.

Last April, as part of the Stability Programme Update, the Department of Finance completed a detailed risk and sensitivity analysis for our economic and budgetary projections.


They suggested that a 5 percentage point depreciation in sterling could be expected to reduce GDP levels in Ireland by some 1 percentage point by 2018-19 with attendant impacts on public finance dynamics.


Brexit, however, is only one challenge our economy faces.


At home our public finances, though improving, are not fully repaired. Although much progress has been made we are yet to close our headline deficit and are still borrowing in the region of €13 million a day to fund day-to-day spending.


Moreover the high level of public debt – measuring €201 billion or 93.8% of GDP at end 2015 – means that the Government would find it hard to respond adequately if we experienced another downturn due to global economic developments.


We also have to comply with our commitments under the Stability and Growth Pact which are designed to limit pro-cyclicality in fiscal policy. To avoid unsustainable expenditure increases during economic upturns and to allow scope to increase or maintain expenditure during downturns, without engaging in the steep expenditure reductions that were necessary during the crises.




I have been struck by the fact that those calling for the removal of FEMPI are also the ones calling for more money for housing, more money for health and more money for myriad other social issues our country faces.


In so doing, they forget the political choices that I, as a Minister, must make. There is no limitless pot of money from which I can draw. Decisions must be made. Priorities must be identified.


The “one for everybody in the audience” approach to politics is an irresponsible luxury that only permanent protest can afford. While the outrage of some on the Opposition benches is seemingly limitless, I assure them that taxpayers’ money is not.


Within the resources that are available, and mindful of the risks outlined, there is a long list of demands for increased government expenditure:


  • recruitment of more public servants including doctors, nurses teachers and Gardaí;
  • investment in capital infrastructure in our housing infrastructure, hospitals and schools;
  • the purchase of newly developed drugs for our health service;
  • enhanced funding arrangements for special needs and third level education.


It is my role as the Minister for Public Expenditure and Reform to balance these competing calls with the unwinding of the FEMPI legislation.




Immediate repeal of the FEMPI legislation would be premature and unaffordable, requiring an additional €1.8 billion above the 2016 allocation for pay restoration. This would violate the terms of the Stability and Growth Pact and leave nothing for the other priority areas of the Irish public.


Instead, the phased approach of the Lansdowne Road Agreement provides the mechanism to deliver pay restoration over the next three years at a total cost of €844m in 2018. The Lansdowne Road Agreement allows the Government to hire more public servants to meet increasing demands for public services.


By the end of 2016, we will have been able to hire an estimated additional 18,000 public servants to teach in our classrooms, to help the elderly, to police our streets and work in our hospitals.


That is at a cost of an extra €1.1bn to our pay bill over three years – necessary spending to help our citizens every day.


It must be remembered that this Agreement is less than a year old – the Public Service Committee of the ICTU only adopted it nine months ago, while the Teachers Union of Ireland voted just voted to accept the Agreement in May – and has the support of the vast majority of public servants. In total over 280,000 public servants and 23 unions are now working within the agreement.


As such it provides a negotiated and agreed pathway to pay restoration.


I am on record as saying the Lansdowne Road Agreement is the only game in town. This is because it allows for fiscally sustainable pay restoration, with budget allocations ring-fenced within multi-annual expenditure ceilings, and pay restoration taking an appropriate share of available fiscal space.


It also gives real pay restoration to individuals, progressively weighted to the lower paid.


For any public servant whose annualised salary is below €24,001 – they benefited from an increase in gross pay of 2.5% from 1 January 2016.


For those on annualised salaries between €24,001 and €31,000 – they benefited from an increase in gross pay of 1% from 1 January 2016.

For all those on annualised salaries up to €65,000 there will be a flat rate increase in gross pay of €1,000 from 1 September 2017.


Additionally, all public servants will benefit from the Pension Related Deduction, or PRD, measures contained in the Lansdowne Road Agreement which will benefit all affected public servants by up to €733 in 2016 and €1,000 in 2017.  Crucially, through the operation of the tax code, lower paid public servants will benefit proportionately more from the PRD measures.


The combined impact of these measures, for example, on a public servant on a salary of €25,000 will be an additional €1​,875 over the duration of the Agreement a 7.5% increase.




The Agreement is also flexible enough to allow for the concerns of recent recruits to the public service to be addressed in a negotiated way and in return for workplace reform to drive greater productivity in the public service, as has already been agreed with representative bodies of one group of public servants representing firefighters.


Additionally officials of my Department and the Department of Education and Skills agreed in recent days with INTO and TUI, both unions inside the agreement, to have engagement later this month to begin to fully scope out the issues involved regarding pay arrangements for newly qualified teachers.

I urge those Unions and Representative Associations who remain outside the Agreement to reconsider their positions and avail of the demonstrated flexibility afforded by the Agreement to address their remaining concerns.


Looking to the future, the Programme for Government commits to the establishment of a Public Service Pay Commission to examine pay levels across the public service including any issues relating to new entrants’ pay.


The precise structure of such a Commission and the technical aspects as to how it will operate have yet to be decided upon and will require broad consultation, including engagement with staff representatives as was committed to in the Lansdowne Road Agreement.




In summary I fully appreciate the impact of the pay reductions on individual public servants, but now is not the time to jeopardise our economic progress with the premature, and unaffordable, immediate repeal of the FEMPI legislation.


This Government remains committed to the implementation of the Lansdowne Road Agreement which has commenced the necessary and sustainable unwinding of the FEMPI legislation.


I look forward to using the framework this provides to further prioritise investment in our public services and people.