Financial emergency legislation which allowed the State to reduce the pay of public servants and cut fees for its contractors continues to be needed, the Minister for Public Expenditure Paschal Donohoe has said.
In an annual review of the legislation,which is known as Fempi, the Minster also said it was appropriate to unwind the measures over the coming years in line with provisions on pay and pensions agreed last year with public service trade unions and staff associations.
Mr Donohoe said repealing the various pieces of financial emergency legislation introduced since 2009 in one go would “exceed available additional resources, violate the terms of the EU stability and growth pact, broaden the deficit, increase the national debt and result in reduced shares of Government expenditure for capital investment and programme interventions”.
The Minister said that under the Fempi legislation provisions and accompanying reduction in public service staffing levels, the exchequer’s gross pay bill fell by about €3.7billion.
Mr Donohoe said in his review that the country’s economic recovery was at an advanced stage and the labour market was fast approaching full employment.
However,he warned that “considerable vulnerabilities remain”.
He pointed to risks arising from Brexit as well as from any disruption to world trade or a potential trade war.
“Domestically, housing supply pressures and the possibility of overheating could threaten our competitiveness. Ireland’s highly concentrated industrial base represents another recurring risk facing the economy. As a result, output and employment are exposed to firm and sector-specific shocks.”
Mr Donohoe said the Government had begun unwinding the provisions of the Fempi legislation in 2015 and that this process would continue under measures enacted to give effect to the public service pay deal agreed last year.
He said this deal would cost €887million between 2018 and 2020 with other pay restoration measures to come into effect by July 2022.
“In total the costs associated with the agreed unwinding of the remaining Fempi measures is €1.2 billion.”
Mr Donohoe said the various Fempi acts had operated effectively since they were introduced and continued to do so. He said the legislation had made a significant contribution both to the initial stabilisation of the public finances and to their future sustainability.
He said he was satisfied that the measures continued to be needed.
However, he also said it was appropriate to unwind the legislation in line with the terms agreed in the pay deal last year.
