THE PUBLIC sector pension levy was strongly defended by Minister for Finance Brian Lenihan, who rounded on the Labour Party which sought its abolition in the Dáil last night.

Mr Lenihan said that the Government had no intention of returning to the bad old days of tax rates of 65 per cent, adding that it had more ambition for the country and its citizens. Labour, he said, on the other hand sought to “mire us all in mediocrity’’ and treat the last 20 years as some kind of aberration.

“Resorting to platitudes about change and getting the economy moving again won’t do it,” Mr Lenihan said.

“We need to have a plan and the plan we propose is to save €2 billion this year and a further €4 billion next year.’’

The Minister was responding to Labour’s private members’ motion calling for the scrapping of the levy. The House will vote on the motion tonight.

During the debate, the Minister repeated his view that the remuneration packages for senior bankers were too high and that there would be a cap on the salary of the new chief executive of Bank of Ireland who would be appointed with three weeks.

Labour leader Eamon Gilmore said that public servants, just by doing their jobs, did not cause the problem in the public finances. They were not borrowing millions from a bank, to invest in the same failing bank.

“It is some irony that nurses, teachers, gardaí and county council workers are now being asked to pay more into a pension fund, half of which is to be handed over to banks, whose top executives are still paid in millions.

“It is an irony not lost on the Irish people. They can see through a strategy that scapegoats public servants. It is the strategy of a government unwilling to go after the big guys.’’ Mr Gilmore claimed that in its haste to take money from public servants to give to the banks, the Government chose to unilaterally impose a so-called pension levy on every worker on the State’s payroll.

He said that the levy singled out one category of worker in the economy for a unilateral pay cut.

“It is unfair because it will be levied on income that will not ultimately be reflected in many public servants’ pensions.

“It is unfair because it fails to take into account the differing contributions public servants already make to their pensions. And it is unfair because it places a disproportionate burden on low and middle-income public servants.’’ Mr Gilmore said that last week he had received an e-mail from a separated mother of four teenagers.

“She works for the HSE and earns €31,000 a year. The Government deems this family’s income low enough to be eligible for the family income supplement.

“But this same Government also wants to levy €1,480 from her take-home pay.’’

Mr Lenihan said that the pensions-related deduction was not seeking to scapegoat the public service. “The deduction is a reasonable and reasoned measure to deal with the serious imbalances which have emerged in the public finances. There was simply no alternative but to make savings in the pay and pensions bill, given its relative size. The Government believes that the fairest way to do that is to ask public servants to make a higher contribution towards the cost of their pensions, which, in the current economic climate, have become a very valuable asset.’’

He said public servants enjoyed significantly better pensions than the majority of workers in the private sector. “Pension benefits are higher and, in particular, those benefits are secure.’’

Kieran O’Donnell (FG, Limerick East) said that the levy was akin to another form of income tax for the lower-paid.

Sinn Féin spokesman Arthur Morgan said that those who had the most should pay the most.

“Instead, all we have got from this Government is punitive, mean-spirited and fundamentally unjust attacks on working people in the public sector.’’