The fees of bank directors should be cut by 25 per cent and upper limit placed on the pay of top bank executives following the Government recapitalisation, Taoiseach Brian Cowen told the Dáil today.
Responding to questions, he said that a committee would report to the relevant minister on executive remuneration in the banking sector.
"If there were to be recapitalisation, I would expect the directors' fees to be cut by 25 per cent and I would expect that when they appoint their top executives, there would be an upper limit on remuneration. I would expect that whatever it is at the moment would be cut by at least another 25 per cent as well," said Mr Cowen.
He said that the Government had outlined its recapitalisation policy position since Christmas and stood ready to carry it through.
"No money has been paid into the banks at this point. Some have spoken of banks being bailed out and billions having been spent on the banks but this has not yet happened. What is envisaged is a support to the banking system on behalf of the hundreds of thousands of businesses and the many hundreds of thousands of people depending on their employment. We must have a functioning banking system to provide lines of credit to Irish business," said Mr Cowen.
Minister for Finance Brian Lehinan told the Dáil that the great bulk of the savings programme announced yesterday would come from the new pension levy which would be paid by all public servants, including TDs and senators.
"For its part the government has decided to continue with their 10 per cent voluntary surrender in addition to the pension contribution of over 9 per cent. We believe that those in positions of leadership in all parts of this country should and must lead by example. The remuneration of politically appointed advisors to the Government will also be adjusted in line with the pension contribution."
Mr Lenihan said the payment would be on a graduated scale with the average payment being 7.5 per cent of total earnings. This payment would apply to all elements of the public service pay bill (with the exception of employers' PRSI), including both pensionable and non-pensionable (e.g. overtime) items.
"This payment is in recognition of the fact that public service pensions are significantly more favourable than the generality of pensions in the private sector together with the need to reduce net public service pay costs. This change will require new legislation which will be introduced as a matter of urgency. A much smaller component of the total pay-related savings will be achieved through reductions in travelling and subsistence rates and other savings," he said.
Mr Lenihan said that public servants paying the new pension contribution would be treated for tax purposes in the same way as those making pension contributions in the private sector.
"Contributions will be deducted from gross pay by employers before income tax, PRSI and health levies are calculated and as such Pension Contributions will be effectively relieved of tax at the marginal rate."
He also said that flexibility in responding to changing service demands would have to be pursued determinedly and he was establishing a mechanism via the Public Appointments Service and the Commission for Public Service Appointments to facilitate the redeployment of surplus staff in several areas and the matching of vacancies at all levels across the civil and public service.
"I consider it important that the pay-related savings measures across the public service should be implemented as part of the comprehensive national effort to adjust incomes, with the aim of restoring competitiveness in national incomes generally. Let us be clear: this is not about targeting the public service. We are simply asking public servants to make the same adjustment that is taking place across the economy."