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News : Irish Last Updated: Dec 19th, 2007 - 13:17:15

Cowen calls for Pay Restraint to rescue faltering Irish international competitiveness
By Michael Hennigan
Nov 2, 2007, 06:00

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The Tánaiste and Minister for Finance, Brian Cowen TD.

Tánaiste and Minister for Finance Brian Cowen TD told a luncheon meeting of the Leinster Society of Chartered Accountants on Thursday that as a small economy, it is clear that sustainable increases in Irish living standards can only be attained through competing effectively in international markets.

"Our relative export performance in recent years suggests that our ability to do this has been compromised somewhat. While there has been some improvement this year, the rate of merchandise export growth will nevertheless remain below growth in our relevant export markets, implying a further loss in our international market share," the Tánaiste said.

Cowen said the contribution of exports to economic growth has been relatively modest in recent years. One of the main symptoms of this development has been the emergence of a significant balance of payments deficit, which is indicative of underlying concerns, particularly in relation to competitiveness. He said that appropriate incomes policy must form a key part of reversing the trend, and retaining and improving flexibility will also be crucial.

The Tánaiste said that a key aspect of overall government expenditure is the public service paybill. "It continues to be the biggest single element in public expenditure accounting for around half of all current expenditure. The total cost of meeting the public service pay commitments arising from the current pay agreement under Towards 2016 will come to about €1.7 billion. The increase agreed was kept at a level which would not undermine national competitiveness," he said.

Last week, the Government approved pay hikes in addition to the planned increases of the Towards 2016 pay agreement, ranging from 36% for the Dublin City Manager and his retired predecessors, 25% for the Secretary General of the Department of the Taoiseach and his retired predecessors; the Taoiseach took a 14% increase, making him the highest paid leader in the democratic world. His predecessors such as Albert Reynolds, John Bruton and Garret FitzGerald also shared in the spoils and the Tánaiste took an increase of 15.6%.

The Tánaiste in his address yesterday made an oblique reference to the reality rather than impression that the Insiders in the Irish economy feather their own nests with sham benchmarking (Ministers got two increases from the original benchmarking mechanism) and what in effect was in last week's pay increases - super VIP benchmarking - while the private sector alone has to struggle with competitiveness.

Within months, there will be more benchmarking and while 900,000 workers in the private sector have no occupational pensions, every public sector retiree including former politicians will get additional increases over the partnership agreement.

"Government policy on public service pay is quiet simple. It is that the public service should be in a position to attract and attain its fair share of good quality staff at all levels. It should neither lead the market nor trail it. Periodic reviews of public service pay levels are necessary to deliver on that criterion. Payment of any pay increases in the public service is contingent on co-operation with a robust agenda of measures to improve the effectiveness, efficiency and user friendliness of our public services and to the maintenance of industrial peace," he said.

The announcement of Super VIP Benchmarking last week coincided with the scramble in the Dáil for 69 paid positions in 23 parliamentary committees, which will have 20 additional researchers. The Government increased the number not to have more accountability but to have more opportunities for patronage. 

Last summer, the number of junior ministers was increased to 20 and most of them have titles rather than serious jobs. There are four ministers in the Department of Enterprise, Trade and Employment, plus political staff and about 17 civil servants who are allocated to handle constituency work.

Ireland has 35 ministers and a 216 person parliament. New Zealand, which has a comparable population and economy to Ireland, has 25 ministers and a 121 person unicameral parliament.

In October 2006, The Irish Examiner reported that the Health Service Executive paid one of its staff  €150,000 in overtime on top of a regular salary and generous pension - 5 times the average industrial wage.

Figures show that some civil servants are earning more in overtime than the average public sector wages, with some pocketing in excess of €40,000 a year.

One individual in the Department of Communications, Marine and Natural Resources earned €45,494 in overtime, while a civil servant in the Department of Agriculture was paid €43,053.

Irish public service salaries rose by 59% in the period 2001-2006 and the payroll has expanded by 38,000 extra staff.

Increases in public sector over the period due to general rounds total €2,479m (or 24.3%), “special” pay increases (primarily benchmarking) total €1,328m (or 13%), and other factors (such as extra numbers) total €2,193m (or 21.6%).

The increase in the average industrial wage for a male worker in the period 2001-2005, was 19%.

Irish Public Service 2001-2006: Salaries up 59%; Payroll up 18% - 38,000 workers and Pensions up 81.3%

Meanwhile proposals on Irish public sector reform are awaited from the OECD in Paris and it is likely that any proposal of significant will be ignored.

RELATED: Where is the Outrage? Gombeenism thrives at home while in Paris, OECD staff work on proposals for Irish public service reform

Cowen also said in his address that it is now clear that the level of new housing output will decline this year and again next year. This sector will therefore exert a negative drag on the overall growth rate for the first time since 1993. As a result, the prospects are for a more modest contribution from domestic demand over the next few years. However other aspects of the economy are still performing well. While growth has been strong in the first half of this year with overall GDP growth of 4 ¾% forecast, the growth forecast over the period 2008-2010 is due to average 3½%.  

He said that lower economic growth will inevitably result in a slower rate of increase in tax revenue, which in turn will be reinforced by the shift away from domestically-driven growth which is relatively tax-rich to an export led one which is less so. Living standards – both current and future – will be affected unless the public finances remain on a sustainable path.

"As part of that challenge, I am determined that the growth rate of public expenditure will fall moderate accordingly. We have made significant amounts of resources available in recent years so the need for very significant increases of the already high level of public expenditure is no longer warranted. Prudent, and sensible fiscal policies have underpinned our economic development over the last decade and my aim is to ensure that they will continue to do so into the future," the Tánaiste said.

© Copyright 2007 by Finfacts.com

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