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Analysis/Comment Last Updated: Oct 4, 2010 - 4:00:19 AM

Irish Budget 2010: Jellyfish politics rule as Cowen sinks in fudge; Awaits "transformational" public sector reform plan from trade unions
By Michael Hennigan, Founder and Editor of Finfacts
Dec 2, 2009 - 9:11:07 AM

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Irish Budget 2010:The fudge agreed by Taoiseach Brain Cowen on curtailing the costs of the public sector via an agreement on unpaid leave that will provide possible cost savings ranging from the Department of Finance's reported estimate of €300 million annually, to the trade unions' estimate of up to €1 billion, is a return to the jellyfish politics of the boom years. A leader who has not once outlined a vision of reform since taking office in 2008, now appears to be banking on the trade unions to produce proposals on reform, which after years of resistance, they are bizarrely dubbing "transformational."

It was always a long shot that a politician who had never taken a tough decision during his political career, would stick to his pledge of cutting the public pay bill by €1.3 billion in next week's Budget. Simply, it was foolish to expect that the people who bent over backward and forward to spending demands during the good years, would develop backbone, even amidst a most serious crisis.

It's ironic that the fudge is on unpaid leave and two people sitting at the Cabinet table are disgracefully still on long stretches of leave but it's not cost free.

Minister for Foreign Affairs, Micheál Martin, is on 20 years of leave from his teaching job at Presentation College, Cork and Minister for Social and Family Affairs, Mary Hanafin, is on 12 years of leave from Sion Hill School, South Dublin. They are both building up pension credits as teachers and it speaks volumes for the low standards that are tolerated in Ireland.

So the typical public servant takes 11 days sick leave each year and one proposal is that 12 days of unpaid leave for teachers could be spread over 3 years but will pupils be sent home?

The Health Service Executive -- the biggest public sector employer with over 100,000 staff -- has said the proposal would take the equivalent of 5,000 staff out of health alone next year.

One suggestion is that staff may be asked to work free in 2010 and take the leave in later years.

On Tuesday, there was an example of the limitation of the ballyhooed "transformational" reform in prospect, when the unions refused to accept an 8am to 8pm core day -  - in the health service i.e no overtime or special payments for work within this timeframe.

The Minister of Finance has also shown himself to be  a jellyfish, having said that a carbon tax would be the only tax change in the Budget.

The Government have bottled it on the issue of public sector reform, according to Fine Gael Deputy Leader & Finance Spokesman Richard Bruton TD, as he described the outline pay deal on Tuesday evening, as the worst of all possible worlds. He said that public sector workers, taxpayers and consumers would all end up losing out if the early details of the putative pay deal were true.

“They’ve bottled it. They had a chance to deliver real change and cost reductions in the public sector and they’ve blown it. This deal represents the worst of all worlds.

“If this deal proceeds as described so far we will see:

  • An estimated 5% cut in the pay packet of EVERY public sector worker regardless of their income level. Those on €25,000 or €125,000 will lose the same proportion of their pay. That is not fair.
  • Consumers lose out through reduced services including frontline areas like the health service, schools, and social welfare offices.
  • No fundamental proposal to address the cost structure in the public sector.

“It appears from other media reports that the Capital Budget will be slashed by an extra €250m to allow for a lower saving target in public sector pay. If this is the case, that vital capital spending has been cut to allow a terrible deal be cobbled together this evening, then we truly do have the worst of all worlds.

“I have repeatedly said that the wrong decisions taken at Budget time can make a bad situation worse. That has happened too many times in the recent past. It appeared that some lessons had been learned but the outline of this pay deal suggests the reverse. Slashing the Capital Budget to grease the wheels of a short term deal is, sadly, only going to prolong the economic depression facing the country. Under this deal, if it plays out as described, everyone loses out. No-one wins – public sector worker, taxpayers or consumer of vital services.”

It would be a joke if it wasn't so serious, but when Brian Cowen became taoiseach in May 2008, he established a so-called taskforce to review the proposals of the Paris-based OECD on public service reform.

In April 2008 former taoiseach Bertie Ahern launched the report and said that an estimated 800 State agencies, commonly known as quangos, was “too many by half.”

The taskforce is apparently on a respirator and it's possible that Cowen has forgotten that it exists.

The only change in the realm of the quangos was to cut the budget of the Equality Authority by 43%, which was an act of political vengeance by the Department of Justice. Nothing has changed for the other 799 and thousands of political appointees remain on handy earners but with no effective responsibility.

The unions who pushed Bertie Ahern to agree to the misnamed "benchmarking" deal in the early years of this decade because private sector workers were believed to be all dot-com millionaires, reject any new benchmarking review.

This week, the SIPTU union's head of research, Manus O'Riordan, carried out his own benchmarking and produced a report with the tagline - - The Use and Abuse of Statistics - - and he selected some data to show that a group of private sector managers had outearned public sector workers.

Of course, there were groups who did very well in the private sector but for example comparing public sector pensions with those of senior bankers, can ignore the reality that the majority of private sector workers have none.

O'Riordan says"over the past year the ESRI has been as much engaged in campaigning as commentary on the issue of public sector pay."

So the publicly funded ESRI may present inconvenient truths but why not have a credible benchmarking review with a three month deadline?

We can guess the reason why benchmarking is not now on the agenda.

In the meantime, the public pay bill may well rise in 2010 as the system of increment increases could offset the savings on unpaid leave.

Cowen's bluster is now seen as that of a vessel without a compass. Even if he produced serious proposals on reform at this stage, the trade unions would assume that he would fold in face of pressure. However, urgent change will not come through political weakness and unmeasurable fudge.

Further background information from Finfacts articles:

Sick leave in Irish civil service almost doubled since 1980s; Average employee absent for over 11 days in 2007

National Strike: Wealthy Irish trade union leaders should give priority to misery of unemployed and flood victims

The 2001 economic consensus that paved the road to economic ruin

Irish Central Bank declared its impotence before launch of the euro; Why Spain's biggest banks survived huge housing boom

IBEC delivers Irish tribal conservatism not needed radicalism

ICTU calls for return to 1980s era Irish income tax rates with combined top rate of 65%

Ireland: A "smart" economy in food better than pie-in-the-sky aspirations?- - including how New Zealand uses home advantage to sustain its position, as the world leader in the international trade of dairy products. 

National Employment Survey: CSO says Irish public sector/private sector pay premium was 19.1% in 2007 for comparable jobs

Public sector economists confirm Irish public service pay benchmarking was a sham; Premium on private pay increased dramatically from 9.7 to 21.6% between 2003 and 2006

Irish average earnings in 2007 were at €37,726; Pay at ESB and Bord Gáis at €71,572; Public/private gap was 48% ex-pensions

Lenihan says total cost of State pension for an Irish public sector worker hired after 2004 is 26.1% of pay

IBEC calls for ending of pay parity link in Irish public sector pensions that gives them a six-star standard status

Where is the Outrage? Gombeenism thrives at home while in Paris, OECD staff work on proposals for Irish public service reform - -  article following recommendation that Ireland's Cabinet be the best paid in Europe. Recommendations for 1,600 senior staff in the public service were for minimum pay hikes of 14%. Pensions for 2 retired Dublin City Managers jumped 36% because of the direct link with pay of incumbent.

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