Irish Economy 2012: The Minister for Public Expenditure and Reform, Brendan Howlin TD,
today welcomed the publication by the Implementation Body for the Public Service
Agreement 2010-2014 (‘Croke Park Agreement’) of its Second Annual Progress
Report. He claims that €1.5bn in pay and 'administrative efficiency' savings
have been achieved in the past two years. However, these savings are a sham.
This report is a sham because of the focus on pay
rather than both pay and pensions and
the benchmark year selected.
There would be no savings on
the pay and pensions bill by 2015 if 2006 -- the
peak year of the boom was the benchmark year.
The report of activities by Ireland's biggest employer has a long list of
'achievements' -- not difficult in itself to produce a laundry list
involving the activities of 290,000 people.
- Efficiencies realised from the closure of barracks: €1.3m;
- Prison Service canteen facilities: €1.4m;
- Changes in work practices and value for money initiatives in the Naval
- Non pay gains in the Garda Síochána: €24m;
- Central Mental Hospital roster changes: €1m.
.. and on the list goes on all 'savings' on
Big issues are not addressed and this list of 'savings' should not be seen
as the result of radical change in structures but a reality of a staff embargo
and a limit from the reckless spending levels of the boom period.
can a civil servant in a bankrupt state retire at the age of 57 with a lump
sum payment of €428,011, a special top-up of €142,670 (for senior civil servants
who retire early) and an annual pension of €142,670?
The Comptroller & Auditor
General said in 2009
that the average number of sick days taken in 2007 by each Clerical Officer was 16 days.
Last year, research published by the German
Macroeconomic Policy Institute (IMK) shows that in 2010, the average hourly
labour costs (including social security costs paid by private sector employers)
were €28 for the Irish private sector and €34 for the Irish public sector.
The rates for Germany were €29 per hour in both
sectors; Finland's rate was also €29 in both sectors and the UK was €20 per hour
in the private sector and €21 per hour in the public sector.
So the Irish public sector had a premium of 21%
before accounting for the benefits of the special pension scheme.
'The National Strategy for Higher Education to 2030'
report which was published in January 2011 stated: "Salaries account for
three-quarters of total current expenditure on higher education in Ireland –
compared with an international average of two-thirds. This means that Irish
higher education operates with lower (nonpay) recurrent expenditure than is
typical in other countries."
Last April, the Department of
Finance said that while taxation receipts in 2012 are projected to be just above
2004 levels, the gross voted expenditure of Government Departments and Offices
in 2012, at an estimated €56bn, is
projected to be 37% above the level it was in 2004, despite the very significant
adjustments to both revenues and expenditure since mid-2008.
Howlin's magic 'savings'
Minster for Public Expenditure and Reform apologised to a sympathetic Dáil
audience last March for even bringing up the issue of public sector pay. He suggested that
the paybill (excluding 30,000 local authority workers) would be cut by €3.5bn
(including the €1.5bn related to 2009 pay cuts and a special pensions levy) by
2015 from the 2008 level .
"It is perhaps easy to become jaded in our
discussion of Public Services pay costs," the minister said in a
There are a lot citizens who could feel 'jaded' about
In contrast with his colleague Joan Burton who has
highlighted the increase in welfare from €8bn to €21bn from 2011, Howlin chooses
2008 as his benchmark years and produces smoke about the 1970s as the reason for
€1bn rise in the cost of public pensions.
His figure for 2009 pay of €17.5bn is before the
deduction of the 2009 pay cut and special pensions levy (offset against pay
rather than the cash cost of pensions) amounting to about €1.5bn, which
was proposed by the late Brian Lenihan, minister of finance, in the Budget of
Detailed data on pay and pensions is published
annually by the Departments of Finance/Public Expenditure and Reform, excluding
the Exchequer net pay and pensions bill (ex local authorities) was €10.2bn; it was €16.2bn in 2006;
€18.7 in 2008 and estimated to be €17.1bn in 2011 - - an increase of 5.6% since 2006 and 67.6%
Pay is down 0.3% since 2006 and pensions are up 67%.
The net cash cost of pensions (after an employee's
normal deductions) was €876m in 2001; €1.4bn in 2006; €2.0bn in 2009 and €2.3bn
A cut of €3.5bn from the 2008 pay bill would leave
€13.6bn. Howlin expects pensions to increase by €1bn and adding to net pensions
of €1.7bn in 2008, gives a total of €2.7bn in 2015 - - up from €2.3bn in 2011.
This would give a total pay and pensions bill of €16.3bn for 2015 compared
(excluding local authorities) with the 2006 level of €16.2bn.
However, annual pension cost increases in 2010-2015
are likely to be higher than €100m annually.
From 2008, the annual increases have been: €140m;
€191m and €192m.
So, the minister's claims compared with the peak
year of the bubble show that there is nothing to brag about.
The minister said today: “I welcome the findings of the Implementation Body that
almost €900 million of sustainable pay and non-pay savings have been
successfully delivered in the second year of the Croke Park Agreement. This
means the Agreement has achieved almost €1.5bn in pay and on pay savings
in its first two years. We should not lose sight of the fact that the Croke Park
Agreement has enabled these savings to be delivered in a climate of industrial
peace across the public service."
“€1.5bn of recurring savings is a substantial
contribution by public servants, who have also suffered an average 14% pay cut
since 2009. Today’s report shows we’re ahead of Government and troika targets on
public sector staffing and payroll savings," said Impact trade union general secretary Shay
IBEC, the main business lobby group, said it was important to recognise that, due to the numbers taking early
retirement, a significant proportion of payroll savings would be off-set by
increased pension costs. The focus of attention should be on savings to the
combined pay and pensions bill, not just the pay bill.
IBEC director Brendan McGinty said: "The need for significant additional reforms
and savings remains. Important progress has been made, but much more needs to be
done. A number of issues still need to be addressed, including the payment of
increments, reform of the allowances system and an overhaul of outdated sick
leave policies. A more progressive approach to performance management is also
"Another €3bn adjustment in Budget 2013 is required and the bulk of this
should come from reducing expenditure, not raising taxes. The pace of change
needs to increase and further changes to public sector pay and pensions should
not be ruled out.
"Budget constraints and fewer staff numbers make it difficult to maintain the
quality of service, but this can be overcome if more use is made of the skills
and experience available in the private sector. Major additional savings can be
made through the public procurement process, and by making better use of
out-sourcing and shared services."
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