Sunday 24 September 2017

'Savings' sound good on the surface but let's delve a little deeper

Whoever is right about the savings from the Croke Park agreement, it is clear there is a lot of confusion over what the Government means by "savings".

To be non-sexist, it is like the man who came home and said he had "saved" €1,000 by not buying the new golf clubs.

It may be that public spending will be €3.5bn less than if there had been no Croke Park agreement but there is no actual saving whatsoever.

Official forecasts make this clear; all the reductions in the pay bill, from pay cuts and the pension levy, have already taken place.

Very few further reductions are planned or forecast. The pay bill of €18bn this year is meant to fall by €1bn over the next three years but rise by €1bn in the next two.

Significance

This is the significance of increments, which cost around €200m a year.

Further redundancies and other Croke Park savings are needed to pay for this each year -- but officially count as "savings".

There is no such ambiguity for taxpayers. Direct taxes are due to rise by €9bn in cash over the next five years, with €5bn coming from income tax.

But even holding the public-sector pay bill steady along side a €9bn rise in taxes is not enough.

The Government must reduce cash spending on goods and services by €2bn, cut "transfers" on things like child benefit by €2bn, and knock another €2bn off capital spending.

Deficit

The uncomfortable fact is that, over the five years, day-to-day government spending before debt interest will fall by just €2bn, while the deficit must be cut by €11bn.

It is a policy question whether public-sector pay should make a bigger contribution to these extraordinary figures but we should at least be clear on what is meant by "falls" and "savings".

Irish Independent

Also in Business