Greed and recklessness of fat cat elite has gone on long enough
Unless we end public sector excess Europe will become more hostile
Published 15/05/2011 | 05:00
The Government's smash and grab of €470m a year from private pension pots is being done, they said, because there is nowhere else to get the money.
Of course, that's not true.
In truth, here in Ireland, there exists a fat cat public sector elite, allowed to develop over decades, which has so far -- for numerous, often dubious, reasons -- remained largely unscathed and sheltered from the impact of this country's worst-ever recession.
Much of the criticism of Ireland from Angela Merkel's Germany, Nicolas Sarkozy's France and David Cameron's Britain doesn't just relate to our banking problems but to the incredible levels of excess in terms of salaries and pensions enjoyed by many at the top of our public sector.
Today, we examine a number of key areas where real savings can and must be made, if Ireland is to restore its reputation, credibility and most importantly its sovereignty.
Judges in Ireland are, along with their British counterparts, the best paid in the world.
Leader of the judges in terms of pay is the chief justice John Murray, who takes home €295,916 for every year he works.
Because of the Constitutional guarantee that they are to remain totally independent from the political system, the Irish judiciary were exempt from public sector pay cuts announced by former Finance Minister Brian Lenihan in 2009.
A High Court judge earns a basic pay of €243,080, plus lots of allowances (which are tax free). Compare this to the salaries of their counterparts in Spain, who are paid €107,000 a year, and their German equivalents, who receive €108,000 a year, according to official figures obtained by this newspaper.
Despite the voluntary sacrifice by many judges of about 10 per cent of their salary, a number of judges have declined to make any sacrifice to the national cause.
Worse still, most are granted a full pension after 15 years.
This means, according to pension experts, that the pension of a High Court judge is worth approximately €121,500 and this would require a funded pension of approximately €4.86m.
Experts say that a fully- funded public sector pension, when all add-on benefits are included, is worth about 40 times the annual amount received by the pensioner.
That means, if a High Court judge gets a full pension after 15 years, s/he gets an annual salary of €243,080 and a nominal tax-free pension contribution of approximately €333,333 per annum.
Judges are one of two groups of state employees who get special tax-free exemptions on their allowances and expenses.
The country's judges racked up €1.6m in expenses last year. Figures showed 149 members of the judiciary cut their claims by almost a third over the last two years, from €2.4m in 2008.
Ireland's diplomatic corp are among the chief beneficiaries of state generosity.
Fine wines, fine dining, business-class travel, children's school fees paid for and plush accommodation are all part and parcel of life as a diplomat, and all paid for by the taxpayer.
Every diplomat has a huge package of tax-free expenses whereas anybody outside the diplomatic service has to pay benefit-in-kind.
This was provided for in the Finance Act 2005.
Figures released to the Sunday Independent show that expenses for diplomats and their families cost over €235m in the past four years. Just before going into office, Fine Gael's Brian Hayes said such "lavish expenses" were no longer tolerable and a total overhaul of the system was needed.
Under the rules, every official and minister attending a meeting abroad also gets a 'delegate allowance' worth €100 in addition to the normal expenses. This was introduced when we entered the EU to help recompense staff for the disruption of going to meetings in Brussels.
More scandalous is the whole area of diplomatic "hardship posts". Diplomats in these "hardship postings", which include many places where people now go on holidays -- such as Turkey, Warsaw and Vilnius -- are also entitled to some special privileges, including 10 weeks' annual leave. "This is a remnant from the British Foreign Service of 1922", is how one former top government official referred to it last week.
Every ambassador has a chauffeur and housekeeper (and probably some more staff). In fact, in Brussels there are four ambassador-level posts with individual cars and chauffeurs and houses or apartments. In New York, there is a consul general and a permanent representative to the UN -- each living in separate apartments, one of which has a rental cost of approximately $100,000 (€70,000) per year and each with their own chauffeur.
It has also emerged there is a huge number of ambassadors at assistant-secretary level and above, including a number on secretary-general level in the Department of Foreign Affairs, which is out of kilter with the structures of the wider civil service.
And let's not forget how much taxpayers have spent on providing these kings of the diplomatic corps with plush palaces. Last year, I revealed how €4.4m was spent on the renovation of the ambassador's residence in Ottowa, Canada.
The department also sanctioned a spend of €7m on the revamp of the ambassador compound in the Hague in the Netherlands.
"The costs relate to both the conversion of a new building, formerly a house, into offices, and the refurbishment of the ambassador's residence," said a spokesman.
Some €1.4m was also spent refurbishing Villa Spada, the embassy to the Holy See in Rome.
Officials in Enterprise Ireland, Bord Bia and the Industrial Development Agency also receive similar "overseas" tax breaks.
Incremental Pay Increases
One of the great scandals of this recession has been the fact that despite the country's need to borrow €19bn last year to keep the lights on, the Government has, since 2007, paid out over €1bn in "length of service" incremental pay increases to public sector workers.
That amounts to €250m a year, approximately half the Government's jobs budget/initiative, announced last week, reversing the impact of the pay cuts imposed on state employees in 2009.
Even many who work for the State who I have spoken to about this in recent days agree that these incremental pay increases should have been stopped. Unforgivable, unsustainable and outdated, they could easily be stopped immediately.
Top Civil Servants
For those at the top of the civil service, a quiet arrangement has existed for many years that allows them to get massive boosts to their pensions on retirement.
It was this arrangement of giving added years that was used to facilitate the early exit of former FAS boss Rody Molloy, and to enhance the package of CIE boss Dr John Lynch.
For secretary generals, who earn up to €228,000 a year, if they have not worked 40 years (the amount needed for a full pension), there exists a provision to top up their pensions so they can benefit from the maximum-value pension.
"They are normally appointed under Top Level Appointments Committee terms, which provide for added years in circumstances where they are retiring," the Department of Finance said.
The total value of such a pension pot is estimated to be in excess of €4.5m.
The excess in expenses of Professor Kieran Byrne in Waterford Institute of Technology, revealed in full today in this newspaper, typifies the incredible amount of waste and profligacy in our education system. For years, added years were thrown around like confetti in the education sector, adding millions to the cost of running the state.
This situation was allowed to develop as pensions did not impact on budgets within universities in particular.
In 2009, the State took over responsibility for the university pension pots, which now means they will be exempted from the new pension levy announced by the Government last week.
Public Expenditure Minister Brendan Howlin is under considerable pressure to tackle the outrageous salary levels in the semi-state sector, typified by the €600,000-plus package for DAA chief Declan Collier and the €750,000 salary package received by ESB boss Padraig McManus in 2009.
The €265,000-a-year state pension to former National Treasury Management Agency boss Michael Somers is another example of the excess that was allowed to develop during the past decade.
Howlin and the new Government's credibility is now on the hook and he needs to deliver on this issue to retain any confidence from an increasingly hostile public. And don't forget about Colm Doherty's €3m payoff in AIB, and Mike Aynsley's €900,000 package at Anglo Irish Bank.
The previous Government made much about the pay cuts it inflicted upon its own ministers, with Brian Lenihan repeatedly stating they were "leading from the front".
However, it must be remembered that most of the pay cuts taken by ministers did not affect their pensions.
Therefore, most of those FF ministers who retired or were booted out in January did so knowing their pensions would be based on their previous higher salary levels.
Also, all pensions enjoyed by ministers are indexed linked to salary increases.
Those who serve in cabinet longer than two years receive a ministerial pension on top of their TD's pension, and after 10 years are entitled to the maximum-value pension of half their final salary. When calculated, the effective value of such a pension pot is in the region of €5m.
There are many reasons why the Germans, the French and the British hate us right now. We were reckless and we were greedy. How can we, with any sense of authority or credibility, plead our case for more favourable terms when we allow such excesses continue.
They serve only to weaken our hand and damage our standing. Only when we get our house in order can we expect to get anything other than hostility from those we need to help us.