Monday 24 November 2014

The €2bn cost of reversing all public sector pay cuts

Published 13/08/2014 | 02:30

Brendan Howlin
Brendan Howlin

Reversing all the public sector pay cuts would cost the taxpayer almost €2.2bn - the equivalent of the entire Budget adjustment for one year.

But there are calls to keep the pension levy as a contribution to the gold-plated public sector pension pots.

The pay rise would work out at €7,600 per worker, if spread across all 288,000 staff in the public sector.

Public Spending Minister Brendan Howlin has announced there will be talks on the restoration of pay cuts to the public sector made during the economic crisis.

However, Mr Howlin has stressed not all the 'emergency' pay cuts will be restored and any reversals will be done over time. The first pay rises for public sector workers are expected in late 2016 or 2017.

The cuts to nearly 300,000 public sector workers were made under emergency legislation, prompted by the economic collapse - the Financial Emergency Measures in the Public Interest Acts 2009-2013, known as FEMPI.

The Department of Public Expenditure has confirmed the value per annum of each measure:

* €900m for the pension levy, which was worth an average of 7.5pc of salary;

* €950m for the pay cut on a sliding scale, dependent on salary size, but worth an average of 6.5pc;

* €125m for the pensions cut for retired public sector workers;

* €210m pay cut for higher-paid public servants earning more than €65,000 and pensioners on more than €32,500.

To reverse all the measures in one fell swoop would cost the taxpayer €2.185m - or an average pay rise of €7,580 per 288,200 workers in the public sector.

But the minister's officials have stressed that this is not his intention.

"Minister Howlin has emphasised, however, that any restoration of FEMPI measures will not be a once off restoration, which would be unsustainable in terms of Government finances, and that any amelioration measures taken will have regard to overall fiscal requirements," a spokesman said.

Contentious

The head of the country's largest business organisation IBEC says there is an argument for keeping the public sector pension levy. The pension levy was the first measure introduced under FEMPI in 2009 and was hugely contentious.

IBEC chief executive Danny McCoy said he felt the pension levy should be the "last argument" around reversal of the cuts. He said the pension levy could be regarded as a contribution towards the very generous pension scheme in the public sector.

He said the public sector pay hikes during the days of the Celtic Tiger, which made comparisons with pay in the private sector, did not take account of the value of the pension.

"The one thing benchmarking didn't do was put a premium on security of tenure and the pension entitlements," he said.

Mr McCoy has also called for any pay cut reversals to be contingent on a commitment to continued cooperation by workers with reform in the public sector.

Mr Howlin announced the pay talks in an interview with the Irish Independent last 
weekend.

Irish Independent

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