State pay hiked after 'pensions plundered'
Lenihan lashes cabinet as legal expert says pension grab 'may be unlawful'
Published 15/05/2011 | 05:00
Hundreds of employees of a commercial state company are set to receive at least one and maybe two substantial pay increases, the Sunday Independent can reveal -- even though the company concerned says it would be "inappropriate" and "undesirable" in an economic crisis.
The revelation is certain to provoke outrage among workers in the private sector who are already angered that the Government has decided, without precedent, to raid their pension funds.
Last night former Finance Minister Brian Lenihan strongly criticised the Government's pension-grab plan: "Who is going to invest in Ireland if their funds are effectively stolen by the Government? I can't get over it," he said.
And a respected law professor, Gerry Whyte of Trinity College, also came out to declare that the levy may be "repugnant to the constitution".
In a week when the ESRI said public sector pay needed to be cut by 10 per cent, it has emerged that Bord na Mona employees are in line for a pay hike to be dated back to 2009.
While based on a formal agreement, which the company says "no longer exists", the recommendation by the Labour Court, on a broader level, would seem to make a mockery of a claim by the Government that it is getting to grips with the cost of the public sector.
In recent weeks, several government ministers have said the public pay bill needs to be cut so that the country can escape a straitjacket imposed by the EU-IMF.
On Friday, Minister for Public Expenditure and Reform Brendan Howlin warned a public sector union: "We can't afford to keep the lights on."
It is against this background that the Labour Court has ruled "valid" a claim by the Bord na Mona Group of Unions that workers were entitled to a pay increase to bring them into line with other equivalent semi-state employees.
In fact, the Labour Court has said that there is "no justifiable reason" that Bord na Mona employees should be "treated less favourably" than those in comparable State enterprises.
In other words, the Labour Court does not believe that the economic crisis, which has forced the country to the brink of bankruptcy, is reason enough to impose cuts in public sector pay -- let alone block a pay increase.
As a result of the ruling, an estimated 1,500 Bord na Mona workers, on an average salary of almost €47,000 a year, including employer pension contributions, are set to receive a pay increase of 3.5 per cent.
Yesterday it seemed as if Mr Howlin was unaware of the ruling. His spokesperson was furnished with a copy by the Sunday Independent.
"The responsible department and the management of Bord na Mona will study the Labour Court recommendations," he said
The prospect of a further 2.5 per cent increase for Bord na Mona employees now also seems likely to bring them into line with other semi-state companies who operate in the energy sector, such as the ESB and Bord Gais.
Equivalent average empl-oyee pay in the ESB and Bord Gais is almost €95,000 and €77,000 a year respectively.
Last week it was confirmed that soaring energy costs have contributed to a relentless rise in the cost of living which saw annual inflation surge to 3.2 per cent last month.
Yesterday a source at Bord na Mona said that the Labour Court ruling would cost the company an estimated €4m a year if implemented.
In 2009/10 Bord na Mona made an operating profit of €23m and returned a €5m dividend to the State.
The Labour Court ruling is bound to anger the 520,000 workers in the private sector who last week discovered that the Government intends to access their pension savings to finance a jobs initiative.
The retirement incomes of workers in the private and commercial semi-state sectors are paid out of the assets contributed over the years to occupational pension funds.
But the pay increase as proposed would easily insulate Bord na Mona workers from the effects of the Government's 0.6% levy on the capital saved in pension funds.
Intense public anger is reflected in a Sunday Independent/Quantum Research poll which found that 64 per cent believed the Government was wrong to introduce the levy: 55 per cent believed that if a levy was to be imposed, it should also be paid by the public sector; and 69 per cent did not believe the jobs plan would create thousands of jobs.
Associate Professor of Law Gerry Whyte, a respected author on public interest law and an expert on the Constitution, said he believes there is a prima facie case that the levy is in fact a retrospective tax because it applies to funds put in place in the past and that, therefore, it may be repugnant to the Constitution.
"There is an arguable case which would leave this measure open to a Supreme Court challenge," he said.
A Department of Finance spokesman told the Sunday Independent: "Whether the levy is constitutional is, of course, a matter for the courts to decide. However, the department obtained legal advice from the Attorney General in relation to the levy in advance of its announcement and the scheme has taken account of that advice."
The Labour Court ruling in favour of Bord na Mona workers was issued in the same week the ESRI said that public sector pay needed to be cut by 10 per cent for the Government to escape the EU-IMF and return to the financial markets by 2014.
Under the Croke Park agreement of March last year, the Government has guaranteed that there will be no further pay cuts for public sector workers and that compulsory redundancies will not be introduced at least until 2014. The deal also includes a mechanism for possibly reversing part or all of the pay cuts introduced over the two years.
In return for these guarantees, the trade unions have agreed to co-operate on the introduction of wide-ranging cost-saving reforms including redeployment of staff.
But last week the chief executive of the Labour Relations Commission, Kieran Mulvey, said that there was a lack of progress and he warned against taking a "scenic route" to change in the public sector.
The ESRI, however, said the Croke Park agreement needed to be abandoned and that public sector pay should be cut by 10 per cent in an effort to intensify savings.
The ESRI economist who said that he would take a 20 per cent pay cut, Joe Durkan, said the Government should target an adjustment of up to €5bn next year instead of €3.6bn. "I think pay cuts are key to all of this. Pay levels are still too high," he said.
The issue before the Labour Court concerned a claim by the Bord na Mona unions, on behalf of their members, for the retrospective application of increases in pay in line with those proposed in the Towards 2016 Transitional Agreement.
In December 2008, the unions formally served a claim on Bord na Mona for the application of the pay increases due.
The company rejected the claim in February 2009, on the basis that pay increases would be inappropriate and undesirable given the economic climate. The Bord na Mona position was that the agreement is no longer valid.
The unions argued that Bord na Mona was profitable; that it did not plead inability to pay as it was entitled to do, and that, consequently, it should honour its "commitments and obligations".