State's plan for massive public sector purge
Jobs and pensions now targeted in €15bn push
Published 31/10/2010 | 05:00
The government is to announce the largest planned exodus of staff in the history of the public sector, in a move that could save it up to a €1bn a year.
The Sunday Independent has learnt of a number of key elements of Finance Minister Brian Lenihan's forthcoming four-year plan, aimed at cutting government spending by €15bn over the next four years, which is due to be announced in two weeks' time.
The most startling development to emerge is that up to 20,000 public-sector jobs are to be cut through voluntary redundancies by 2014 and existing pensions for state employees are to be cut, in a major departure in government policy.
Mr Lenihan has confirmed the ambition of the Croke Park agreement will have to be "broadened and deepened", and it has emerged that the job cuts will result in €1bn in savings to the State over the next four years.
Senior government sources said yesterday the majority of the cuts will come from within the HSE, which has 140,000 employees, and in the firing line are mid-level managers.
"There is a huge rump of middle managers who are doing very little, and we are just figuring out how we will entice them out of the system," one senior government figure said.
Discussions at the Department of Finance within the past few days have centred around what incentives can be offered to staff for leaving, according to sources.
"It will not be possible to go as high as 30,000 [as State Street boss Willie Slattery suggested] but the figure being considered is between 15,000 and 20,000.
"It has to be done, we can't afford not to do it," a senior government source said.
In a further tightening on employment procedures, it has also emerged that this year's relaxation in the public sector moratorium is to be cancelled and the cessation on hiring will be "strongly enforced" until the end of 2014.
Despite mounting opposition, Mr Lenihan is now targeting existing public sector pensioners who have up until now remained unscathed from any cut. The annual public sector pension bill is almost €3bn and is one of the main target areas for cuts.
This measure is on top of major changes to pension arrangements for new entrants into the public service which he announced last December.
"We can no longer afford to maintain a public sector pension bill of almost €3bn a year. This is a group of people who have paid off their mortgages and have a lot of disposable income.
"They have gone untouched so far, it's time they took a hit," one senior government source said.
The Sunday Independent has also leaned that in another key proposal, politicians are set for further pay reductions of up to 10 per cent.
Since 2008, senior ministers have seen their pay cut twice by more than 20 per cent and another cut would see their salaries back at 2002 levels.
A sizeable majority of Irish people want the Croke Park agreement torn up immediately, according to the latest Sunday Independent/Quantum Research nationwide poll.
Sixty per cent of those polled felt there needed to be a radical overhaul of public service numbers, wages, working conditions and pensions -- in fact everything should be revisited and a new cost saving and efficiency model developed. There was a lot of anger directed at politicians, and government ministers in particular, for not showing leadership and drastically cutting down on their own wages and expenses.
The other 40 per cent did not think that the agreement should be scrapped, but a fair proportion of these did think it should be revisited and modified. Some respondents stated that they did not think the government would have the political will to go head-to--head with the public service unions in pursuit of a better deal.
The need for fiscal consolidation comes as it was revealed that Irish banks including AIB, Bank of Ireland and Anglo Irish Bank had borrowed €83bn from the European Central Bank, with €23bn of that coming in September alone to cover significant debt maturities that fell due.
It is the clearest signal that the normal markets have closed up to Irish banks, who have been forced to rely on the ECB to stay afloat.
Loans to Irish, Greek and Spanish banks made up 61 per cent of loans supplied by the ECB in September.