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When discussions opened last week to extend the Croke Park Agreement, unions were shocked by what was proposed. This shouldn't be the case as they know how bad things are. The Government and senior management left it too late. They should have demanded substantive reform in 2009 when the unions were on their knees and accepted change was needed.
It would have been easy to cut another €10bn from public sector pay and pensions and probably more. In the first round, the Government secured redundancies by making outrageous payouts in lump sums and pensions. Public sector pensions have risen by about €500m.
That's what the Government robbed from private sector funds, many of which are already underfunded.
The unions don't want any more pay cuts or compulsory redundancies. The Government wants €1bn in savings, but it probably needs to save more. It can seek all the improvements in work practices it likes but it will be difficult to achieve the savings without cuts in jobs, pay and pensions. If it doesn't achieve the savings by renegotiating the Croke Park Agreement it intends to plough ahead with cuts across the board of another 7 per cent.
I worked in the civil service for 10 years. So I have some idea what it's like and it's no bed of roses. I never got expenses or an allowance. Overtime was strictly controlled and it wasn't always on offer anyway. Many needed the overtime and allowances just to pay the bills. But that doesn't mean they are justified. There was the prospect of a pension, but it only paid off if you got far enough up the ladder to get higher pay. The job was for life. For some, it was secured poverty. But it was better than what the private sector had.
Those in trouble in the private sector and those who lost their jobs would like the benefits that public servants have. But they followed different career paths and now they must live with their choices, for good or bad. It wouldn't be quite so bad if they had a Croke Park Agreement of their own to hold things together. But they don't and while they fall further behind the only relief goes to the public sector, or that's how it seems. There just aren't enough life rafts to save everyone. Even the ones that are there are beginning to leak.
The negotiations need to be out of the way by the end of March. If agreement isn't reached there is the prospect of strike and work-to-rule practices. But it is in the unions' interests to reach agreement. Their members have too much to lose if they don't.
Many still feel that public sector pensions are outrageous. And some are. As they are not properly funded, they come out of current tax revenue. Because the budget deficit is so high, there are compelling reasons to undo the pension arrangements. It might be the final straw for some public officials. But that is the economic reality that we face unless we can cut our debts.
In the years of secured poverty it became customary to supplement public sector pay with guaranteed overtime and expenses that became part of the package. The Croke Park Agreement set out to change this, but it only opened a can of worms. They cannot justify the spending and the savings are grossly inadequate. Last year the Minister for Public Expenditure and Reform, Brendan Howlin, left it to senior officials to find the savings in the outrageous expense payments that he failed to secure. We are still waiting for a solution. It might never come.
The guarantee of a job for life in the public sector is as much a problem for management as it is for the Exchequer. On the one hand they cannot be asked to move on if there is no longer a job for them. It must be demoralising for staff at all levels too. They may have a job for life, but the package they thought they had is being whittled away.
Meanwhile, they are forced to outsource much of the work that should be done by public servants. Why are we paying more and more to private contractors to do the jobs that should be performed by our public servants?
Now we have the old public sector, the new public sector and the public sector that is staffed from outside. Is it any wonder we cannot afford it.
While public servants and their unions are fighting to keep the status quo, their jobs are being lost to the private sector. Surely it makes more sense for them to face up to inevitable change and take it on before they lose any more.
The new recruits are already on reduced benefits compared with their long-serving colleagues. This can only cause resentment and a lack of productivity as a result. What is the point in sacking nearly 40,000 public servants if the positions are going to be filled by outsourcing the work to private contractors. Meanwhile, we still have the outrageous pensions bill and redundancy costs. And it isn't any more efficient.
Those who are cushioned at the top are still feathering their nests and keeping all the benefits they accumulated for themselves. Even when public sector pay was cut, the top dogs converted their bonuses into core pay. So even their pensions will be higher.
The lower ranks lost most and even their jobs are being replaced through the back door by outsourcing their work. The unions have been hoodwinked. They have failed their members and they can't even see it. They should have embraced the change and rationalised what they have. They could end up with nothing.
Public servants might qualify for a mortgage due to their secure jobs and guaranteed pay, but the same banks that financed them are still dragging us down. Figures released by Eurostat revealed the Irish people have paid for nearly half the European bank debt. Our EU partners paid only a fraction of what we did. We need a debt writedown and it must be substantial.
If we get that we might be able to go easy on our public servants whose entitlements are under threat. But no matter what happens the public sector must be reformed and the outrageous cushions must be surrendered.
No public servant will give up what they have while politicians fare best of all. They should lead the way by giving up all their entitlements. Henceforth nothing should be paid out unless the benefit justifies the cost. Even then it should only be paid if we can afford it. If a politician can have it, a business person should be able to claim similar entitlements. If public servants get perks, then every private sector employee should be entitled to claim the same. If the system was fair there would be nothing to argue about. Then we could all focus on recovery.
James Fitzsimons is an independent financial adviser specialising in tax and financial planning
