Saturday 20 December 2014

Talks will be a charade if old delusions remain

Union leaders have a responsibility to think creatively and not remain mired in self-interest, writes Alan Ruddock

Alan Ruddock

Published 14/03/2010 | 05:00

Who is for turning? Will Brian Cowen and his Government dismantle their strategy for repairing the public finances or will the public sector trade unions accept that last year's pay cuts cannot be reversed? For now, instead of answers, we have talks about talks.

As Peter McLoone, head of the Impact trade union, said last week, "they know what we need and we know what they need so let's see what happens". In other words, prepare for the murky world of compromise, semantics and opaque deal making.

The unions have refused to abandon their current campaign of disruption (though they have agreed not to escalate it) and the Government, through Brian Lenihan, the Minister for Finance, says there can be no going back on the pay cuts: "There is no scope for restoring the reductions that have already been made."

On the face of it, there is not much room for negotiation. The unions want what the Government cannot give, so it is unlikely that a carefully orchestrated talks process can deliver anything but fudge.

The unions will try and negotiate pay increases in return for public sector reform (and those increases will be cast by them as a progressive reversal of the cuts) and the Government will try and negotiate reform that actually delivers new savings, not replacement savings.

All very delicate, no doubt, and all expertly choreographed by the social partnership veterans in the Department of the Taoiseach, but it will be a charade, and a very dangerous one. Ireland's fragile credibility in the international markets depends on the Government delivering on the promises that it has made to deliver sharp cuts in government spending and it cannot afford to send out signals of weakness.

For Cowen and Lenihan a talks process is a tightrope: one false step and they will tumble, and there will be no safety nets to catch their fall because if the markets sense surrender by Cowen, they will be merciless.

So what is the point? It is fundamentally dishonest for either side to suggest that talking can reverse the cuts that have already been banked, and it is fundamentally dishonest to pretend that essential reform of the public sector is somehow in the gift of the public sector trade unions, or that it has to be bought with more money. It is also dishonest to pretend that significant savings can be made in public-sector spending without further reductions in take-home pay or job cuts.

Colm McCarthy's report on cutting government spending identified massive savings across the board, but they were not pain free. It is possible, for example, to slice a few hundred million from the education budget by changing the contracts of teachers and lecturers, but those savings come from their pockets, not from a magical pot of gold in the basement of the department. Genuine reform will be tough to negotiate and will be tough to deliver and there is absolutely no point in pretending that it will comes without consequences. If Cowen believes that the leaders of the public sector unions are ready to deliver that sort of change, then by all means talk. But if he knows that it will not happen, and that all they want is a cloak to cover their own retreat from confrontation, then the risk of engagement is too great.

Cowen, though, has cast that die and the talks about talks will play out for the next two weeks. David Begg, the general secretary of the Irish Congress of Trade Unions, says that failure to reach an agreement will be "catastrophic", that a breakdown in talks would result in "very real consequences" for the future relationship between government and unions and would be seen as "very, very bad" outside the country. It is a peculiarly one-eyed view of the world, and sits strangely with the realism that Begg has been forced to adopt in his other role as a director of Aer Lingus. In Begg's world, an agreement to unravel the December budget would be viewed positively, and he seems to think that the need for cuts in spending is at an end. "If (public sector) pay can be realigned with its original position over a period of time and in circumstances where savings can be achieved in other ways well then that surely in anybody's point of view is a logical thing to do," he told RTE.

Begg is wrong. As Lenihan has said clearly, there can be no retreat from the pay cuts because the Government can no longer afford to pay its employees that much. And far from being the end of the cuts, we are just at the start. If Begg and McLoone were serious about helping the Government tackle the public finances, however, they could come up with an alternative that would help reduce the debt burden.

When Portugal announced its austerity package last week it included a provision to raise €6bn by privatising state assets. It was a simple, uncontroversial element in a much larger package and politically acceptable because the more a government raises by selling companies it does not need to own, the more it can reduce its debt and the cost of servicing it. Ireland's trade unions are ideologically opposed to privatisation, but that opposition needs to be set in context so that the union members and the rest of the country can understand the choices.

If McLoone and Begg want to mitigate the pain that must be extracted from the public sector, why not insist that their members endorse a privatisation strategy that sees the ESB, Bord Gais, airports, sea ports and companies like Coillte and Bord na Mona sold to private investors over the next three years? The range of estimates for what privatisation could raise are very wide -- anything from €5bn to €15bn, depending on market conditions, pension provisions, existing debt and investor appetite -- but even at the lower end the potential proceeds cannot be ignored. The benefits would not begin and end with the money: privatisation would breathe life into the economy by removing the stultifying effect of State control.

Trade union opposition to privatisation may be rooted in politics and ideology, but there is also a hefty dose of self-interest. State-owned companies are, not surprisingly, bulwarks of union power, their employees often among the best paid in the country. Cutting those companies adrift to compete in the real world would be good for the country and the economy, but it would not be good for the unions. That should no longer matter to Cowen or Lenihan, or to Begg and McLoone. What matters more to them: the pay and conditions of a low-level civil servant, or protecting the ESB from rigours of the free market?

Privatisation would only solve a small part of Ireland's financial difficulties but by announcing a detailed programme of sell-offs, the Government would demonstrate some much needed flexibility -- both to raising money and revitalising the economy. Cowen believes that Ireland's economic future hinges on innovation -- after announcing the talks "breakthrough" he jetted off to the United States, armed with the report of the Innovation Taskforce and determined to sell his message of Irish ingenuity.

There is plenty of flannel in the strategy, which in parts resembles an elaborate wish list rather than a road map to the future, but if he is serious about making this country a magnet for cutting-edge technology companies then it makes sense to modernise those parts of the economy which fall under Government control. Even the most technologically advanced businesses want the basics done well: efficient government, cost-effective electricity, high-quality communications, and cheap and efficient air travel. A country that wants to be seen as innovative and forward thinking does not need to be dominated by State-owned behemoths.

Talking to the unions only makes sense if the Government can emerge from those talks with a firm commitment to modernise the Irish economy. The pay cuts cannot be reversed, reform of the public sector cannot be bargained away, but it is possible to create a plan that is based in realism, not delusion.

The unions have a choice: they can start thinking creatively, looking for solutions and playing a role in the recovery, or they can remain mired in the politics and ideology of self-interest. The world has changed, the economy has shrunk and the future will be very different to the past dozen years of economic growth. There is no room for charades, or for talks about talks that lead to nothing more than fudge. McLoone says that he knows what the Government needs: if he does, then he has duty to deliver.

Sunday Independent

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