Brendan Keenan: We needed radical reform but got a step backwards
THERE are two core problems with the Irish public sector. It costs too much, relative to the size of the economy, and it does not perform very well. It would be a very good idea to deal with those two problems simultaneously. It is far from clear that the dramatic talks between the Government and the trade unions have done so.
The drama is part of the problem. The Government has a budget crisis of unparalleled proportions and urgently needs significant cuts in the cost of the public service. Yet pay cuts would mean more strikes -- if not something worse.
There is growing concern about the level of anger in the private sector over what many seem to see as irresponsibility from cosseted, protected public sector workers. There is much talk of street riots.
On the other side, the trade unions realised that, even after their day of action, the cuts would indeed involve a reduction in basic pay and, with it, a drop in the value of those cherished public sector pensions. They had every reason to look for an alternative.
These are not the best conditions in which to negotiate a "transformation" of the public services, as it is being called. Transformation is, in fact, what is needed. Yet far from taking a step towards radical reform, there is clearly the risk that this week marks a large, probably irreversible, step backwards from dealing with the problem.
There is the obvious, immediate risk. Can Finance Minister Brian Lenihan now make the €4bn promised adjustment in next week's Budget? With one week to go, and so little detail on what has happened, it is hard not to answer: no, he cannot.
Not without a bigger rise in taxation than anything anticipated so far. Tax is always the easiest option for governments, even though its ill effects are well-known and well-documented; not least in the Ireland of the 1980s.
What if Mr Lenihan decides to have a 2010 deficit bigger than the planned €20bn? The answer there is that we do not know what would happen. There might be an immediate reaction from our creditors, or there might not. We can say that the crisis will merely have been deferred, unless the unions really can deliver a quite different public service.
Many of their leaders are aware of the fundamental difficulty -- one which will not go away no matter how well the economy performs. This is that it is not possible to raise €65bn in taxes to pay the cost of government in an Ireland whose national income is heading in the wrong direction towards €140bn.
The Government's five-year plan to deal with this envisages virtually no change in the amount spent on public services over the five years. No cuts, mind you, just no increases. The extra €4.5bn required to service the ballooning national debt comes from taxes. Some of it is new taxes, some the "painless" taxes produced by the hoped-for growth from 2011 on.
Those union leaders have realised what most of their members have not -- the implications of holding cash spending on government services at around €57bn a year for five years. For a start, if basic pay is not to be cut, the numbers in the service will have to be reduced significantly.
Those remaining will have to provide the same service or -- since the services are so poor by European standards -- better ones. That really would be a transformation.
It is hard to see how taking two weeks' unpaid leave even fits into such a strategy. Had they agreed to work two weeks without extra pay, as a temporary measure pending full negotiations, it would at least have shown an understanding of what is at stake.
Without such understanding, there seems little reason to suppose that transformation can be agreed or achieved. It is not only that departed staff would not be replaced, which breaks every trade union taboo. The expensive, inefficient patterns of overtime, allowances, shifts, strict demarcation of duties and resistance to change without payment -- sometimes even after payment -- would all have to go.
It may well be the case that present pay levels could be afforded in such a transformed public service, although pay rises -- even increments -- seem out of the question. But the transformation has to begin almost at once if the country is to have any chance of keeping its public debt within manageable proportions.
It should not, of course, be left to the unions to mix the pill they will be asked to swallow. It is the Government's job to put forward its ideas for the new public service: its size, its management structure, its plans to deal with those whose idea of service stops with self-service.
The Government has failed to produce anything, except a set of tax and spending numbers. One can only hope, however faintly, that yesterday does not mark a failure even to stick with the numbers.
bkeenan@independent.ie
- Brendan Keenan
Irish Independent
