News Colm McCarthy

Tuesday 23 September 2014

We need to make public service effective as well as affordable

Senior civil servants bear much of the responsibility for bad political decisions

Published 05/01/2014 | 02:30

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From left, Derek Fowlds, Paul Eddington and Sir Nigel Hawthorne in 'Yes Minister'

PUBLIC service reform is firmly on the Government's agenda for 2014.

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Minister for Transport Leo Varadkar, junior finance minister Brian Hayes and public spending minister Brendan Howlin were urging change last week in the remuneration system in the public service. All three would like to see better performance rewarded and failure penalised, with Varadkar going so far as to suggest that poor performers should be fired. Education minister Ruairi Quinn is also proposing sanctions to deal with under-performing teachers and the Government is due to publish a new scheme of performance management for the public service within the next few months.

Once the Irish bubble burst in 2008, there were two issues to be addressed about the public service -- affordability and performance. Only the first of these has seen much in the way of practical action.

Recruitment has been minimal and early retirement schemes have been offered. After a decade of rapid expansion up to 2008, the number of public servants is actually falling. The other change has been a sizeable pay cut, with the biggest declines for the better-paid officials.

Both of these measures have helped to reduce the public service pay bill, which saw such explosive growth during the social partnership era. It is unfortunate that the opportunity has not been taken to undertake a proper benchmarking exercise on public service pay and conditions.

Both of the benchmarking reports, the first of which resulted in large across-the-board pay increases, were short on detail and the suspicion is that valuable information on relative pay levels in public and private employments was suppressed.

Those who believe that balance has been restored should have nothing to fear from a definitive and fully transparent examination of pay, pensions and conditions of employment in the Irish public service, including comparisons with the private sector in Ireland and with public employment in other European countries, particularly the United Kingdom.

Until such an exercise has been completed, those who maintain that Irish public servants are overpaid will persist in this belief, while public service trade unions will nurse grievances arising from the recent pay reductions.

They cannot both be correct and it is a pity that successive governments have shied away from a definitive examination of the issue. In its absence, the Government is vulnerable to pressure for the restoration of pay levels which may never have been justified in the first place. There is already evidence that the better-placed public service trade unions are limbering up for campaigns to restore bubble-era pay and conditions.

There has been rising disquiet over well-publicised cases of under-performance and weak governance and accountability standards in parts of the public service.

The ministerial statements noted above look like a co-ordinated signal that this is understood and that action is in the offing. But a greater concern should be the quality of policy-making: not many European countries have managed to go bust twice in a generation.

While the primary responsibility rests with those elected to government office, there has been too little scrutiny (or none at all) of the advice and counsel offered by the senior civil service over the years.

The central civil service in Ireland employs only about 10 per cent of all public employees and many of these are engaged in administrative tasks. No more than 1,000 people or so are close to the policy-making function and perhaps no more than a couple of hundred are in a position to really influence what happens.

When their political masters are seen as having made an unholy mess of things, they get hammered at the next election. They also face daily scrutiny from the opposition in parliament and pressure from the news media.

The senior officials are, with few exceptions, happy to remain anonymous, aside from occasional appearances at Dail committees. These latter are under-resourced and not always effective at scrutinising performance.

For small countries in a globalised world, the management of economic policy, the area in which the most damaging mistakes tend to be made, has become increasingly challenging over the last few decades. Fifty years ago, the biggest mistake a minister or a senior civil servant could make was letting CIE buy the wrong locomotives. Now they can do far more exciting things, like pick the wrong exchange rate policy or guarantee the banks for three times GNP. Policy choices have become more complex and mistakes more costly.

Small countries find it difficult to mobilise the human resources needed to meet the challenges of policy-making and indeed countries much larger than Ireland have sometimes made a mess of things too. But the Irish performance has been persistently poor since the 1970s. The country almost ended up in an IMF bailout at the end of the 1980s and finally managed this unenvied feat in 2010.

Along the way, the country engineered for itself one of the largest banking crashes ever to occur anywhere and mishandled the consequences. It is no achievement at all that Nama is one of the world's largest property concerns. A comparable milestone was reached when EU commissioner Olli Rehn felt able to blame Ireland for the eurozone crisis!

It would be absurd to lay all of the blame for these catastrophes at the feet of the senior civil service. The politicians, and the electorate which chose them, must get in the frame too. But Irish politicians have persistently neglected civil service reform, bar an honourable mention for the late John Boland, who tried to change things as a minister in the middle of the 1980s.

It is ultimately another political failure if Ireland has not equipped itself with adequate policymaking capacity. There is no point pretending that the machine has shown itself fit for purpose and it is fair to acknowledge that many senior officials (privately, of course) share this view.

What is to be done?

One overdue change would be to scrap the 30-year rule regarding the release of government papers. Irish government is conducted largely in secret, an arrangement which politicians find convenient when in office and outrageous when in opposition. It suits civil servants far more than it does politicians. The UK government has begun this year a transition to a 20-year rule and, unless Ireland plans to preserve the last Whitehall civil service in the world, it is time to do the same here.

There is far too little staff mobility within the broader public service and between the public and private sectors. The civil service departments operate a monastic career system: you join in the first flush of adulthood, display obedience and devotion, never stir outside the monastery and can expect automatic progression, even the mantle of abbot, as the eventual reward.

One of the principal barriers to mobility is the public service pension system. Aside from its generosity relative to what is available in private employments, it is structured in a fashion incompatible with mobility. Ireland needs pension reform anyhow, since the Ponzi-scheme promises of defined-benefit pensions are no longer capable of being delivered. When reform finally arrives, it should be a central objective to place public and private sector pension entitlements on the same footing, preferably in the form of a universal pre-funded and portable system. This would facilitate an end to the monastic career-management system in the upper reaches of the Irish civil service.

Most public servants are employed in delivering public services, rather than in the formulation of policy. Health and education directly employ more public employees than all of the other activities combined -- these have become, in effect, the two great nationalised industries of modern Ireland. Particularly in health, there has been a long sequence of what look like serious administrative and governance failures.

A part of the problem is that managers are largely denied the capacity to manage. Most public service organisations are labour-intensive, with 80 per cent and upwards of the budget going on payroll. But managers cannot hire and fire and cannot determine pay levels, since staff numbers and remuneration are determined in a highly centralised system.

There is an extraordinary proliferation of grades, incompatible even within the public service system, as well as annual pay increments granted more or less automatically. Neither feature is found in private employments.

It is not enough to make the public service affordable unless ways can also be found to make it effective, a task which has barely begun.

Irish Independent

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