Monday 24 October 2016

An explosion in public sector pay looms and the State can't afford it

Published 28/05/2016 | 02:30

'Enda Kenny and company are only notionally in charge, because currently there is no issue on which he will bolt to the country to seek a mandate' Photo: Mark Condren
'Enda Kenny and company are only notionally in charge, because currently there is no issue on which he will bolt to the country to seek a mandate' Photo: Mark Condren

The crises are lining up for the minority Government now, with the crisis in crime and the need to be constantly looking over its shoulders at its Fianna Fáil puppet masters.

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But not least of the headaches it faces is the daunting challenge on public sector pay.

Political wrangling over €130m of domestic water bills is really just a fiscal sideshow.

Losing control of public sector pay, already standing at €14.2bn this year, could spell disaster.

But for the Croke Park/Haddington Road pacts, the bill would be €21bn.

The new man in charge, Paschal Donohoe, is adamant that the terms of the Lansdowne Road Agreement won't be breached. "It's the only show in town," he says.

We'll see. The teachers and gardaí are set to test his resolve this autumn. Be in no doubt, this is the front on which the battle to survive for the lifetime of this Dáil will be fought and it is also the one that could spell curtains for the Cabinet and the Dáil.

The Lansdowne Road details include extending Haddington Road until September 2018.

There are also pension levy reductions, which increase earnings by €1,000 this year. On top of this is a salary increase for 2017 of a further €1,000. The cost of this in 2016 is €267m. For 2017, it amounts to €290m. For 2018, it is €287m.

This all adds up to €844m.

Total austerity pay cuts were €2bn.

Pay-restoration agendas seek a balance of €1.156bn to be paid as soon as possible.

While the majority of the 19 unions within the ICTU public services committee, the teachers' unions (ASTI and TUI) and garda representative associations (GRA and AGSI) voted not to embrace these agreements, their main bone of contention was the unequal pay for new entrants since 2010.

The so-called 'yellow pack' entrants face a career-long income deficit.

Over 40 years, a new primary teacher would earn €227,000 less than their counterparts, whilst a post-primary teacher would be down €300,000 and a staff nurse €129,000.

Over 30 years, a garda would ship losses of €120,000. Some postgraduate entrants have trained for up to five years.

The dangers that gardaí face are all too immediate, as epitomised by the gangland killings, but you wouldn't think so, judging by pay levels,

The starting pay for a garda is just €23,750, plus allowances; teachers begin on €31,009; a Dublin firefighter is supposed to survive on €22,976.

Living independently in Dublin and paying rent is virtually unsustainable at such levels of income.

Before leaving office, Brendan Howlin signed off on a revised pay deal for local authority firefighters. This will close the gap for recent recruits and their peers, restoring a €4,500 rent allowance which was scrapped in 2012.

But it will also accelerate demands for pay parity across all sectors of public employees, as agreed within the terms of the Lansdowne Road deal.

Meanwhile, the ESB's 6,000 staff have been offered a 5.5pc pay hike over 30 months, plus a lump sum of €2,750, on top of a 2pc pay rise in April 2015. One has to assume that the austerity era is over.

For the future, managing expectations and minimising strike days will require the negotiating skills of Bertie Ahern in his heyday. Keeping the bonanza of benchmarking pay-outs in check will also be a formidable task.

Meanwhile, the other 1.7 million who work in the private sector wait in the long grass.

The latest CSO statistics on earnings/labour costs reveal that average public sector wages are 51pc higher - €916 versus €539 per week.

Furthermore, this does not even allow for the yawning gap on pension provision.

There are unfunded public sector liabilities of €400bn, while 50pc of private sector employees have no pension provision. It is anticipated that average private sector pay will rise by 2.8pc this year.

Into this maelstrom of conflict must be added the delicately balanced political equation that makes for the 32nd Dáil. Fianna Fáil holds the balance of power and ultimately will determine the final outcomes on legislation, budgets, Irish Water and public sector pay policy.

Enda Kenny (pictured) and company are only notionally in charge, because currently there is no issue on which he will bolt to the country to seek a mandate.

To avoid loss of office, he must always acquiesce to 'new politics'. In all circumstances, the entire array of opposition parties (Sinn Féin, AAA/PBP) will avidly support public employees. Rest assured, Labour will be in the vanguard as it attempts to recover erstwhile voters from public offices, the party's natural constituency.

All of this adds up to a heavy bill, which will have to be picked up at some point. Cutting our cloth to suit our purse does not seem to be on the agenda for 'new politics'.

Fianna Fáil's stated policy on public sector pay is set out in a detailed position paper that was published last May.

Inter alia, it promised the following key principles: "reform of pension levy"; "equality of treatment for newly appointed staff".

The biggest difficulty ministers that will face is that their 'Programme for Partnership' Government has spending commitments of €6.75bn.

No provision has been made, when acceding to an additional €3bn of new spending commitments, for any extra public sector pay provisions. 'New politics' equals populism, which comes with an eyewatering price tag that we can hardly afford.

Irish Independent

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