Friday 28 October 2016

Issue of public sector pay rises is Howlin's biggest test yet

Published 05/05/2015 | 02:30

Brendan Howlin, represents a party that is (a) badly struggling in the polls, and (b) heavily dependent on public sector votes (Damien Eagers)
Brendan Howlin, represents a party that is (a) badly struggling in the polls, and (b) heavily dependent on public sector votes (Damien Eagers)

News that the Government and unions will next week begin talks about restoring pay levels in the public sector brings to mind the old joke about the man asking for directions being told: "If I was going there, I wouldn't be starting from here at all."

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Holding talks on public sector pay 10 months, at most, from a general election is potentially a recipe for disaster. Particularly when the minister responsible for those talks, Brendan Howlin, represents a party that is (a) badly struggling in the polls, and (b) heavily dependent on public sector votes.

That scenario should make all those genuinely concerned that the country doesn't return to 'the politics of old' very nervous. Of course, with the crisis over, the issue of public sector pay would have to be revisited at some point. Public servants have done more than their fair share when it came to painful measures to address the public finances.

But the timing of talks is highly questionable. The Haddington Road agreement doesn't run out until July 2016. Would that not leave plenty of time for a new government to sit down with the unions post-general election?

That new government, freed from the pressures of a pending election, would have a much stronger hand to play in those negotiations. But politically that was probably never going to happen.

To be fair, the Financial Emergency legislation that cut pay, Fempi, must have been hard to swallow. But it's important to remember public sector wages during the boom years had soared, funded by unsustainable Vat and stamp duty from a bubble property sector. The public sector pay bill of 2008 is simply not affordable today.

There should be room for some compromise. But there can be no going back to the pre-Fempi days and the bonkers economics that bankrupted the country. Each 1pc public sector pay increase costs €150m a year.

One way of countering that would be a deal whereby wage rises were based on increased productivity. The unions have been quick to rule that out, but it needs to be on the table in any negotiations. The reality is that, even with the pay cuts and the pension levy, public sector pay levels are still comfortably ahead of the private sector. Unions have to offer something in return.

The notion of productivity in return for wage rises was reportedly the subject of sharp exchanges at Cabinet in recent days between Howlin and Fine Gael ministers. That's a worry. As also are the noises from Cabinet about offering the unions a reduction in the pension levy rather than pay increases. That seems highly Jesuitical. Whether the sweetener comes with pay increases or pension levy reductions won't make any difference to the bottom line.

The public sector pension - guaranteed lump sum and a pension of half pay - is highly coveted and simply not available anymore anywhere else. Cutting what is a modest levy would send out entirely the wrong signal about what is realistic and what's affordable. To his credit, Brendan Howlin has taken a tough line with public sector pay and the public finances. This is his biggest test.

Memories of Labour in government last time around are difficult to dismiss. Decisions such as the scrapping of third-level fees and the ending of compulsory water metering for new houses were all taken to try and shore up the party's poll rating (to little effect).

The temptation to do the same will be difficult to resist. A pay deal must be fair, not just to public sector workers, but to the country.


Shane Coleman presents 'The Sunday Show' on

Irish Independent

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