Business Irish

Wednesday 21 March 2018

We need to know reasons behind decisions on cuts

Proper analysis is essential if we are to do things differently, writes Brendan Keenan

IT WASN'T the best week to announce that the Irish public services was going to do things differently in the future. Even as the fanfare sounded, the old way of doing things was painfully on view; reminding us of how difficult, if not downright impossible, change has been in the past.

There was the retirement of another senior civil servant in the prime of life, with the income of a multi-millionaire; the cack-handed closure of the army barracks; and the floundering of the usually adept Education Minister Ruairi Quinn over student fees.

Bridget McManus deserves to be commended for her decision to waive part of her severance pay on retiring as secretary-general of the Department of Education, when she could have had a total package of half a million. As Oscar Wilde might have said, only those with no money think it is easy to give it up.

The fact is, though, that with bond yields where they are, a risk-free, pay-related pension of €140,000 a year, such as she will receive, would require the shrewd investment of €5m.

Of course, Ms McManus, along with the multitude of senior public servants who -- in the Japanese phrase -- will "parachute into heaven" between now and March, will not have access to that kind of capital. But the wise old Victorians would never touch their capital. On that basis, departed officials will enjoy the same lifestyle as a cautious millionaire.

The amount of money is not, however, the main issue when one starts to consider the chances of success for Brendan Howlin's Great Leap Forward. It is the uncomfortable memory that the hugely generous terms for secretaries-general and kindred grades come from a previous attempt to make the public service leaner and meaner.

At the time, it was said there was too much of the poet Louis MacNeice's description, "Sit on your arse for 40 years, and hang your hat on a pension". (He worked for the BBC). Secretaries-general would have to shape up, or ship out, it was said. They would have contracts for just seven years, which would not be renewed if they under-performed.

What we got instead was this extraordinary early retirement scheme. There was no serious assessment of performance. Under-achievers could stay on; good people who could earn well outside could collect their pot of gold and leave.

It is a tale which could be told in various forms about almost every past reform and efficiency drive. This time, it will have to be different because the money has run out, but that does not mean it will be. The barracks closures, so long in the making, could have marked a step in doing things differently. They didn't.

The reaction suggested a new reality on the part of citizens. The demand was not just the usual one that the barracks be kept open, but for a proper explanation as to why they are being closed.

This would involve a proper cost/benefit analysis, taking in, not just the direct savings, but the cost of closure, funding for the restoration of the sites, and the indirect costs to the local community.

The barracks might even survive, if such items were enumerated. It would also remove the suspicion that politics played a large part in the decisions. It is completely naive to suppose politics can ever be kept out of such matters, but there needs to be something to keep politicians in check.

All these great decisions are taken in Ireland on the basis of no published evidence at all. One often fears there is no private evidence either. It is widely believed that what economists call "externalities" -- such as the loss of employment in the affected towns -- is usually not included in government analyses.

Spending ministers want figures which can come off their budgets to meet the targets set by Finance and the troika. They do not want the complication of calculating which savings do the least harm -- or even perhaps some good -- to the whole community.

Yet, with a target of reducing government spending by a mighty €10bn in money terms, it is essential that the savings are chosen, not because they are easy, but because the spending involved is the least useful.

Mr Howlin has promised to make it so, and he'd better succeed. The worrying fact is that, without better performance and analysis, spending cuts on this scale will see many public services sink into decrepitude.

Meanwhile, Mr Quinn, caught with the most photographed broken election promise of all time (what was he thinking of?) blamed the student fees and lost grants on the EU/IMF deal.

Of course, he wouldn't do it if he had money to burn. He should be doing it because, of the €8bn spent by his department, he thinks this ranks among the least useful, and explaining why that is.

Sunday Indo Business

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