Monday 14 October 2019

Public sector pay-cap plan in tatters as ‘special deals’ soar

Cormac McQuinn

Cormac McQuinn

THE Government's promise to cap public sector pay is being seriously undermined as it is increasingly forced to provide for "exceptional" salaries to attract top talent.

In the latest breach of the much-vaunted pay ceiling, Finance Minister Michael Noonan has had to sanction a salary, technically €50,000 above the limit, for the new deputy governor of the Central Bank. The approval of the €250,000 pay packet for Swedish economist Professor Stefan Gerlach came just weeks after the Government introduced lower pay ceilings for senior public servants.

A special request was made to the minister by Central Bank Governor Patrick Honohan, according to correspondence obtained by the Irish Independent.

Mr Honohan sought approval for the salary just a week after Public Expenditure Minister Brendan Howlin capped maximum pay levels for higher positions across the public service at €200,000.

And the correspondence shows how Mr Noonan rubber-stamped Prof Gerlach's appointment two weeks later.

The latest revelation will refocus attention on:

- The viability of maintaining government-imposed salary caps while still attracting talent to top jobs.

- The lack of transparent guidelines which would reveal exactly why exceptions are made for certain candidates.

The Government has already breached its own guidelines several times -- most notably in approving higher salaries for ministers' advisers.


In approving €127,000 for two ministerial special advisers, the Government risked the public's anger.

The pay is €35,000 more than the standard €92,000 rate for the position and was approved for Ciaran Conlon, a friend and former PR adviser to Taoiseach Enda Kenny, and Edward Brophy who is now an adviser to Minister Joan Burton.

Prof Gerlach is undoubtedly well qualified for the Central Bank role. Most recently he was managing director of the Institute for Monetary and Financial Stability at Goethe University Frankfurt.

But approving his new salary was a rigmarole for Prof Honohan who felt he needed to make a case to the Finance Minster.

He stressed the "scarce and exceptional skills" that Prof Gerlach could offer. The aim was to match Prof Gerlach's earnings as managing director of the Institute of Monetary and Financial Stability in Frankfurt.

Mr Honohan says it is "seen as the minimum required to secure his services" in correspondence sent earlier this year.

But pay in the public sector was politically sensitive at the time as Mr Howlin had just announced "a general pay ceiling of €200,000 for future appointments to higher positions across the public service".

There is a grey area when it comes to pay ceilings at the Central Bank, National Treasury Management Agency (NTMA) and the National Asset Management Agency (NAMA). Technically these were not included in the bodies subject to the pay cap.

But after announcing the €200,000 pay cap in June, Mr Howlin said he would like to see leadership and transparency within the financial bodies.

Records seen by the Irish Independent show how Prof Honohan wrote to Mr Noonan eight days afterwards.

"Minister Howlin's statement allows for a small number of exceptional cases and the (Central Bank) Commission are of the view that this appointment would fall into this category," he wrote.

Prof Gerlach took up his post as deputy governor on September 1.

A spokeswoman for the Finance Department said that Mr Noonan does not set the levels of pay for deputy governors.

The Central Bank has confirmed that Prof Gerlach's salary is €250,000, and added that "the appointment was made with the consent of the Minister for Finance".

A spokeswoman said: "The Minister for Public Expenditure and Reform was also consulted and it was confirmed that the appointment was not contrary to government decisions on higher level pay in the public service."

Irish Independent

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