€678m of Croke Park's savings are 'now in doubt'
But Howlin says there was no overestimation in the final figures
A Government deputy and Public Accounts Committee member has questioned the basis for claims that almost €700m has been saved in public service non-pay cost cutting.
Eoghan Murphy, FG TD, says an instruction by the Department of Finance to all other government departments to increase all savings figures by 40 per cent when reporting to the Croke Park Implementation Body, cast doubt on the final figures.
This has come to light in a report that reveals the Department of Agriculture refused to apply the 40 per cent figure because it was felt this would distort the real situation.
But a spokesman for the Implementation Body and the responsible minister, Brendan Howlin, insisted yesterday that the final figure published for non-pay savings -- €678m -- was exclusive of the 40 per cent figure, and was therefore not over-stated.
So far, Croke Park has claimed savings of €1.5bn since its inception, and of that, €678m came from non-pay or administrative savings.
Since it was signed in April 2010, there have been two annual reports published on the progress of Croke Park, the most recent last June.
On foot of a formula from the Department of Finance, the implementation body was forced to add a 40 per cent premium to non-pay savings when they were being calculated.
"In accordance with the Department of Finance methodology, non-pay savings should be estimated by the addition of 40 per cent to total salary cost, which in this case is 40 per cent of total annual savings," the report stated.
"They were the guidelines laid down by the department and we had to follow them," PJ Fitzpatrick, chairman of the implementation body, has said.
But to bolster "confidence" in the agreement, independent consultants Grant Thornton were asked to examine a small number of case studies to verify the savings claims.
One of the case studies examined was the Department of Agriculture.
It has emerged Simon Coveney's department chose to ignore the formula from Finance when calculating its non-pay savings.
Since the start of the agreement up until March 2012, had it used the Finance criteria, Agriculture would have made €17.7m in non-pay savings -- but it considered that criteria "excessive".
The Grant Thornton report stated: "Agriculture has reported that the additional savings were not declared because the 40 per cent allocation for non-pay costs, while in line with Department of Finance guidelines, was considered excessive, relative of actual costs incurred; and from the closing of offices and relocating staff etc, the full savings achieved are not yet fully realised by Agriculture."
Rather the Department of Agriculture concluded it had only saved €6.1m in non-pay savings in the first two years of Croke Park.
Ultimately, buried deep in its report, Grant Thornton appears to agree with Agriculture's quibbling with the Department of Finance formula. "We are satisfied that the reasons for undervaluing the declared savings are adequate and understandable," the report concluded.
While the numbers in this one instance are small, in light of the overall spend, the man who has highlighted the savings inflation, Public Accounts Committee (PAC) member and Fine Gael TD Eoghan Murphy, said the revelation cuts to the core of the entire agreement, and doubt is now cast on the claimed non-pay savings of €678m.
"It calls into question everything, the €1.5bn claimed savings, but particularly the €678m claimed in non-pay. It is clear the formula set down by Finance inflated the figures, and Agriculture didn't agree. This is very serious because it casts doubt on the entire basis of the Croke Park deal," Mr Murphy said.
He added: "How can we have confidence in the agreement and what it says it is delivering?" Of most concern is the doubt now cast over savings claimed in Health.
According to the published figures, they accounted for €238m of the €369m, or 65 per cent, of savings last year.
Yesterday, the Implementation Body refuted Mr Murphy's claims "in the strongest terms". A spokeswoman for Mr Howlin and the Implemenation Body said: "Specifically, the Body wishes to clarify for the avoidance of any doubt whatsoever that it was the more conservative savings estimate used by Department of Agriculture management that was used by the Body in its calculation of the overall non-pay savings. Therefore, there can be no question of any overestimation."
At last Thursday's meeting of the Public Accounts Committee, clarity was also brought to the issue of whether increments and allowances are part of the agreement.
According to Mr Fitzpatrick, despite the claims of union leaders and several cabinet ministers, both are not "provided for in the agreement". As revealed in the following exchange with Mr Murphy, there was no doubt left as to their status.
Eoghan Murphy: "You said earlier nothing inside the agreement had threatened it so far. Can something outside threaten it?
Fitzpatrick: So far the agreement has coped robustly with whatever has come its way. Big ticket items have come its way, and I have given examples of people losing real money, on top of the pay cut. Could something happen? Of course it could, but I don't know of anything at the moment.
EM: Allowances and increments don't come under the agreement?
PJF: They are not provided for in the agreement.
EM: My reading is that they do not.
PJF: Yeah, I think that is fair.
EM: Do you think, in your interpretation, that allowances and increments are outside the agreement? Could they threaten the agreement?
PJF: I am certainly not. . . I'm going to let the staff side, the trade union side, speak for themselves on that.
EM: I am just interested in your interpretation of the break clause?
PJF: The truth is anything could threaten the agreement, whether those (allowances and increments) do or not is a matter for the trade unions. I couldn't speculate.
EM: People talk about the break clause in the agreement, paragraph 10.28 -- it is subject to no unforeseen budgetary circumstances. My reading is that only the Government can initiate the break clause.
PJF: That is probably true in that sense. It is a matter for the employer and the workers. I am not trying to be unhelpful. But as chairman I don't think it would be helpful to speculate on this as it would be unhelpful. It is out there, there is a lot of debate on these issues. A circular has gone out on allowances. How that is dealt with is between the employer and the workers.
The agreement is silent, there is nothing in the agreement about the two issues you mention (allowances and increments). It will boil down to a definition of pay.
EM: Is pay defined in the agreement?
PJF: I am trying to remember . . . there is no detailed definition in there. That is a matter between the employer and the workers.
EM: To define what pay is?
PJF: That is not a matter for the implementation body.
Mr Fitzpatrick's comments are significant. Allowances and increments are not a part of Croke Park and therefore the unions' belief that they are is nonsense.
He also agreed with Mr Murphy's very perceptive question that the agreement states that only the Government can initiate the break clause. This surely must strengthen the hand of the Government to use the "inability to pay clause," but of course to suggest such a thing has been compared to treason by some.
While Mr Howlin and Taoiseach Enda Kenny sought to assuage Fine Gael backbenchers with a bit of pantomime last Thursday over 88 allowances, a far more accurate picture of the battered Croke Park deal came to light. Mr Murphy's discovery is another example of why the deal is past its sell-by date.
It is easy for Mr Howlin to claim to his European counterparts that Croke Park is an extraordinary thing, it is because the price being paid for it is too high.
Mixed in with the new revelation that savings have been overstated, the time has come for this agreement to be put in the bin where it belongs.