Colm McCarthy: We need Benchmarking Three to slash the cost of public sector pay
The farce over allowances shows that the civil service will never co-operate with attempts to curb spending, writes Colm McCarthy
Spare a thought for Clare County Council. On Monday, it emerged that the council was seeking confirmation that the €100 household charge had been paid by families seeking student maintenance grants.
Their lead was being followed by other counties. The typical maintenance grant for a student studying more than 30 miles away from home is €3,025 per annum. In addition, students at colleges in Ireland face fees which are only a fraction of the full cost of third-level education, so there is a double-subsidy for those receiving the maintenance grant.
Yet the council was roundly denounced by several TDs for checking whether the €100 due from each household had been paid. It is truly remarkable that politicians, including representatives of supposedly progressive political parties, can countenance the sheer chutzpah of applying for a €3,025 grant while dodging a €100 charge that is legally due.
There was a government capitulation on Tuesday. The Coalition is committed to cutting over €2bn from public spending in December's Budget, along with imposing €1bn or more in extra taxes. The most depressing feature of this Government's approach to expenditure control is the endless prevarication about actually making any cuts. This was vividly illustrated when Minister for Public Expenditure and Reform Brendan Howlin announced that he was unable to foresee any meaningful savings in the €1.442bn annual cost of allowances for public servants, payments over and above the official salary scales.
There was a further €403m cost for overtime in 2011.
When the public-spending review (the Bord Snip report) was being prepared back in 2009, it emerged that only 68 per cent of payments to serving members of An Garda Siochana took the form of regular pay. The remaining 32 per cent was in the form of allowances and overtime, much of it reckonable for pension purposes. The typical officer was receiving almost €1 extra on top for every €2 in the basic pay scale. The pattern is repeated across the entire public service, although not to the same degree in most cases.
The Croke Park agreement is one of the TUPs -- the Three Unwise Promises. It precludes further reductions in actual pay rates. This is a mistake, along with equally short-sighted commitments not to raise income tax and not to reduce rates of payment under the social-welfare system.
Budgetary adjustment becomes arbitrary and ultimately impossible if too many major options are ruled out. But the 1,100 allowances payable across the public service are not part of basic pay and were to be reviewed. The minister promised savings of €75m in the current year -- almost 5 per cent of the total. He admitted on Tuesday that the actual saving will be under €4m, a derisory amount in the circumstances.
Not just public-service pay scales, but the plethora of allowances, are to be ring-fenced, it would seem. In effect, he announced that the Croke Park protections for public-sector pay had been unilaterally extended by government decision.
The employer of all public servants, the State, is bust, cannot fund itself without the aid of the EU and the IMF and faces serious obstacles in avoiding indefinite bailouts.
Most other people in Ireland whose employers got into this kind of trouble have already lost their jobs or are in imminent danger of losing them.
Those who have kept jobs in financially distressed companies have had to accept pay cuts and changes in work practices. They do not enjoy the benefit revealed in Tuesday's listing, on the website of Mr Howlin's department, of the 1,100 distinct allowances payable to public officials.
These allowances have attached themselves to the public-service ship like barnacles over the decades, many the result of buying off trade unions in the good times.
The case for dismantling them is simple. The employer is bust, the good times are over and the financial stability of the State is on the line.
The heaviest costs on overtime and allowances are in Health, Education and An Garda Siochana.
There is so much overtime, and so many overlapping allowances, in An Garda Siochana that claiming and verifying pay must be a substantial cost in itself.
One of the allowances is straight from Alice In Wonderland. Several hundred gardai on a nine-to-five roster receive an allowance because they are not asked to work overtime. This is explicitly justified as a payment in lieu of the earnings they would have made if they did have to work overtime. If you work overtime, you get paid extra, which seems fair enough. If you do not work overtime, you get paid anyway, to compensate for the absence of overtime opportunities!
In the 'business case' prepared by the Department of Justice to assess the 54 allowances, the identical conclusion offered in each and every case, ranging from the defensible to the absurd, is: "This payment is both cost effective and represents value for money."
The same straight bat is deployed elsewhere. The spending departments have, in virtually every case, declined the invitation from the Department of Public Expenditure and Reform to consider seriously the scope for economies in the huge budget for allowances.
There have, however, been policy changes and more are under consideration. The strategy is to withdraw allowances only from new recruits and this has already been done in the case of teachers. There are two drawbacks with this approach, both substantial.
The first is that it will save very little, since there are few recruits likely in most areas of the public service and payments to all serving personnel are to be retained. It will take several decades for this manouevre to make a worthwhile dent in the pay bill.
The second drawback is that whatever new recruits are hired will be working indefinitely beside older colleagues doing identical work at higher pay. In some cases, the differences will be substantial. This will naturally be resented and will store up industrial-relations problems for the future.
It is also an admission by the Government that there are qualified people willing to take public service jobs at remuneration levels below what is currently paid to incumbents. Where this is the case, and bearing in mind that the employer is bust, there is a rather obvious conclusion to be drawn, namely that existing remuneration levels are too high.
The approach of seeking co-operation in bringing about better expenditure control from the management of government departments and agencies has failed once more.
Middle management in the Irish public service does not regard expenditure control as part of the job description. Many of the responses from spending units displayed on the Department of Public Expenditures's website are in the nature of the two-fingers salute.
If the public-sector payroll is to be brought under control, solutions will need to be driven from the top. It should now be perfectly clear that they will not be forthcoming from public-service management.
The fairest way to address the public pay bill would be to commission rapidly a new (third) benchmarking report. This should build on the unpublished findings of the last exercise, which apparently established a wide variation in the appropriateness of remuneration levels across the public service.
The report should compare remuneration and work practices in each public-service grade with comparable jobs in the private sector in Ireland and with similar employments in the United Kingdom and other EU countries.
Full account should be taken of non-pay benefits, particularly pensions and job security. The widespread belief that pay and conditions in the public service are superior to what is available elsewhere may or may not be correct. It needs to be confronted with the facts once and for all. If there is no public pay premium, as the public-service trade unions maintain, they have nothing to fear from a proper and transparent benchmarking study.
If excess pay prevails in the Irish public service, the Government can negotiate a rebalancing programme to be implemented over a period of years.
Benchmarking Three should form the basis for a new Croke Park deal. The TUPs (the Three Unwise Promises) will eventually have to be abandoned.
The first Croke Park deal was holed below the waterline last Tuesday.