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Private pensions will be ransacked to fund public sector pay and perks

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PROTECTING PUBLIC-SECTOR PAY: Taoiseach Enda Kenny and Tanaiste Eamon Gilmore at the
Jobs Initiative launch at Government Buildings on Tuesday. Photo: David Conachy

PROTECTING PUBLIC-SECTOR PAY: Taoiseach Enda Kenny and Tanaiste Eamon Gilmore at the Jobs Initiative launch at Government Buildings on Tuesday. Photo: David Conachy

PROTECTING PUBLIC-SECTOR PAY: Taoiseach Enda Kenny and Tanaiste Eamon Gilmore at the Jobs Initiative launch at Government Buildings on Tuesday. Photo: David Conachy

WE ARE in real trouble now. At the first time of asking, the Government has shown itself to be utterly incompetent. Not only is the proposed pension levy grossly inequitable, it may also be unconstitutional. Make no mistake, though, it was designed for no reason other than political expediency.





Before the election, Fine Gael said no tax increases on income; Labour said no cuts in social welfare. It was glaringly obvious even then: never the twain shall meet.

After the election, both Fine Gael and Labour were adamant on one thing: public- sector pay levels would remain untouched, notwithstanding the niceties of that three-card trick -- the Croke Park Agreement -- the credibility of which was destroyed by Joe Durkan of the ESRI last week.

To honour a gimmicky election promise, then, this Jobs Initiative wheeze, it has come up with a desperate measure, an outrageous stroke. No matter how it might try to dress it up otherwise, with its by now familiar 'spin' made to seem as if black is white, the Government has decided to raid the pensions of private-sector workers, such pensions which have already been bled white by this recession.

When the verbiage is stripped, this is what we are left with: just over 500,000 workers, clinging on by their finger tips in the real economy, are to be robbed of the guts of €4,000, that a few unemployed may (just may) get back to work to pay income tax that the inflated pay of those in the public sector be maintained.

It is a scandal.

The coping class is about to be screwed again, therefore, by the very people who had vowed to protect them. Quelle surprise. Fine Gael has just lost the next election, not that that matters a jot anymore, and Labour has shown itself to be true to form.

With a little imagination, there was another way, a better way, which would have bound in solidarity all sectors in society, public and private, workers and jobless, OAPs and the young, that we might all contribute, as we should, in a fair and equitable way to help lift this country out of a mess.

This is not designed as yet another attack on the public sector, but somebody has to say it: enough is enough. Within the past fortnight, two men, economists in the public sector, Joe Durkan of the ESRI and Morgan Kelly of UCD, said it: enough is enough.

Kelly last week set out a radical proposal that may help

the country avoid bankruptcy, avoid becoming a long-term protectorate of the EU, Europe's answer to Puerto Rico; he said that public sector pay should be slashed by up to 50 per cent.

Of course Kelly was to be rounded upon by fellow public-sector academics, to be portrayed as a maverick, a loner, as some kind of isolated figure, a recluse, who had gone too far, who had come to believe his own publicity, as decreed by that periodical to the stars, of Hollywood glitz and glamour, Vanity Fair, no less.

So the jealousy has become naked, the back-biting a form of upfront knifing: the attacks on Kelly are no more than economists in academe jousting to the seductive allure of media whoredom. All of which is to say that, by and large, Kelly was right.

"At age 50, every man has the face he deserves," said Orwell. What then are we to make of Joe Durkan of the ESRI, aged 68, going on 69? If ever a man spoke the truth last week, it was Uncle Joe.

Pay in the public sector needed to be cut by 10 per cent, he said: and yes, he said, he would stand in line, at the front of the line, in fact, to take a cut of 20 per cent.

Kelly has credibility, not just because of what he rightly predicted in the past, but because he is prepared to stand in line too.

Durkan has even more credibility, because he worked in the real world for six years from 1983 before he returned to the public sector, UCD, in 1989, and from there to retirement, and then back to the ESRI this year, the public sector institute he had first joined in 1969.

It is not as if such advocates are saying what they are saying for reasons to do with ideology. The facts speak for themselves.

In 2009, the ESRI used authoritative data to analyse the public/private sector wage gap and to investigate the impact of awards implemented under a number of wage- setting institutions on the differential. The results indicated that public sector pay increased dramatically from 7.7 to 23.5 per cent between 2003 and 2006.

The ESRI also found that by 2006 senior public-sector workers earned about 10 per cent more than their private sector counterparts, while those in lower-level grades earned between 24 and 32 per cent more.

Furthermore, the public premium predated the payment of a further two Social Partnership wage deals, along with the pay increases awarded in the second benchmarking exercise.

The years 2003 to 2006 are instructive: these pay increases, and the two subsequent, were awarded mostly at the height of the Celtic Tiger, and even at the downturn.

Who paid for this? The taxpayer, mostly through stamp duty on property sales in the bubble era. It is, therefore, incontrovertible: the sector benefitted greatly from the property boom. Yes, the bankers and property developers -- and media owners, through advertising revenue -- also benefitted; but undoubtedly, and excessively, workers in the public sector lapped it up.

In the real economy, events of the last four years have taken their toll: job losses, pay cuts, pension decimation. The public sector has taken a hit of sorts too: new entrants have been asked to contribute to their own pension; but other than that, and tax increases it pays with the rest of us, it has escaped relatively unscathed.

And now the private sector is to have its pension raided that the unemployed may find work again, that they may pay tax again -- in effect, and this is the effect, that workers in the public sector will continue to enjoy an outrageous pay differential and perks, to finance, in extreme, taxis from Waterford to Dublin, fine wine

and even finer art, as we saw

last week.

Here is how Colm McCarthy of UCD, formerly of the ESRI -- and, like Joe Durkan, formerly of the real world -- saw it last week: around 520,000 people own €80bn in private-sector pensions, an average of about €154,000 each. The levy will cost them about €920 a year on average.

In the public sector, however, about 330,000 employees have entitlements under pension arrangements. These schemes are unfunded and therefore have no taxable assets, but the total liability has been estimated at €108bn.

It follows, then, that the average sum standing to each member in these unfunded schemes is about €327,000, which is more than double the average amount standing to those in funded schemes which are liable to this levy.

The Jobs Initiative is being funded, in effect, by those who have small occupational pensions: those with the bigger pensions, public servants in the main, will not be contributing.

As McCarthy says, Michael Noonan looked a bit uncomfortable while explaining this measure to Sharon Ni Bheolain on Tuesday evening. And well he might.

On Wednesday evening, however, I was a bit confused: RTE, the public service broadcaster, gave an account of the ESRI quarterly report as prepared by Joe Durkan on Six-One News. But at no stage did the RTE report refer to the elephant in the room, as highlighted by the ESRI: that is, the call by Joe Durkan that public sector pay be cut by 10 per cent and that he himself would take a 20 per cent cut.

Fine Gael and Labour, then, campaigned in a General Election fully aware that the country was broke, but pretending otherwise, that the EU/ IMF/ECB would somehow allow the Government to throw around money on a wheeze which may, or may not, get a few hundred back to work.

To honour that dubious pledge, it has turned to where

it is always easiest to turn -- and in doing so has stoked the anger which exists between the public and private sectors, when there is nothing to be gained by this.

With a little imagination, there was a better way: call it a Jobs Levy, where everybody, bar none, is made to contribute to a national cause.

Everybody: the unemployed €5 a week, ditto our OAPs; all 1.8 million workers, private and public, €10 a week; those on over 100 grand €20 a week, and so on.

Surely it should not be beyond the wit of the Government to devise such a levy -- as opposed to the spin, at which it is adept . . . or, well, maybe that's just it, maybe it is beyond them.