Sunday 22 September 2019

Brendan Keenan: Downsizing requires skills the public service chiefs don't have

WHILE Enda Kenny and Michael Noonan were busy saving Europe from itself, some alarming news from the home front rather got overlooked.

This was the revelation that the HSE spent €1 billion paying people to do the work of others who had left but could not be replaced under the recruitment embargo. It is an old, old story but one from which few lessons seem to have been learned.

Recruitment freezes are the Department of Finance's default position for making savings on the public finances. That word "default" has multiple meanings, most of which seem to apply in our current circumstances.

One definition is, "failure is to act" -- in this case upon the lessons which should have been learned in the 1980s, when new depths of crudity and automaticity were plumbed with the simple refusal to fill one in three vacancies. Naturally, services began to grind to a halt.

When money became available again, not only were the vacancies filled, but all sorts of new vacancies which had not existed before were also filled. The cycle of expansion and freeze began again; the last freeze being in 2002.

Financial crashes

This, however, is not a freeze. It is climate change. Ireland is already another piece of evidence for the historical pattern of financial crashes being much longer and more severe than consumer or investment crashes.

Without serious redeployment and re-training, the public services will not survive crude job losses over what could well be a decade.

Every public servant one meets complains about the effect the Department of Finance edicts are having on their operations. I have not met any who think they could, never mind should, find ways of maintaining those operations with the staff they have left.

I have a deal of sympathy for them. Efficient downsizing requires management skills of the highest order. The public service does not have those kinds of management skills. Yet, somehow, they are going to have to acquire them, and a recognition by all that is going to have to be done. It's either that, or Spanish levels of pay.

The critical point is that the whole restoration of financial stability depends on these cost savings. The restoration of tax revenues requires growth as well as new taxes.

The savings -- if deflationary pay cuts are to be avoided, depend on urgent re-structuring to follow the 14,000 jobs shed so far by wrecking ball methods .

One has heard very little from Ministers on these topics. They are too busy trying to save Europe from itself, by persuading Europe to save us.

Yet, if the public spending savings do not materialise as planned, or public services wither away, there is nothing Europe can do to save this fledgling government turning into a dead duck.

It might seem a useful, if cynical, tactic to divert attention from flawed policies and flawed implementations at home by blaming Europe for charging too much and not picking up its share of the burdens.

That is if you believe it is a tactic. It looks more like being swept along by the tide of events and public anger.

The election was surprisingly competitive, given that there could little doubt about the outcome. The battle for seats between Fine Gael and Labour led both into positions from which they must now extricate themselves.

At the time, it may have seemed a good idea to attack the terms of the bailout, since they were likely to be changed and the new government could then take credit for changing them.

New deal

This reckoned without the needs of other European governments as well as us to get something from any new deal.

As one seasoned observer put it recently: "They are democracies too." It could also have been foreseen that the something they would want would be changes to the Irish corporate tax system.

I gather there was almost a deal at last weekend's summit. The Germans like the idea of a common tax base, but not a consolidated one (see elsewhere in today's paper for explanations), and might have backed off on the rate change. Mr Kenny might even have been tempted, but Mr Sarkozy snatched away the apple.

We will get there in the end. Europe, as always, is a building being constructed from the top down, which means lots of accidents. At the very end, there will be a Union system for rescuing countries with financial crises, whose rules will be known, and other rules to prevent it happening.

That is where one should start in building a monetary union, not finish, but it does not work that way. In the interim, the Government will have to explain why getting the lower interest rates, and even longer payback terms, while very helpful in the long run, makes no noticeable difference to next year's Budget.

That may not go down well with the public. They have been given the impression that if only Europe would see sense and play fair, most of our troubles would be over. Or that at least the existential threat to our grandchildren would be lifted.

A sad reminder of where this kind of delusion leads came in a BBC programme on the visit of Queen Elizabeth. A clearly frightened young woman in Cork wondered if the Queen might be able to do something for us, to save our children.

There is no reason why that woman should know anything about the niceties of constitutional monarchy.

But our political leaders -- and many of our commentators -- must ask themselves why a clearly intelligent Irish citizen has been led so far down the path of irrational fears and attitudes.

It is even more bizarre that the banking crisis should have been the source of much of this irrationality.

They're only banks, for goodness sake, not nuclear power stations. It is possible to kick this can along the road for a very long time.

The urgent matter is to restore credit supply to the economy. That's not easy in current circumstances, but it is where all attention should be focused.

The slide into irrationality is a common feature of financial crashes and helps to prolong them. It is a government's job to limit that slide, not encourage it. Ground was lost during the election and the Coalition must start re-gaining it.

The four-year plan remains no more than a set of numbers, hedged about with half-baked election slogans. There is no clear vision of an appropriate tax system.

Three years on, we await with baited breath the details from government departments and agencies as to how they will provide a better, improving public service for €45bn a year, with no back-door HSE/ESB/Aer Lingus style tricks.

The real election slogan should have been; little done, much to do.

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