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Exceptions to salary cap must be exceptional

With both external and internal economic conditions continuing to worsen, the government's apparent inability to get something as basic as a public sector salary cap right does little to inspire confidence.

Today we report that the new deputy governor of the Central Bank, Swedish economist Professor Stephen Gerlach, is to be paid an annual salary of €250,000. This is €50,000 more than the €200,000 cap on public sector salaries imposed by Public Expenditure and Reform Minister Brendan Howlin.

In fairness to Mr Gerlach, it would seem as if the salary he will be paid in this country is no more than what he was being paid in his current position. Central Bank governor Patrick Honohan wrote to Finance Minister Michael Noonan seeking his consent to breach the salary cap pointing to Mr Gerlach's "scarce and exceptional" skills.

While a strong case can be made for paying Mr Gerlach more than €200,000, he could hardly have been expected to take a pay cut in order to accept the Central Bank job. In a market where skills are at a premium, then it is to be expected that if we limit ourselves to a ceiling we will not get the best brains to help us get out of our economic mess.

This brings into question the whole area of transparent guidelness, specific criteria and a realistic approach. In other words we need a proper system that will scientifically allow us to say one candidate is not worth €200,000 (though he or she might qualify for it under the current blanket approach) while another contender may well be good value for €50,000 more.

It is surely right that any cap should have some flexibility to allow for higher salaries to be paid to a handful of individuals with scarce but necessary skills who could not otherwise be recruited.

If the government's salary cap is to be credible then it must present us with a far more detailed and comprehensive range of how we get value for our money. As matters have transpired, we are in danger of having pay cap conditions breached more often than they are observed.

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