Our overpaid civil servants must be held accountable for their actions

DERMOT McCARTHY is around long enough to know that this week’s controversy about the extraordinary pension and pay-off he received in July will pass.

It is nothing for Ireland’s former top civil servant to worry about: he will be able to continue to draw his €142,000 annual pension undisturbed, his €570,000 lump sum to ease his way into retirement will not be reclaimed.

That’s what happens in this country. There is shouting and roaring for a couple of days after such rewards for the elite are disclosed and then nothing happens until the next revelation is made and we go through the same rigmarole again. Only the previous week we learned of the €260,000 in expenses that Bertie Ahern has claimed since he stepped down as Taoiseach in May 2008, aged 57. This comes on top of his own super six-figure pension, which he has been able to claim since that date, even though most have to wait until 60 at best, or 65, before they get such largesse. Will it change for those who were responsible for the mess that we’re in, where money has to be borrowed from the IMF to pay these pensions and lump sums they claim? You can bet it won’t.

Here’s another example that might drive you mad to read about. On his retirement in 2009 the former head of the National Treasury Management Agency, Michael Somers got a lump sum of €842,000 and an annual pension, paid out of current government cash flow, of €265,000, making him the highest paid public sector pensioner in the country. You might wonder who decided that he was entitled to such a lucrative deal. In 2001 Somers was given this incredible package, apparently to compensate for the fact that he wasn’t employed in the more rewarding private sector, a form of benchmarking, so to speak. Somers was given a salary of €387,000 in 2001 and the right to up to another 80% in bonus. Then Finance Minister Charlie McCreevy increased the salary to €460,000 in 2004 and by 2008 Somers was paid a salary of €565,000 and a bonus of €403,000. He got another top-up of €35,000 for being a “commissioner” of the National Pension Reserve Fund, as if he wasn’t being paid enough. Somers justified all of this largesse on the basis that it still wasn’t half what top bankers like Eugene Sheehy at AIB and Brian Goggin at Bank of Ireland were getting at the time.

The State also had to pay to get people to work for the NTMA instead of in the private sector.

Just over 20 years ago the then government decided that the Department of Finance was not fit for purpose when it came to managing the country’s enormous public debts. At the time, the interest bill on the state’s debts ate up more than 25% of total tax receipts. The Department of Finance simply didn’t have the best people to run a treasury operation that would get the best prices on the international debt markets. It couldn’t induce the best to join the civil service because the pay and conditions apparently weren’t attractive enough.

NTMA was set up to recruit the best people on the financial markets to go toe to toe with those employed, for vast monetary and other rewards, at privately owned financial institutions. It was kept “off the books” so that other public servants would not see what its employees were paid. A system was put in place whereby much of the annual income a contracted employee could earn was based on performance; hence the “bonus” culture. Somers was the main beneficiary.

He could argue that he did his job very well, that the NTMA succeeded in bringing Ireland’s debt burden down dramatically before everything was ruined by the economic collapse. But that is only partially true. The debts fell mainly because the exchequer was providing the tax revenues to pay down those borrowings.

So how well did Dermot McCarthy do in his job and does it come near to justifying his pension arrangements? He served for 11 years as secretary general to the Government and to the Department of An Taoiseach and attended almost all Cabinet meetings during that period.

McCarthy was arguably one of the most powerful men in the country for the last decade and was one of the most important figures in the room when the disastrous bank guarantee was decided upon. He was there when the Government surrendered to the IMF/EU/ECB last November. He was instrumental in agreeing the unsustainable pay agreements reached with the public sector unions, for example, overseeing much of the process personally.

In that and other issues he has not just been involved in implementation, but has been deeply involved in formulating policy. He was regarded as very important in the Northern peace process. McCarthy has received some public testimonials, and is by repute a very able and hard working man, but we are being asked to take a lot on trust: he has never been available to account publicly for his actions. McCarthy’s annual salary had been cut from €285,000 to €208,000 in the last three years because of the austerity measures but when it came to his pension his entitlement was calculated by reference to the highest salary he had earned.

Former Taoiseach John Bruton made an interesting claim earlier this year, those civil servants effectively drove the policy themselves with the politicians merely the front-men who rubberstamped decisions. If so it raises questions as to why politicians don’t change that, or make the civil servants more accountable. How many top civil servants have been axed, for example, because of their failures of economic management, just as the Central Bank and Financial Regulator changed their top positions and the government ministers are about to be replaced, eventually?

MOST of the top civil servants, serving and retired, that I’ve met seem undoubtedly smart. They are articulate and well motivated. They are also highly skilled when it comes to office, as distinct from party, politics. They are also institutionalised by the system they serve and seem biased towards protecting what exists than engaging in radical change of it. They now run a system that has a deficit of over 18 billion between what it takes in and what it spends and is under the control of the IMF. Imagine if that happened in the private sector: those responsible would not continue in charge. We know from what we have experienced in recent years that we need change in the calibre of our politicians. We need it with our civil servants too.

Yet the circus goes on. Recently it was revealed that NTMA boss John Corrigan — who had been promoted to replace Somers — had decided not to “accept” the near €250,000 bonus he was “owed” by the State for 2010 on top of his €490,000 salary. Corrigan could argue that it was not his fault that the NTMA was no longer able to borrow on international markets, but that of the government. But Corrigan was also one of those responsible for negotiating the surrender of our sovereignty to the IMF/EU/ECB last November. It would have been obscene had he taken the bonus, but it remains remarkable that he is still paid so much.

And if you put aside the morality of making such payments to officials past and present, and the state’s need to borrow the money to do (which all of the rest of us will repay) there is also one massive practical side-effect. How hard is it for Corrigan and other state officials to request changes to the terms and conditions of the loan agreement reached last November if our negotiators are earning what may well be a multiple of what officials on the other side get — and if the money is being used to pay people like McCarthy, Ahern (and Brian Cowen) their massive pensions?

The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm. His new book, How Ireland Really Went Bust, will be published by Penguin in October.

More in this section