Public service pay ‘could face cut’

Public services could suffer as a result of the big numbers taking early retirement, members of the troika have warned in their latest report, calling into question the Croke Park Agreement.

The report issued by European Commission staff suggested wages could be lowered rather than having more public servants leave, a view that is at odds with the 2010 deal which trades off productivity improvements for no more pay cuts.

It comes as plans for an EU finance minister who could reject and change national budgets and set a limit to government borrowings in exchange for eurobonds has been welcomed by the Government.

But the master plan to save the euro has met with a frosty reception from some countries, including Britain, which is furious with the proposal that ultimate responsibility for all EU banks, including theirs, should be at EU level.

Meanwhile, the report issued by European Commission staff involved in Ireland’s bailout programme, says the Government assured them the Croke Park agreement was working well, delivering the envisaged savings and allowing a wider reform of the public sector.

From last September to late February 9,000 public employees had retired, well ahead of the expected 6,000, to beat the cut-off period during which benefits they could receive were calculated on pay-scale levels before the 2010 salary cuts.

The commission asked whether cutting numbers “could risk jeopardising the delivery of public service,” and suggested savings could be made instead by lowering average wages, which they noted were high by international comparison.

The Government said it was confident it could avoid services deteriorating, and planned to hire a significant number of workers to cover the gap, while keeping to the planned lay-off numbers.

“The Commission Services stressed once again that this should be kept under review and should the desired savings not materialise, it would be prudent to consider taking additional measures, such as revisions to some pay scales and savings in some non-core pay and allowances,” the report stated.

While the State is on target to reduce the deficit this year to 8.3% of GDP, the Commission warns that this must be met even if growth slows further, especially given that the deficit is the largest in the EU.

It suggests there is scope for more tax increases and spending cuts, however, as this would have a more limited effect on the country’s economic activity because the economy is so open.

The report warns the country faces even more budget cuts when it has to borrow on the markets at higher interest rates than is being paid for the bailout money, and when money from services to the banks tapers off.