Return of social partnership would make proper Charlies of us all

The revival of social partnership would be a real danger to the wider economy and to the jobs that depend on it, writes Gerard Howlin

Return of social partnership would make proper Charlies of us all

SOCIAL partnership — a central cause of Ireland’s economic collapse — has ostensibly been abolished, but it has subsisted as a form of influence in the public sector.

Last weekend, there was a concerted attempt to re-establish it.

In this newspaper on Saturday, David Begg, the general secretary of the Irish Congress of Trade Unions, advocated for it again.

Siptu president Jack O’Connor chimed in, calling for talks on a successor to the Haddington Road Agreement to be fast-forwarded.

The recovery is running ahead, he reasoned, and better times for his members should be, too.

Lest the point be lost, Pat Rabbitte, writing in the Sunday Business Post, separately called for a revival of partnership.

It is barely four years since the then Minister for Finance, Brian Lenihan, spoke of the “enormous damage” done to the economy by the partnership process.

His remarks were prompted by ‘A Preliminary Report into the Sources of Ireland’s Banking Crisis’, by Klaus Regling and Max Watson.

That report said that Irish wages increased from two to three times the eurozone average between 1997 and 2008.

In nominal terms, gross wages were higher in Ireland than in any other country in the single currency, except than in Luxemburg.

From 2001 to 2008, the number of staff in the Irish public service grew by 15.5%.

When Begg made the case for reviving partnership, this newspaper’s Michael Clifford wrote an opinion piece entitled ‘New Year, Same Old Promises’, in which he said:

“The banking debt foisted onto the shoulders of citizens is around €64bn, with the possibility of recouping anything up to €20bn over time. The national debt is of the order of €200bn.

“So two thirds of the debt, which has been grappled through major cutbacks and tax increases, was accumulated through mismanagement of the exchequer finances.”

In my opinion, central drivers of the splurge in public spending were the social partnership and increases in public pay.

A parallel surge in credit was led by housing demand, fuelled by rising wages. We are back on that slippery slope.

On Monday, this newspaper’s Kyran FitzGerald wrote that rents in Dublin were up 30% from their low point, and were now only 10% off their peak.

All the ingredients — rising wages, and rising property prices and rents — are in play to do “enormous damage” again.

The only certainty is that social partnership, essentially a political project, would, at some point, pour rocket fuel on the process.

On Sunday, the RTÉ drama Charlie gave a colourful take on Charles Haughey’s establishment of the social partnership process.

It was historically inaccurate, but essentially true.

A generation of Irish politicians concluded that they needed trade unions on board to govern effectively, or perhaps govern at all.

From 1987, it usually allowed Fianna Fáil eat the Labour Party’s lunch. But the fundamentals of the Irish economy have changed radically since.

Unlike the trade unions leaders in Charlie, Begg and O’Connor are largely a public sector lobby group.

Trade unions represent 80% of public sector workers, but less than a quarter of workers in the private sector.

Social partnership became the ultimate insider deal.

The revival of social partnership would be a real danger to the wider economy and to the jobs that depend on it.

The Central Bank’s proposals to ensure prudent mortgage lending, including a 20% deposit from borrowers, met an overwhelmingly hostile political reaction.

Over time, politicians always march to the drum of popular demand. If not, they are summarily replaced.

Sooner or later — and I predict sooner — social partnership would be equivalent to giving alcopops to boy racers.

It’s a simple case of supply and demand. Political and economic structures matter.

They determine who has their hand on the levers of economic power.

The extent to which a ghostly form of social partnership has subsisted since its supposed abolition should not be underestimated. Irish Water is proof of that.

Largely unappreciated by their own members (eaten bread is soon forgotten), who focus on pay-cuts and increased taxes, trade union leaders have done an outstanding job in protecting their interests.

I am highly amused at the outrage over the largesse enjoyed by Irish Water. A foreign observer could be forgiven for thinking it is something different.

In fact, it is wholly normal within the commercial public sector.

The outrage this week is about patients on trolleys in hospital emergency departments.

The deal done to secure the same terms and conditions for the same number of people in the new water body, while replacing a multitude of local authorities, is the same as the one done at the foundation of the HSE, which replaced myriad health authorities.

Those terms are standard, not exceptional. All of this is a back-handed compliment to trade union leaders who represent public service workers, but it is to point out, too, that the sectorial interest of the public service is not the same as the public interest.

Far from it.

According to the OECD, Ireland spends 8.9% of GDP on health, just below the average of 9.3%.

The Irish health service is not cruelly underfunded, by international norms. It is poorly structured, poorly managed, and, in some instances but certainly not all, overpaid.

Representative bodies have a vested interest in a partnership process.

Access and influence are how they justify the subs their members pay.

Over the seven pay agreements between 1987 and 2008, what began on the back of sharp fiscal adjustments, in restoring competitiveness, ended by reversing them and destroying competitiveness.

In the private sector, that meant unemployment and emigration. In the public sector, it meant voluntary redundancy, at worst, or pay cuts and tax rises.

If not sooner, then certainly in 2016, there must be a successor to the Haddington Road Agreement.

Much is made of job security and pay as the key advantages enjoyed by a more privileged public sector.

As we all live longer, however, their pensions may prove to be, by far, the most valuable asset of all.

I have said it before, so let me do so again: If disappointing on political reform, Brendan Howlin has largely been a good minister for public expenditure.

A key, but underappreciated, change he introduced is that new civil servants will be pensioned on an average of their career-long pay and not based on a usually higher final salary.

Though it will have maximum impact on workers in higher grades, who enjoy pensions unaffordable in the private sector, it will take decades to work through the system.

For those who want social partnership again, or a fast-tracked post-Haddington Road Agreement, I wonder if social solidarity extends to emulating public sector norms in Britain, or to those in the private sector lucky enough to have any pensions at all?

I doubt it.

Social partnership once did the State some service, then it utterly undid it.

It should not be countenanced again.

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