GERARD HOWLIN: Public sector pay increases are off the scale, and that adds up to trouble

A REPORT slipped out into the ether of a holiday weekend, last Friday, without fanfare, but whose impact in the long-term will be second only to Brexit, writes Gerard Howlin.

That was The Examination of Remaining Salary Scale Issues in Respect of Post January 2011 Recruits at Entry Grades, a report required of Finance Minister Paschal Donohoe under Section 11 of the Public Sector Pay and Pensions Act, 2017.

My heads-up came 12 minutes into the RTÉ news at 9pm. The informed, intrepid Ingrid Miley explained the disquiet of 19% of public servants, who, since 2011, start on the first point of the salary scale, as distinct from the third point. “It’s going to get worse and worse, as more and more people come in and the tipping point shifts”. I couldn’t disagree more. But it’s about perspective.

Talking about this issue of public service pay, in terms of equality, requires a fertile imagination. I don’t mind if that’s how its advocates frame it. Their job is to put our money into their own pockets. As a vested interest, they know that framing the question is half the answer. They have astonishing success in that regard. Repeating the word “equality” makes those who declaim it seem paragons of the virtue. It is interesting to see how exclusionary the purpose to which it is ultimately put.

It’s an achievement that reform succeeded over seven years to the point where 19% of public servants, or 60,513, actually start at the start of the pay scale.

Compare your situation if you are in private employment, and have any pay scale to speak of, and wonder in awe at the equality of it all. The great socialist, George Orwell, thinking on the decline of the British empire, in the 1930s, wrote that “the standard of living of the trade-union workers... depended indirectly on the sweating of Indian coolies”.

Circumstances have changed, and, certainly, the use of language has. But certain principles, if mutated, remain. Trade unions may speak of the precariat. But look at what they do: They do their duty. That duty is to their members. Equality is a diversion. It’s the schmozzle that allows them to hold together in the face of facts.

The facts are that in 2010, those already-in left those not-arrived behind without a backward glance. Worse than pay — where, after only a slightly longer time, all eventually arrive at the same point — they did the same on pension. The difference here is not a slightly longer incline. It’s a root-and-branch change that means all entering the public service after 2013 are on a pension based on average earnings, as distinct from final earnings.

Equality? You have never, ever, heard any suggestion of levelling down platinum pension entitlements to ensure equality with new arrivals.

That’s not the sort of equality that’s intended for you to see. The solidarity intended is that those outside the public service, for whom pay scales, increments, or defined benefit pensions of any sort are fantasy, will pay in cash first, and then in forgone opportunity for better public services, so that select public servants can enjoy a connived sort of equality, sufficient to salve the conscience and to preserve the unity of their unions. I expect no different. I take no umbrage.

But I do want clarity on the caper we are involved in.

I mostly admire our trade union leaders. For modest salaries, given their responsibilities, they deliver astonishing returns on small subscriptions from public servants. The scale of return in times of plenty, but particularly during the crash, puts them in percentage terms, year on year, in the same ether as an Irish Warren Buffet. By 2011, when pay reversals began, 283,000, or an increase of 174%, had arrived on the dole queue since 2007, and worse was to come. The public service was less a safe harbour than the equivalent of a nuclear bomb shelter.

Ironically, the gratitude union leaders got from their own was some of the surliest sort of thanks imaginable. I wish they were paid, now, to mind the public interest, instead of gouging it. This brings us, however, to the deeper question of who, in fact, protects the public interest at all.

The gamekeepers have turned poacher. A 10% cut for new entrants, decreed by Fianna Fáil and the Greens in 2010, implemented from 2011, was rejigged under the Haddington Road Agreement, by Fine Gael and Labour, into a “start at the starting point of the pay scale” for new entrants. It’s the same pay scale for all. It ends at the same maximum point. It seems a fair, if belated reform. Whatever the principle at stake, there is a lot of money. It’s €200m a year, every year, in perpetuity. It raises the floor, in terms of cost, but does nothing to raise the ceiling, in terms of service delivery. So the cost is effectively a cost that investment in public services has to bear.

But that’s equality, you see. It’s equality in health, where €84m a year, every year, will be required before another band-aid is bought. It’s equality in education, where €83m a year, every year, will be required before another teacher is hired, but hired on a higher salary.

We were here before. Public service salaries inflated to catch house prices.

It ended in disaster.

The circumstances are different, for now. But the dynamic is similar; 2018 is the first real test of governing in economic growth, and not leaving us exposed when a shock arrives.

WE ARE back, for now, in rude good health, and big economic numbers. There will be a budget, with more than €4bn to play with, in October. Fianna Fáil promptly swung behind the public servants last Friday. Sinn Féin were already there. That’s having your cake and eating, it in terms of budgetary strategy, or, more precisely, electoral strategy. But the politics of spending on stuff is only one side of the coin. The other side is the politics of giving it away, before you spend it on anything at all. That’s Leo Varadkar’s pitch on tax cuts. It’s as feckless.

We were warned, publically, by the Department of Finance, about over-reliance on corporate tax. The OECD gave telling fiscal advice recently. There is no political will, however, to address the fact that 28% of earners are outside the tax net completely. On tax, the single learning of the crash — to widen the tax base — has politically been abandoned. We have too many eggs in too few baskets. The only question arising now is how you want your eggs served, and how much bacon you want on the side. Public servants are determined to be up first at the all-you-can-eat buffet. It won’t end sunny side up.

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