Whither the social contract between citizens and their governors? asks Michael Clifford

THE pensions row at INM (Independent News and Media) is a reminder of how brittle is the social contract. The contract between citizens and those who govern on our behalf has come under pressure in recent years. The trust required to allow politicians govern in our best interests has been fraying since the economic collapse of 2008.

Bad decisions were made, the knee was bent to institutions such as the European Central Bank, and, crucially, certain sectors at the top of society were largely insulated from real financial pain. All of this has chipped away at the trust we invest in government to act in the interests of society as a whole.

Now, however, all that is supposed to be behind us. Then it begins to dawn that the upheaval was not a temporary blip, but the harbinger of a new world order.

The first big example of this was the closure of Clery’s department store in Dublin last year. Four hundred workers, many who had been there for decades, were simply turfed out by new owners who had different plans.

No protection from the Government was forthcoming. The lawmakers had not made a law to protect citizens against the more insidious aspects of capitalism. There was much handwringing among the body politic, but nothing could be done.

The pensions row in INM, the country’s largest media company, is now destined to further erode the trust that is vital to the social contract.

Three years ago, in light of the recession and the perilous nature of defined benefit pensions, employees at the company agreed to a restructuring that saw many lose up to 40% in the projected value of pensions.

That’s some hit for those in the autumn of their working years, looking forward to kicking back and catching up with a cushion of minimum security. But it was done for the greater good, and on the basis that the new set-up wouldn’t be revisited for at least 10 years.

In some ways, this resembled the begrudging acquiescence given by the majority of Irish people to the measures which were designed to save the economy after 2008. The bank guarantee was hard to swallow. The cuts, particularly those delivered to the sections of society least equipped to withstand them, did not result in the breakdown of social order. The loss of sovereignty was stomached because it was going to be a bridge to a better future.

For the current and former employees of INM, that future has darkened. The 2013 plan included a commitment by the company to invest €5.6m a year for 10 years into the pension fund. A few weeks ago, they were told that agreement was being torn up. Now, the pensions have been slashed by up to 70%.

This kind of move by company management is illegal in the UK. There, a pension fund deficit becomes a legal debt of the company. In other words, only if the company goes to the wall can it escape its obligation to the fund.

Far from going to the wall, INM is flying. It has cash reserves of over €80m. Now there is a move to ensure that shareholders are paid a dividend for the first time in years. The effect of this is that major shareholders such as Denis O’Brien and Dermot Desmond will receive millions in a pay-out at the same time that hundreds of employees, some of whom spent their entire working lives at the company, face into a retirement of relative penury and uncertainty.

Last Monday, at a company EGM in Dublin, Martin Fitzpatrick, who worked in INM for decades, said that what was happening was a “despicable first” and “one of the most shameful corporate deals” he had encountered in 50 years as a business journalist.

Corporate Ireland has been silent about the move. When it comes to the economy and pay rises, business groups such as Ibec lecture about the greater good, the need for employees to act in the interests of the country as a whole, the need to be responsible.

Now one of its members is behaving in a way that many find morally repugnant. Where is Ibec? Where do its responsibilities lie in terms of social cohesion? Or is it a question of nod, nod, wink, wink to its members on anything that can be got away with? Sure, look what the mugs put up with over the last eight years…

The response from the main political parties has been no less limp. On Tuesday, the Minister for Social Protection Leo Varadkar and his opposite number in Fianna Fáil, Willie O’Dea, appeared on RTÉ’s Prime Time.

Both thought the situation was terrible altogether but there wasn’t a lot that they could do. Mr Varadkar revealed that he had asked the Attorney General to see if she could represent the public interest in the High Court when the INM pensions matter comes before it. Good luck with the outcome of that.

That pensions are the issue at the heart of this story acts to further disillusionment with how we are governed. When the ship of state hit the rocks in 2008, those on the bridge sped off in motor- powered lifeboats. In particular, the politicians and bankers who had steered the ship found their inflated and often obscene pensions insulated from the fall-out.

Unlike the gilded nation builders in politics and banking, the INM pension beneficiaries were not protected from encroachment into their life savings. In this area, as in others, the law of the jungle appears to apply. Whither the social contract between citizens and their governors?

A lot is taken on trust. We trust that it is necessary for workers to begin paying the top rate of tax at €36,000, while corporations pay just 12.5% or even less. We trust that the decision to back Apple over its gross tax avoidance is in the greater interests of the people as a whole. We trust that the Government has not ceded all responsibility to protect citizens from the worst excesses of globalised capitalism. We trust that they know what they’re doing.

The handwringing in the body politic over the INM story will pass. Something else will occupy the political cycle. But this has served to further erode trust in how we are governed.

The maintenance of predominantly centrist politics through the recession suggests that, by and large, citizens begrudgingly accepted what had to be done for the greater good. Those days have passed. The recession is over. Enda Kenny is keeping the recovery going.

Chipping away at trust in such a way is going to do long-term damage to the social contract that has been maintained. The only problem is that, in our political culture, the long term is many elections away, a time when the boys and girls will be off enjoying their gold-plated, iron- clad pensions.


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