Miserly savings for State from Croke Park deal so far
OPINION:ULTIMATELY THE success or otherwise of the Croke Park agreement will be measured by a simple criterion – how much money will be saved from the exchequer pay bill by 2015?
The second annual report of the Croke Park Implementation Body, published in June, includes a forecast of exchequer pay bill savings (excluding local authority staff) up to 2015. Does this report show that the agreement is working, or failing? The agreement was ratified by mid-2010, some months after the across-the-board pay cuts of January 2010. These cuts seem to be the principal reason for the 10 per cent reduction in the 2010 pay bill (before increments) compared with 2009. These cuts were the result of a government executive decision, followed by enabling Dáil legislation.
After 2010 the annual rate of reduction in the exchequer pay bill is a level 2 per cent per annum. This percentage seems to indicate that Croke Park-related change programmes aimed at reducing pay costs are coming through at a consistent annual rate. Anyone who is engaged in complex change programmes knows this is rarely the case, so what is going on? From my own experience as chief executive in An Post, which inherited public service pay structures on its formation as a company, I know that incremental pay scales cause annual increases in the pay base.
In May 2011 the Minister for Finance disclosed that the annual cost of increments in the public service was about €250 million per annum. Allowing for the excluded local authority staff reduces this amount to €225 million per annum, or 1.4 per cent of the 2010 pay bill.
So each year the Croke Park agreement has to save 1.4 per cent of the pay bill just to stand still. When this percentage is added to the 2 per cent published as a net saving, the annual saving in the pay base has to be the sum of 1.4 per cent and 2 per cent, or 3.4 per cent per annum. This looks better as a measure of underlying savings but it raises a troubling issue. Each subsequent year approximately another €225 million in increments will accrue to staff, and by 2015 they will be 7 per cent better off than in 2010, and only 3 per cent worse off than in 2009. In other words by 2015 the annual increments will have captured 70 per cent of the savings made by the 2010 round of pay cuts. Going back to the steady rate of reduction in annual pay bill costs which first caught my attention (3.4 per cent before annual increments are funded), I wondered how natural reductions in the workforce (deaths, retirements and so on ) affected the figures?
My experience tells me that natural causes result in annual reductions in staff numbers of at least 2 per cent per annum. Similar headcount reductions must also be included in the implementation body estimates.
This leads to the conclusion that the implementation body estimates that the annual rate of change in the pay base is made up of natural reductions of 2 per cent and productivity change of 1.4 per cent. In the context of the scale of the exchequer deficit it seems to me that the productivity savings of 1.4 per cent per annum arising from the Croke Park agreement itself is minor league.
This low level of Croke Park-inspired change is against a background of a public sector that was (and still is) “overripe” for better cost management.
A few weeks ago the Labour Court recommended that those local authority white-collar staff who currently work a 32-hour week should work a 34-hour week, and that all new staff should work a 35-hour week, with effect from next year – the fourth year of the agreement. It is astonishing that, three years into the agreement, unions should fight such an issue all the way to the Labour Court.
Resistance to change and delaying tactics are evident across many issues, with changes to sick pay, leave and so on all having to run the full gamut of the industrial relations machinery of the State. After six years of the agreement, the implementation body forecast of a 24 per cent reduction in the exchequer pay bill base seems to be due to the following: pay cuts 3 per cent (initially 10 per cent but reducing annually as increments are paid); staff reductions due to natural causes 12 per cent; and Croke Park agreement changes a miserly 9 per cent.
This seems to be the verdict of the Croke Park Implementation Body itself.
John Hynes was chief executive of An Post for 13 years up to 2003