Public service pay cuts are test of capacity for reform

The spurious link made between the horrific murder of Det Garda Adrian Donohoe and the cuts applying to gardaí demonstrates how difficult it is for any government to make savings and introduce overdue reform.

Some Ministers have expressed frustration that the media, which has been loud in its condemnation of the Croke Park agreement, has immediately sprung into action to campaign against every saving now being proposed. It was the same with the property tax and will be repeated again with the water charges when they come along.

The British politician Enoch Powell once remarked that the politician who complains about the media is like the ship who complains about the sea. The Coalition has no option but to stick it out and hope for calmer seas by the time of the next election.

While there is no arguing with the fact that almost everybody has suffered some drop in living standards since the onset of the crisis in 2008, many people have been cushioned from its worst effects. Pensions and welfare payments have been protected and public service workers are still significantly better paid than those in the private sector. However, the problem remains that the State simply has to find new ways of cutting its total spending to bring it into line with tax revenue.

The unremitting focus on the bank debt may be obscuring the necessity for continued action on the domestic front and that could ultimately be as damaging as a bad deal on debt. The troika has on a number of occasions expressed frustration at the failure of the Government to cut costs in medical and legal professions and open both up to genuine competition and it has repeatedly pointed to the high salaries right across the public service.

The other two countries in bailout programmes, Greece and Portugal, have reduced their public service pay bill by a much greater proportion than Ireland yet their pay levels were considerably lower than ours to begin with.

Reducing the pay bill is certainly not easy, as the current talks show, but it is something that will have to be achieved if the country’s finances are to be put on a sustainable basis. Tax revenue came down by a third in 2008 and it has stabilised only after a substantial increase in tax.

The bailout has given us time and space to get government spending and revenue into line. The moment of truth on this issue is close at hand as it will have to be done by diktat if it cannot be done by agreement. That will be a real test not just of Government but of Irish society’s capacity to accept reform.