Backfiring allowance plan fuels two-tier pay system across public service

ANALYSIS:THE REVIEW of the 800 or so allowances paid to staff across the public service was one of the big initiatives planned by Minister for Public Expenditure Brendan Howlin for this year.

However, the project has backfired spectacularly. The Government has failed to generate anywhere near the amount it projected it would save from the review.

And in its decision to focus cuts primarily on new entrants, in some cases it is to continue to pay allowances to serving staff even where the review said there was no justification for doing so.

The Government appears to have calculated that the risk of undermining the Croke Park deal with the public service trade unions was too great to press ahead with reforms on the scale Howlin had envisaged.

Howlin yesterday sought to play down the importance of limited amounts to be saved from the review of allowances. He insisted that savings envisaged from reform of allowances did not form part of the Government’s overall financial arithmetic and that in any event it would achieve its overall targets in reducing the State’s pay and pensions bill.

However, there is no mistaking that reform of allowances was one of the “big ideas” of the Department of Public Expenditure and Reform for this year and it has not delivered in the manner expected.

The department had flagged in advance of the December 2011 budget that it wanted to secure a 5 per cent reduction in expenditure on allowances this year and 10 per cent next year.

This equated to making savings of €75 million on allowance and premium pay costs this year and €150 million next year. However, the Minister confirmed yesterday that only €3.5 million will be secured this year.

Howlin spoke about the review on many occasions over recent months. In April, at the annual conference of the Public Service Executive Union in Kilkenny, he indicated that change could be on the way not only for new entrants but also for existing personnel.

“We are engaging on the basis of looking at the allowances into the future, that is true, but there may be cases where they are not justifiable even for existing cases.”

However, the Cabinet has decided that only one allowance paid to serving personnel is to be withdrawn. This is a representational allowance for staff who attend EU or other international meetings abroad. This cost about €1 million in 2011. It may be no coincidence that this particular allowance is being abolished ahead of Ireland taking over the EU presidency next year where the cost involved was expected to soar.

The business cases for various allowances published by the Government last night shows that in some cases the Cabinet rejected the views of officials conducting the review that the continuation of particular allowances was unwarranted.

For example, the review found there was no business case for continuing to pay 50 per cent of the €20,600 annual allowance for ministerial private secretaries to those who had previously served in this position.

In most cases the allowances under review concerned payments made to staff for carrying out a particular job.

In the case of former private secretaries the €10,000 allowance is paid to personnel who are no longer performing the particular role.

The retention of 50 per cent of the private secretaries allowance is to be dropped for new entrants but kept for serving personnel.

In dealing with allowances the Government has essentially adopted a similar approach to that taken in relation to pay generally. Pay reductions have been put in place for new staff but the remuneration of existing personnel is protected.

This stance has undoubtedly helped to preserve industrial peace in the public service under the Croke Park agreement. However, it is creating a significant two-tier pay system across the public service.