Cowen reiterates commitment to €1.3bn pay bill cut

Thu, Dec 3, 2009, 00:00

TAOISEACH BRIAN Cowen insisted yesterday that the Government remained committed to making savings of €1.3 billion in its pay bill.

In the Dáil, Mr Cowen said the Government had made it clear that the public service pay bill would have to make a substantial contribution to the adjustment required for next year.

“The level of savings that we seek to obtain remains of the order of €1.3 billion in terms of a reduction between the cost of the public service pay bill this year compared to next year. That remains our position and we wish to discuss with the trade unions on that basis,” said Mr Cowen.

Speaking in Brussels, Minister for Finance Brian Lenihan insisted that pay cuts for public servants had not been ruled out in advance of the budget, despite the decision to negotiate with the public service unions on the alternative proposal for unpaid leave.

“An option was put to the Government by the trade union movement, an option with a measured saving, which involved unpaid leave,” he said.

Mr Lenihan added that the Government was examining the proposal and was prepared to engage with the unions on the public pay issue. However, he stressed that “no final decision has been made by the Government”.

Mr Lenihan added that the only commitment at this stage was that the Government would secure €4 billion of savings in this budget. “That is an enormous task, but it is an important one . . . the Government will have to find a credible pathway to €4 billion worth of savings and that is what the Government is engaged upon and all of the Ministers and the Taoiseach are of one mind on that.”

He added that the Government would consider further proposals emerging from the discussions but a basis for agreement would only exist if the scale of the reduction in the pay bill was sufficient.

Fine Gael deputy leader and finance spokesman Richard Bruton said the Government’s budgetary strategy was falling apart.

“We were led to believe that a fundamental pillar of this strategy was to achieve a €1.3 billion reduction in the public service pay bill. This policy has now been replaced by a fudge.

The proposal to have 12 days of unpaid leave simply does not confront the core challenge of reducing the cost of delivering public services which is vital if we are to restore confidence, both at home and abroad. It simply will not work,” he said.

Meanwhile, the economist behind the Government’s plan to reform the public service has poured cold water on the proposed deal with the public service unions, saying that a one-year arrangement “is of no value.”

Colm McCarthy, the chairman of the expenditure review group which last July identified over €5 billion of potential savings, emphasised the need for long-term measures to deal with the structural weakness in the public finances.

“Permanent measures are needed to deal with this permanent component of the deficit,” said Mr McCarthy, adding that Government revenue needed to be raised, or spending reduced, by a specific proportion of GNP over a period of years through specific and permanent policy actions.

In a post on the economics website www.irisheconomy.ie, Mr McCarthy said media reports of a manoeuvre involving unpaid leave for public servants would only achieve a cash saving next year.

“If it is compulsory, but only for 2010, it is of no value in the context of fiscal consolidation. The Government might as well place a temporary surcharge for a year on some item of tax revenue, and it all has to be done again, from scratch, the following year,” Mr McCarthy wrote.