The Government has committed itself to paying €170 million more than it originally budgeted for in public service pay this year but it doesn’t seem to have any idea where the money is going to come from. Given that further demands are building up in the pipeline this could become a real problem later in the year, particularly if tax receipts do not come in on target.
Following agreement at the end of 2016 to pay gardaí an extra €50 million Minister for Public Expenditure Paschal Donohoe announced this week another €120 million would be found to bring forward a €1,000 salary increase for public servants from September to April.
Half of the money to pay the gardaí is supposed to come from the Department of Justice budget, with the rest coming from the Exchequer, but there is no information about where the €120 million for the fast forwarding of the general public service pay rise is to come from. Mr Donohoe provided no clarity on the issue when he appeared at the Oireachtas budget scrutiny committee on Tuesday saying that the money would be found through “savings and efficiencies”.
This is eerily reminiscent of the bad old days of budget overruns under Fianna Fáil. Decisions about where the savings are to be made in 2017 need to be taken as quickly as possible and the Minister should spell out precisely what they are. With nurses and hospital support staff already clamouring for pay increases further pressures on the pay bill are inevitably going to emerge in the course of the year.
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Ministers are probably relying on tax buoyancy which has been a feature of recent years to come to their rescue again in 2017 to cover the cost of the overrun on public pay. However, that could turn out to be a serious mistake as the economic storm clouds are beginning to look ominously large, and in any case the surge in tax revenues has been slowing down over the past year.
The Department of Finance has estimated that the "hard Brexit" outlined by British prime minister Theresa May will over time do serious damage to the economy with a 30 per cent decline in exports to the UK. When taken in tandem with the potentially damaging impact of the Trump presidency the Government would be advised to proceed with extreme caution when it comes to spending commitments.
At the very least it needs to spell out in detail where the savings are going to be made so that the public can appreciate the trade-offs being made to fund public service pay increases.
The Opposition parties also have some responsibility in all this. At the Oireachtas committee Fianna Fáil, Sinn Féin and Labour attacked Mr Donohoe for not spelling out where the money would be found yet all of those parties demanded the bringing forward of the pay increases. They can't have it both ways.