Coalition’s credibility at stake in new pay deal

When EU-IMF troika officials have talked privately about how the Government has been faring on its bailout programme, they have borrowed a phrase used by management consultant Eddie Molloy: "implementation deficit disorder".

There have been some very clear examples where the Coalition has wavered off the fairway into deep rough over promised savings. That has been especially apparent in failures to bring in promised savings in the health sector.

The internal staff reports of the European Commission and the International Monetary Fund at the end of each quarter have disclosed concerns about "notable implementation risk".

In other words, promises in terms of savings (in health) and increased efficiencies (throughout the public service) have not always been kept. This may be because the authorities here have dragged their heels, or because there is a delay in implementing legislation or a policy decision.

In its latest internal report, the European Commission did not mince its words when expressing concern about whether or not the Croke Park II deal on public sector efficiencies will live up to its billing. “As stressed on other occasions, necessary savings need to be secured while ensuring at the same time that the delivery of essential public services is not compromised,” the report stated.

Tracking this agreement to its beginning, the Government has been consistent with its mantra of what must be achieved: a total of €1 billion in savings over three years, of which €300 million needed to be delivered this year.

Unions were told that if they failed to agree on this matter, pay cuts throughout the public service would be imposed by way of legislation that would be in place by July 1st.The Government’s position was clear: the targets were non-negotiable.

Even when the deal collapsed, after union members rejected it in a ballot, and Labour Relations Commission chairman Kieran Mulvey was asked to begin exploratory talks to see if a revised agreement might be achievable, that line was maintained.

In an interview last month, Tánaiste Eamon Gilmore was adamant. "Kieran Mulvey is [meeting with unions] and he'll report back to us," he said. "But if any of the unions have proposals, it's quite clear that the €300 million in savings must be made this year, the billion by 2015. But if there are proposals we'll listen to them."

Savings no longer compulsory
At the weekend, however, there was the first public confirmation that the Government's Maginot Line on public sector pay levels had been breached. It was left to Fine Gael Minister of State for Finance Brian Hayes – not exactly a champion of public sector pay levels — to admit the €300 million was no longer a compulsory outcome, rather a slightly more aspirational "ambition".

The translation of that was clear – it was an admission that the Government would not achieve €300 million in pay savings this year. In recent weeks there was evidence that this was the direction that the talks were going in, as details of the concessions made to trade unions were made public. Gardaí and nurses would see their Sunday premium pay retained and incremental payments for those earning above €65,000 would continue after a six-month pause.

Politically, there are a number of consequences that will flow from this: for the Coalition as a whole, its credibility and relationship with the troika; for the Labour Party and Minister for Public Expenditure Brendan Howlin; and for the trade unions (especially those that recommended ratification of the deal).

Over the weekend it was reported that the new target was €250 million in savings, though there are some suggestions that it may be as low as €200 million.

A shortfall of €50 million in the savings to be achieved might just be tolerated by the troika and by the electorate (well, those not working in the public sector) but if the Government misses its target by €100 million it will face the charge that it has been forced into a humiliating climbdown in order to achieve industrial peace.

It is significant that it was Hayes who announced the adjustment, as it showed that Fine Gael was on side about the target being adjusted downwards. A number of its backbench TDs, Simon Harris and Eoghan Murphy in particular, have argued that the €300 million target should remain in place at all costs but clearly they don't have the ear of the party leadership.

Moving target
For Labour it's more complicated. In one sense, any positive outcome for the public sector benefits the party. But then its own senior Ministers, especially Howlin, were insistent on the €300 million target. If he is to avoid taking a substantial blow to his credibility as Minister with the troika and the public, he will have to show a clear pathway as to how the extra savings will be achieved over the next two years.

In the course of his interview with RTÉ's This Week Hayes insisted that the overall target of €1 billion would still be achieved over three years. But already the Opposition has contended that if the supposedly immutable target of €300 million for 2013 was shifted, there is no reason that public sector unions can't wring further concessions from the Government in 2014 and 2015.

The troika’s sentiments on Croke Park II – and its prospect of actually achieving €1 billion in savings – were tepid to begin with. Expect some tough exchanges with the Government on this issue between now and July.

Union leaders who supported the Labour position on the pay deal will also find themselves in a slightly invidious position. Of course, Siptu and Impact will welcome any concessions but the clear message is the row-backs have ultimately been achieved by those unions that refused to sign up to the deal.

Harry McGee is Political Correspondent