Public service pay: pension nettle must be grasped
Budget arithmetic is tight and there is not a lot of room for manoeuvre
The forthcoming talks about a new public service pay deal will be a real challenge for all concerned and the outcome will have a huge bearing on the financial health of the State for years to come. The talks will begin after the Public Service Pay Commission reports in the coming weeks and its recommendations will inevitably set the tone for negotiations to follow.
The Irish Times reported earlier this week that the Government is willing to offer 300,000 public servants a pay increase of six per cent over three years, with potentially more available in local bargaining. But it is also seeking significant reform of the pension system for State employees. Whether the Government’s offer is an opening gambit or a bottom line won’t become clear for some time but the budget arithmetic is tight and there is not a lot of room for manoeuvre.
All sides need to be conscious that the excessive public pay increases arising from the benchmarking exercise of the early years of the 21st century were a critical factor in bringing the economy to its knees during the financial crisis.
There is a strong argument for affordable pay increases for public servants who suffered cuts in their income from the emergency measures necessitated by the financial crisis. In particular, the lower pay scales for new entrants to the public service, not least in teaching, need to be phased out in the interests of fairness.
However, the corollary is that the generous pension provision for retired public servants has to be put on a more sustainable footing if the entire public service pensions system is not to collapse in the years ahead.
The Public Service Pay Commission was charged with examining the pension system as well as pay rates and its findings on this score are being eagerly awaited by all sides. The Government submission to the Commission points out that the current cost to the taxpayer of the public service pension system is €3.3 billion a year. It is arguing that the value of these retirement benefits relative to the private sector need to be examined along with the cost of the entire system.
There have been suggestions that the Government would like to incorporate the emergency pension levy, which averages at around five per cent of salary, into a permanent contribution for those earning above a certain threshold.
The unions will certainly resist any attempt to do this, but, one way or another, it is time to address the long-term viability of public service pensions. Although new entrants have suffered a reduction in benefits, those employed before 2013 are still entitled to a far more generous pension than counterparts in the private sector.
Finding an acceptable solution on pay and pensions will be extremely difficult. It has the capacity to bring down the minority Government but it is a challenge that cannot be shirked.