Ireland simply can't afford luxury of our public service


A new consensus among the social partners is needed if we want to rebuild our economy, writes Turlough O'Sullivan

IRISH BUSINESSES, small and large, are the source of every Irish citizen's prosperity. Most days I hear about enterprises that are taking tough measures to keep afloat in a severely competitive environment.

They are struggling with reduced sales, increasing costs, difficulties in keeping employees on the books, pension funds in crisis and pressure on credit. Like many ordinary taxpayers, they are perplexed that the public sector appears to be largely immune from such realities.

I have spent much of my life working in close conjunction with public servants. Ireland is blessed with the quality of these men and women who are genuinely driven by a sense of public service. They must see that the country simply cannot afford the luxury of the present public sector pay bill.

Ireland is not exactly where it was in the late 1980s. However, we are not in a good place domestically or globally. It is not the first time that we are facing a financial crisis.

The difference is that unlike the experience of the 1980s, we now know we have it in us to be an internationally acknowledged economic success. We have a track record.

We have enjoyed the fruits of good economic management for several years. We now see how these can almost disappear overnight.

From about 1993 to 2000, Ireland traded successfully. For the first time in recorded history we stood out in the world as a resounding success.

From 2000 until now we have been losing competitiveness and have lived off the proceeds of internally generated and unsustainable growth, mainly in construction. This could not continue indefinitely, even though many behaved as if it would.

As far back as 2000/2001, Ibec pointed out that our small trading economy had lost the plot and was overly dependent for its economic growth on construction and consumer spending. Spending based on the unsustainable revenue generated became embedded in our cost base mainly in the public sector.

Ibec made this clear in its comments and submissions on the budget each year and quite forcefully before the 2002 and 2007 general elections.

It is now time for a reality check. I believe that the vast majority of our citizens know that we are in dramatically changed circumstances and they are ready to accept tough and fair measures.

We did this in 1987 when the country came to accept modest incomes for a few years on the promise of future tax cuts. This was a courageous leap of faith that paid off.

Given that we now know what works, we do not need such a leap of faith today. We just need to be honest with ourselves. We also need some strong leadership from all the social partners as was provided in the 1980s.

Then trade union and business leaders exercised courage and advised their members of the realities facing them. Politicians from the main parties also behaved responsibly in the national interest.

The Government made choices in Budget 2009 based more on increasing tax than cutting its own expenditure. It also based its forecasts on optimistic assumptions. Additionally, it made some mistakes, including applying the 1 per cent income levy to the very low paid.

Taking medical cards away from some over-70s without careful explanation and communication was bound to cause upset among a group that has made a major contribution to the development of our country. I think it's fair to say that not all over-70s need a medical card.

I believe that all these decisions undermined the acceptability of the thrust of the Budget to the public. We must quickly restore public support for necessary actions.

On Friday last the Taoiseach called for leadership from the social partners.

Ibec quickly and positively responded to this call. In my view what is required is fairly straightforward. The Government should call an urgent meeting of the social partners.

The solution to our difficulties is to mobilise everyone behind a fair and equitable set of policies that will ensure that, just as in 1987, the enterprise sector is given the chance to win back its lost competitiveness.

It is imperative that the burden of the public service on all taxpayers is eased. Headcount must be reduced, including very many surplus employees in the HSE following the amalgamation of the 11 health boards.

Increments should be frozen, pensions capped and State bodies reduced further. The productive sector is immersed in such economies, with nearly 95,000 more people on the live register now compared with this time last year. The Government deserves credit for underpinning financial stability and prioritising infrastructural expenditure, both of which are critical ingredients for a competitive economy.

Politicians and interest groups should do what they did in 1987. While they may enjoy some point-scoring at the moment, the image and stability of the economy is the loser.

If we begin to win again on international markets the jobs haemorrhage will stop. Everything else will follow, including the availability of more resources to look after the poor and homeless.

• Turlough O'Sullivan is director general of Ibec, the employers' representative body