Pat Leahy: Irish politics is still based on dangerous giveaways

If there was one thing I thought everyone was agreed on, it’s that there is no going back to 2008.

Lately, I’m not so sure. Strong economic growth is filling Paschal Donohoe’s coffers with fat tax revenues and there is a race on among special-interest groups to get their hands on the loot.

Front of the queue are the trade unions representing public-sector workers. They know that with a bulging exchequer, a minority Government and an election in the mid-distance, now is their chance to secure higher pay for their members.

Public-sector unions have often been successful at conflating the interests of the public service with the interests of public servants. Pay us more and you get better services. But it’s a wheeze, and they know it.

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On Monday, all public-sector workers will receive a 1 per cent pay increase, the second such increase this year. Many will also have received increments, the automatic increases in salary based on length of service. Scheduled pay increases (not including increments) will cost €450 million next year.

Restraint

So far, the Government can claim to be observing reasonable restraint on public pay. But it’s under pressure, and it’s beginning to creak a bit.

The administration folded on the pay increases for the 35,000 public servants taken on since 2012. The nurses were bunged a new deal on allowances (cost: €20 million) but they will almost certainly strike anyway. The teachers want “back pay” for the newer recruits.

It’s more or less accepted in Government that it will pay out to the workers in section 39 organisations, funded by but not directly employed by the State (estimated cost €68 million). The Defence Forces are the next group to be considered by the public pay commission, and they’ll get more money next year.

There’s more coming down the line. A Siptu conference in Cork next week will hear demands for further pay increases. Ditto a meeting of the hospital consultants.

It’s all going in one direction. At one recent meeting in Government Buildings one senior official warned his colleagues that it was all beginning to feel a lot like 2006 again. . .

Back to 2008. The reason for the economic collapse was an international financial crash that left the Irish banks utterly exposed on property loans they had made in the previous half a decade. As economic activity fell off a cliff, tax revenues collapsed. So while the State borrowed eye-watering amounts of money to bail out the banks (that’s a whole other conversation) there was also a huge adjustment to be made to the domestic day-to-day budget as well.

There are people who claim if the panicky bank guarantee hadn’t been issued 10 years ago then you wouldn’t have had the years of austerity. Poppycock. Once the boom ended, the public finances were unsustainable.

It would be idiotic to say public-sector pay caused the crash; of course it didn’t. But unsustainable public finances, of which public-sector pay was a central element, were one of the reasons why Ireland’s adjustment was so painful.

Back to 2008 again. There’s taoiseach Bertie Ahern telling the Dáil in January, while defending his latest pay increase, that any fair comparison with the private sector would have given the taoiseach a salary of at least €600,000. Oh yes, good times.

I remember once counting the number of pay increases that Ahern had received between 2000 and 2007 and coming up with something like 25 of them. This was slightly mischievous – the taoiseach’s salary then and now has two components, his TD’s salary and the minister’s top-up. He had benefited from general public-sector pay increases, benchmarking and special reviews for higher earners in the public service.

There is no political or electoral benefit for politicians in being responsible

Ahern’s good fortune is less significant for itself than for demonstrating the rapid growth in public-sector pay in those years.

By 2008, it was clear that public-sector workers were better paid than their counterparts in the private sector, and significantly better paid than their equivalents elsewhere in the European Union.

Three conditions for the surge in public-sector pay were necessary: a weak or willing government, strong unions under pressure from their members and a bulging exchequer. Two of those conditions are replicated today. What about the third?

Budgetary expansion

For all Paschal Donohoe’s talk about prudence, he will give away more than €3.5 billion in tax cuts and spending increases in 10 days’ time when he announces the budget. The fact that most of it has already been committed will detract from the budget-day drama (intentionally and commendably) but it’s still a significant budgetary expansion. There’s more than a whiff of St Augustine about it all – Lord, make me chaste, but not yet.

In fairness to Donohoe, there is absolutely no indication that anyone else would do any differently. Indeed, most of them would be more profligate, some of them a lot more. Our system of public and political discourse is set up to constantly demand that more money is spent on public services, tax cuts, giveaways of one kind or another.

Economists comment and pointy heads run the numbers but Donohoe has to live in the real world; and, as he often reflects privately, politicians have to get re-elected. There is no political or electoral benefit for politicians in being responsible. This is a huge failing of our system.

The truth is that unless other people show leadership too, politicians won’t make lonely and unpopular stands.

A decade on from the beginning of a great national trauma, we are entitled to expect a commitment to remembering 2008 and what followed – and a determination to avoid a repeat, no matter what – from our political leaders, from the media, from trade unions, from Opposition parties. And from voters. Because whatever about all of us partying, we all certainly shared the hangover. Make the same mistakes and we will do so again.