HOW are pay rates for top posts in the public sector – including government ministers and members of the judiciary – reset to reflect our changed economic circumstances? Last April Minister for Finance Brian Lenihan asked the Review Body on Higher Remuneration in the Public Sector to revise its 2007 recommendations, taking account of both current pay levels in the private sector and the pay of those in comparable posts in countries with similar economic and political systems. The review body is expected to report shortly. The Department of Finance, in a submission, has argued a case for capping or cutting the pay of ministers, senior civil servants and judges.
The department contends that the benefits of pay restraint lie not merely in the financial savings achieved – which would be relatively small – but in the demonstration effect which could be significant. Pay cuts at the top would impress international investors by showing that Ireland is serious about tackling its economic difficulties. It would also set a headline for pay developments in the rest of the public sector and make it easier to secure pay moderation from others at lower levels. In the private sector, where job losses are greatest and where pay cuts are helping to preserve employment, those cuts would be secured more easily if matched by a parallel adjustment in public sector wages.
Traditionally, the main objective of the review body has been to recommend pay rates for top public service posts which will enable the State to employ high-calibre people. In the past this has involved benchmarking top-level salaries against private sector comparators in Ireland. However, the review body has never previously been asked to consider the pay of those in comparable positions in other countries.
This failure to benchmark top-level remuneration against counterparts elsewhere has produced pay disparities that cannot be justified now, and are no longer sustainable. The Taoiseach and Government Ministers are paid more than their counterparts in most European countries; the governor of the Central Bank receives more than the chairman of the Federal Reserve, while judges are remarkably well paid on any international comparison. The review body cannot avoid cutting top-level salaries, given its specific terms of reference: namely, to take account of the state of the economy, current pay levels in the private sector, and the pay of those in similar posts in other countries, in making its recommendations.