Pay cuts climbdown could mar whole budget strategy

 

INSIDE POLITICS:The Coalition may not be out of the woods yet over what many see as special treatment for more than 600 top public servants, writes STEPHEN COLLINS

THE PETERING out of the latest peasants’ revolt in the Fianna Fáil parliamentary party over the Government’s climbdown on pay cuts for top civil servants has encouraged the belief among Ministers that all is set fair for another two and a half years in office.

The placid mood in Leinster House during the week has lent substance to the view that the Coalition may be over the worst. There is certainly a view in Fianna Fáil that the corner has been turned and things can only get better but it may not be as simple as all that.

The failure of the mutiny led by Tipperary South TD Mattie McGrath against the Government’s decision to do a U-turn on the scale of the pay cuts for about 600 or so highly paid public servants has fuelled the view at the top in Fianna Fáil that all the major political hurdles are now out of the way.

At the parliamentary party meeting last Tuesday evening, the rebellion was crushed comprehensively.

Minister for Finance Brian Lenihan stoutly defended the decision to modify the salary cuts for public servants in receipt of bonuses and the few speakers against his strategy got little support.

It prompted Labour frontbencher Pat Rabbitte to remark in the Dail the following day: “Deputy Mattie McGrath has made so many false starts that were he a horse, he would have to be put down.”

While the remark naturally caused some amusement, it detracted from the serious point that McGrath was trying to make.

Whatever Ministers may think, the decision to let some of the highest paid public servants off the hook has the capacity to do serious damage to the credibility of the Government’s budgetary strategy.

Pursuing that strategy of cutting public spending has taken a lot of political courage and skill and, to its credit, the Coalition, at the instigation of Lenihan, adopted the right budget and got it through the Dáil.

The benefits of that strategy are being reaped already. Just in the nick of time Ireland managed to escape from the status of “the sick man of the EU” and leave it to Greece.

Over the past month the problems facing the Greeks have threatened to spin out of control and leave the country defaulting on its debt.

Were we still bracketed with Greece, we would now be facing far higher interest rates on the national debt with the prospect of national bankruptcy looming in the longer term.

Instead, as a result of a budget that showed the Government’s determination to get public spending under control, our international rating has improved and with it our long-term prospects of recovery.

This was the background against which the Government decided just before Christmas to mitigate the impact of public service pay cuts for some of the highest earners in the system. The message could not have been more damaging in terms of undermining the credibility of the Coalition’s budgetary strategy.

While there is a certain logic in what the Government has done, it made no sense politically.

The logic is that assistant secretaries, who are paid between €135,000 and €150,000 a year, had already suffered a dramatic reduction in salary because of the abolition of bonus payments which averaged €10,000 per annum.

While this is true, the fact is that bonus payments were supposed to have been based on performance and were not meant to be regarded as part of the normal salary.

The fact that the system effectively incorporated them into the salary structure meant that those involved were taking a bigger effective cut than everybody else but that should have been regarded as their tough luck.

Another argument, with a lot of merit, is that the 160 or so assistant secretaries in the system are vital to the machinery of government, most of them work long hours and don’t get overtime like people in lower grades.

Any government will want to keep its senior officials well-motivated and this argument held sway with many Ministers.

The problem, though, is that not only were the pay cuts of about 12 per cent of salary reduced to 5 per cent for assistant secretaries but also for a tranche of linked public servants from 231 local government officials to 100 HSE employees, as well as those in senior Army and Garda ranks.

The net result was that the modification of the initial cuts announced in the budget applied to more than 600 people across the public service.

The hasn’t been much of a hullabaloo from the trade unions about the fact that the better-off public services struck their own side deal but that is because the natural ambition of the unions is to unpick the Government’s entire public service pay strategy. If the special arrangement for the higher paid sticks their hope would be that it can be used as leverage for those lower down the pay scales.

The issue may not go away as easily as the Government thinks. Fine Gael deputy leader and finance spokesman Richard Bruton has announced that his party will table a private members motion in the Dáil on Tuesday and the issue will come to a vote on Wednesday night.

“I would like Minister Lenihan and his colleagues to have an opportunity to explain this unfair move to the Oireachtas, and to those public servants on the lowest salaries who are being offered no such reprieve,” said Bruton.

More to the point the motion will put it up to Mattie McGrath, and those of his colleagues who are unhappy at the decision.

There are differing views across the party divide as to whether the Tipperary TD will have the courage to vote against his party or, at the least abstain.

Wednesday night will provide the answer to that question but the bigger one is why the coalition is so determined to stick to a decision that has only tarnished its considerable budget achievements.