THIS YEAR economic activity is expected to contract by 9 per cent. In 2010, according to recent estimates by the Economic and Social Research Institute (ESRI), output per head will have fallen back to the 2001 level. This unprecedented contraction has involved major and painful economic adjustment, in the form of pay cuts, job losses, business closures, and worries about the solvency of many private sector pension schemes.
To date, the private sector has shouldered much of the burden of adjustment in this recession, with the rate of unemployment expected to reach 17 per cent next year. The public sector has, by comparison, escaped lightly so far.
Public sector numbers actually increased last year. The public sector pension levy was a pay cut. However, the levy can also be seen as a payment by public sector workers to maintain superior pension benefits; benefits which many in the private sector no longer enjoy.
In March, Minister for Finance Brian Lenihan announced an immediate and indefinite public sector jobs embargo. In December 2002, his predecessor in office, Charlie McCreevy announced a similar, though less draconian, ban on public service recruitment. Those job reductions failed to materialise. Instead, the number of public service employees increased by some 36,000 (13 per cent) between 2003 and 2008. This time the parlous state of the public finances allows no room for error in enforcing the embargo. The Taoiseach Brian Cowen and Mr Lenihan will be anxious to emphasise this point when, shortly, they begin talks with the trade unions on public sector reform.
Mr Cowen in his recent letter to the Irish Congress of the Trade Unions (Ictu) pressed for “greater flexibility” in the deployment of people and resources across public service boundaries “so that we can restructure public service delivery”. The Government wants to transform how the public service operates. Fine Gael and Labour want the same outcome,
Fine Gael’s deputy leader and finance spokesman, said last week that managers in the public sector should manage, or face dismissal. Eamon Gilmore, leader of the Labour Party, advised public sector unions that embracing, not impeding, change was the best way of winning the publics support and of protecting the interests of union members. Serious reform of the public sector – too long shirked by all political parties – was never more necessary. An economy in crisis presents a political opportunity to achieve that reform.