GOVERNOR OF the Central Bank Patrick Honohan is correct in saying the Government has a choice between cutting public sector jobs and adjusting pay scales to secure the necessary reduction in State borrowing. The implicit criticism accords with the views of Dr T K Whitaker who, at the onset of the fiscal crisis, suggested that pay reductions should be favoured over job losses in correcting the public finances.
That approach was, however, rejected by the public sector unions that negotiated the Croke Park deal and by the last government.
Early retirement applications by some 7,700 public servants have generated considerable publicity in recent days and questions have been raised about the effect their departures will have on existing services. The obvious answer is that the quality of many services, both frontline and back-office, will be reduced. Such negative consequences are likely to become magnified over the next three years, however, as the Government seeks a further 12,000 redundancies.
Minister for Public Expenditure and Reform Brendan Howlin has argued that fundamental change cannot take place within the public service without the co-operation of workers and trade unions. That is a reasonable point. But the required level of co-operation cannot be guaranteed, if past experience is anything to go by. In any event, his dismissal of Prof Honohan’s alternative suggestion as an “academic exercise” was both inappropriate and self-serving. The Government’s own policy is politically motivated and has been driven by vested interests.
Since the general election, the Government has defended itself against criticism by invoking decisions taken by its predecessor in relation to the bailout memorandum, spending cuts and the Croke Park deal. Those responses have passed their “sell by” date. Ministers should admit that fresh ideas and approaches may be required to reduce the public deficit and generate economic growth. Specifically, pre-election commitments in relation to income tax and the Croke Park deal may have to be revisited.
The Government intends to reduce the number of public servants to 282,000 by the end of 2015 and to generate savings of €15 billion. Its carrot-and-stick approach towards those nearing retirement brought a surge of applications. Cutting costs is one thing. But managing that loss of experience and ability will be extremely difficult. Two months ago, Mr Howlin estimated that 9,000 staff will leave in 2012, the majority under this scheme. Because of its voluntary nature, however, he was unable to provide a sectoral breakdown. To alleviate the worst effects of sudden departures, up to 3,000 posts in critical areas may be back-filled.
But, as Mr Howlin made clear, all new recruits will start at basic salary level and special allowances are under review. Already, particular groups are seeking special treatment and teacher unions described the suspension of allowances as disgraceful and outrageous. What planet have they been living on?