ANALYSIS:The Government must provide full, detailed calculations if the plan is to be credible, writes Arthur Beesley
BRIAN COWEN’S effort to curtail public expenditure by an annualised total of €2.09 billion will yield €1.81 billion this year if his Ministers can extract all of the savings mooted. The key question now is whether they can really reach those targets, some of which seem more tangible than others.
By far the largest – and most contentious – item in the list of cuts is the €1.4 billion the Government is seeking mainly by way of a pension contribution from the 369,000 civil and public servants that the State will employ over of the course of this year.
After trade unions pulled out of social partnership talks on the stability package earlier yesterday, it remains to be seen if their members take any industrial action to fight what are big pay cuts in all but name.
State employees will pay 3 per cent of their gross income on the first €15,000 they earn, 6 per cent on the next €5,000 and 10 per cent on the balance. Someone on €50,000 – roughly the average annual pay rate in the public service – will pay €3,750 under the scheme, or 7.5 per cent of their income. At €100,000, the contribution amounts to €8,750 or 8.8 per cent of income. At €35,000, the contribution is €2,250 or 6.4 per cent of income.
So do the Government figures stack up? On this most crucial aspect of the plan, the Department of Finance was unable last night to provide any breakdown of the number of workers in each pay bracket within the State system at large.
Neither would it set out the total contribution of the workers from each bracket with respect to the overall total of €1.4 billion.
Within the Civil Service, the department said 983 workers earn less than €20,000; 16,222 earn between €20,001 and €40,000; 9,607 are in the €40,001 to €60,000 bracket; 5,419 earn between €60,001 and €100,000; 1,303 are in the €100,001 to €200,000 bracket and 37 earn over €200,000.
The department said it was for the Department of Health to provide figures in respect of the 111,000 full-time equivalent staff in the health service. The Department of Health passed questions to the Health Service Executive and the HSE said the matter was for the Department of Finance.
Given this confusion, it follows that the Government will have to produce full calculations sooner than later if the plan is to have any credibility. After all, the international credit rating agencies that determine the interest rates the State must pay on its ballooning debt are closely watching how Cowen tackles the fiscal crunch.
It seems unlikely that he would expend political capital – not to mention the risk of confrontation with a highly-organised workforce – without recourse to a precise set of calculations. Within the €1.4 billion total, unquantified cuts in travel and subsistence have been identified. Savings from the non-payment of the Towards 2016 pay round due this year and next will yield €1 billion in 2010.
The next item on the list is €80 million it hopes to yield by cutting medical and legal fees it pays to professionals subcontracted by the State. This amounts to an 8 per cent cut in fees totalling some €1 billion, which the Government pays doctors in respect of the general medical services scheme and in respect of legal professionals the State uses.
The argument goes that such professionals should take the same pain as everyone else in the public sector.
The Government is also targeting a cut of €95 million in the annual budget for overseas development aid. This will reduce the commitment to €796 million from €891 million this year. Although cuts to the aid programme have proved controversial in the past, the Department of Foreign Affairs made the point that the aid budget stood at €255 million in 2000. Next on the list is a €75 million cut in the early childcare supplement, a universal payment made to all parent of babies and young children. In a full year.the payment will fall to €1,000 from €1,100 and it will be restricted to children under five years, having previously applied to children up to five-and-a-half years. Applicable from May, the cut will yield €51 million this year.
The Government also hopes to achieve savings of €75 million through “general administrative reductions”. Mothers on maternity leave and parents taking parental leave will not be replaced; posts will not be filled as they fall vacant; spending on public relations and consultancies will be cut by €25 million; and the Government also wants savings on defence equipment.
It hopes to achieve savings of a further €300 million across all departments on the procurement of services for capital projects.
While the Department of Transport is obliged here to save €180 million from its capital budget, it said this will be achieved without cutting projects in light of the fact that contractors are offering better terms. These savings are ambitious. The target next year is to cut €4 billion.