The Government has reconsidered its attitude towards the extraordinarily generous pay proposals made in October by the Review Body on Higher Remuneration in the Public Service. But, in deciding to defer a phasing in of ministerial pay increases for 12 months, it has breathed new life into this public controversy. The worsening state of public finances and the pressures likely to develop in the course of a benchmarking process and negotiations on public and private sector pay in 2008 leave the Coalition with the worst of all worlds. The issue is unlikely to go away.
By initially making the major miscalculation to accept the money on offer without taking account of other considerations, the Government did itself tremendous damage and may have injured the prospect of securing a new national wage agreement. In that context, a time-limited deferral of pay and pension increases for Ministers only, while a privileged group of about 1,500 civil and public servants benefits immediately, serves only a cosmetic interest.
The review body - appointed by Government - made two significant recommendations: first, it proposed that Ministers, judges and top State employees should receive parity of pay with the lower quartile of private sector executives, thereby raising average salaries by 15 per cent, before catch-up increases were granted; and secondly, it decided the additional value of a public service pension amounted to 15 per cent of a private sector salary. It suggested these changes might be phased in over a period to 2009.
The last general review for this elite group set basic pay levels at 85 per cent of that received by the chief executives of smaller companies when they were implemented in 2002. What public service productivity has taken place to justify an increase in pay ratios to 100 per cent? This group received an interim pay award of 7.5 per cent in 2005. And a further 7 per cent catch-up is now being proposed. In addition, Ministers received national pay awards based on their Dáil salaries. These are not insignificant amounts, even when allowing for a deduction of 15 per cent for public pension values.
One must have some public sympathy for the Taoiseach and his Ministers in the position in which they find themselves. Members of government should be well paid. The purpose for paying them well is to prevent any dependence on "dig-outs". The review of their salaries was conducted by an independent review body. It was undertaken at a time when the economy was strong and Government revenues enjoyed a healthy surplus. It was designed to provide a mechanism that would limit public pay increases by valuing pension rights.
The Government faced two options when the review body reported: to defer the pay increases or to robustly defend them. It wimped out and did neither. Then, it was forced by the court of public opinion to change its mind. The whole episode, so early in the life a new Coalition, demonstrates a detachment from reality bordering on arrogance.