The week of the Dublin Bus strike featured a post-holiday season acceleration of the push by public sector trade unions for pay hikes for their members. There are parallels. Both the State and Dublin Bus have come through a financial crisis and are now in a more stable position.
However, the union narrative in both cases – which is that they are just looking for a share of a growing cake – is flawed. Higher pay in Dublin Bus will mean higher fares, or a bigger subvention from the exchequer. A wage hike for public servants means less spending or more tax elsewhere. This doesn’t mean that neither case could be justified. But the cake simply isn’t big enough – in Dublin Bus, or the State – to allocate more pay and still keep doing everything else.
We are in the era of choices – and it is one for which our “new politics”, with its endless search for compromise and consensus, looks uniquely unsuited. Dublin Bus is profitable, to the tune of about €10.2 million last year. The company was in the red from 2006 to 2012 but a series of cost-cutting programmes and rising traffic now means it is making a profit. But this profit is after a €57 million subvention from the exchequer to account for the obligations put on Dublin Bus to run routes which are not profitable. The subvention has fallen in recent years.
With pay frozen since 2008, Dublin Bus staff may well have a case for a rise. But they rejected a Labour Court recommendation of an 8.25 per cent rise over three years. An increase on this scale would pretty much eliminate the current profit levels. It is hard to see how the company could afford yet more, as the unions demand, unless a big wad of extra cash comes in from the exchequer, or passengers are stung again.
Zero-sum game
In the pre-crisis days, the exchequer might well have stumped up and given more to the company. Now, there is simply much less cash to spare.
There is just €700 million to add to the level of spending next year in the budget, according to the Government sums. This represents less than 1 per cent of total spending, and has already been spent many times over in the pre-budget debate. This is also the backdrop for the wider argument. The public sector unions are demanding their “share” of a growing economy. But we are now into the era of the zero-sum game budget. Gains for one section of people means money saved or tax raised elsewhere. Growth may yield a bit of a dividend each year. But not a lot. And in the era of new politics, upsetting anyone by cutting back existing spending or raising a new tax is off-limits, with a few minor exceptions.
The budget debate has started like we are back in 2006. We just have to hope that, in a few years’ time, it doesn’t all end like it did in 2008. The feeling now is that there is money to spend and it is only a question of fighting over who gets what. The good times are back. The economy is growing. But, like in Dublin Bus, higher pay for public servants would have to be paid for.
The €1 billion to "spare" on budget day – for spending increases and tax hikes – will be spent in the twinkling of a few Independent deputies' eyes. By the time the diverse demands of Shane Ross, Denis Naughten, Michael McGrath and the rest are met, we will already be well in the red.
The recent statements by Enda Kenny and Michael Noonan that the budget will be "cautious" and "Brexit-proofed" look very like the start of a process of playing down expectations. In the good old days, this was a game inevitably followed by the unveiling of something that was "better-than-expected" on budget day. This time it is different. We are being prepared to be underwhelmed.
Bankruptcy
It is against this background that the unions and Government are starting to square up on public sector pay. The unions want the emergency legislation that allowed the cuts during the crash to be repealed and are calling for promised pay restoration to be accelerated. All sides know the Lansdowne Road deal, which runs out in 2018, is creaking. A public sector pay commission is to be set up to try to come up with a new framework.
But the central point remains.
Ireland’s public finances have been run for years on the McCreevy principle of spending money when we have it, and cutting back when we don’t. In fact, we have entered a new era, driven by the fallout from the crisis and tight EU rules, which means spending will only creep higher each year, unless we decide to raise new taxes to pay for it.
In the heady days of the early 2000s, there was something for everyone in the audience. Public sector pay rose by an unsustainable 66 per cent between 1999 and 2006, but there was plenty of money elsewhere too – for tax cuts, non-pay spending rises and so on. Now it is different. More money for one group will mean less spending elsewhere, or higher taxes.
Dublin Bus can afford some pay increases. And so can the State for public servants. Pay and productivity rises are part of the normal course of healthy economic life. But the folly of “restoration” – of going back to where we were before the crash – continues to dominate the debate. If we go back to where we were before, we will have a bus company and a State both heading back to bankruptcy.