Do we want more public servants, or do we want to pay existing public servants more? As the debate rages about pay restoration rages across the public sector, there seems to be no appreciation of the trade-offs that will be have to be made when deals are done to end the strikes either threatened or already under way. And make no mistake, there will be deals.
Public servants are angry because restoration of gross wages – never mind take-home pay – to pre-crash days is still a long way way off. Figures from the Department of Public Expenditure and Reform show the average gross pay of public servant, taking into account the pension-related deduction, fell from just over €60,200 in 2008 to a low of €52,360 in 2015 and has since returned to close to €55,000. Progress in the right direction – but it is far from restoration. And when you consider the extra tax being paid, the gap back to pre-crash levels if all the greater.
More rapid progress has been made in restoring public-sector numbers. The total number of exchequer-funded public servants (excluding local authorities) is now back to pre-crisis levels of about 285,000. The overall gross cost of pay and pensions is also back close to its pre-crash peak at €19.378 billion – though within this pay costs are lower while pensions costs are up.
There is a problem at the heart of all this – the concept of restoration. It is infecting the whole debate. It all has to do with how the cuts were “sold” in the first place. Most were made under what was emergency legislation – and now that the emergency is over, the legal basis of this is increasingly questionable. There is an agreed basis under the Lansdowne Road agreement to unwind part of the emergency measures, but just some.
But the problem is that the structure of what was in place before the crisis – in terms of the way we raised money and spent it – was unsustainable. Restoration is a dangerous road. But it is the one we are going down.
It remains to be seen whether the Lansdowne Road line can be held, with Fianna Fáil and the Independents tempted into supporting the cause of the unions. Labour Party leader Brendan Howlin wrote this week that a new deal was needed to give public servants "a clear road map to get back to where they were before the crisis". We just can't get away from this talk of going back to some kind of imaginary pre-crisis world where everything was grand.
Choices
And the trade-offs in a world where spending increases are capped are simply not addressed in political debate. We have choices between pay rises, employing more staff and cutting taxes. We can’t have it all.
Lansdowne Road set in place a three-year programme with a full-year cost, by 2018, of more than €800 million, involving phased increases for public servants and relief for lower earners from the pension deduction. There is also agreement on significant increases for more newly hired teachers. Part of the Government’s problem is that if it gives too much in the current disputes to unions outside Lansdowne Road, the whole structure could come under further pressures,
Of course the old Irish solution to any crisis is to set up a new body, and so we are to have a public pay commission to chart a way forward. Part of its work will be to be benchmark Irish public pay with that of public servants abroad, as well as the tricky task of comparing the public and private sector here. The data would suggest that public servants here are still paid on average more than their private sector counterparts, certainly for the bulk of lower and middle income jobs.While in pay terms, more senior public servants may now be behind their private sector counterparts, their generous pensions will, in most cases, more than make up for this.
So the conclusions of the public pay commission, due to be established shortly and report by the middle of next year, may not suit the public-sector unions too much. Perhaps this is one reason for the current push for wage deals to be done quickly.
Markers
There are a few markers for the Government as it heads into this . If it is seen to give too much to, say, the ASTI, or other unions outside Lansdowne Road, it risks being picked off in more fights with individual unions. It has to find a way to keep the game played on the Lansdowne pitch. And it has to outline the facts – the automatic pay increases provided by increments are back operating again in the public sector.
It also has to include the cost of public-sector pensions in the debate to come, and it is welcome that Minister for Public Spending Paschal Donohoe has said these will be taken into account by the commission. We face a looming pension crisis on two fronts – the cost of public-sector pensions and the inadequacy of private sector ones. The solution is not to take more money from taxpayers to put into a fund to pay future public-sector pensions.
Perhaps there is a deal to be done, trading some future pay increases for pension reform. But it won’t happen. We are on the road to restoration. No political party in the Dáil will stand against it. If we base all this on the idea of going back to where we were in 2008, we are asking for trouble. Back then spending was too high and taxes too low. Restoration of living standards to where they were before the boom is a fantasy.