LAVISH RETIREMENT arrangements for the most senior civil servants are an understandable source of controversy when the public is focused on social fairness and an equitable sharing of the burden in correcting the State’s finances. A severance payment of €570,000 made to a former secretary general at the Taoiseach’s Department at the age of 57, lit the fuse for reform. But a reduction in these entitlements forms only part of sweeping legislative changes that will affect the entire public service.
Reducing terms and conditions of employment can be a hazardous task, fraught with potential litigation. As a consequence, the Government has hastened slowly, giving advance notice of its intention to cut top-level pay and connected pensions within the public service from next February. The result has been a surge in the number of voluntary redundancies as those nearing retirement age moved to protect their existing entitlements. Talks are also under way on the remuneration of hospital consultants.
Getting public pay and pension costs into line with government revenues will be a major task. Many civil servants are not highly paid and only 2 per cent earn more than €100,00 a year. While the good times rolled, however, national agreements provided a built-in percentage advantage for higher earners. This growing wage gap was magnified by additional pay awards made to ministers, judges and senior public servants, recommended by their peers in the private sector. Falling competitiveness and increasing inequality went hand in hand.
It would be wrong to suggest that secretaries general have behaved badly. They all took voluntary wage cuts, on top of statutory arrangements, that reduced their incomes by about 30 per cent. Salaries, now at €200,000, are still considerable. But the Government’s commitment to review these changes in twelve months suggests the package may not attract outside expertise for such posts, now that the recruitment system has been changed for that very reason.
Passage of the constitutional referendum on judges’ pay will not only lead to cuts in judicial salaries. It will clear the way for their future inclusion in pension arrangements that will apply to all new entrants to the public service. Those with accelerated pension benefits will be required to double their rates of contribution. In addition, and in line with social welfare changes, the age of retirement will be gradually increased to 68 years, with a maximum retirement age set at 70. Pensions will be based on a career average, rather than on final salary. Such radical reform is designed to address the ballooning cost of pay and pensions, which cost the exchequer close on €19 billion last year, or about one-third of all State spending.
Legislation to give effect to these changes is now before the Dáil but its impact will not be felt until the mid-years of the century.
By then, it has been estimated that the cost of servicing public service pensions could be reduced by up to 35 per cent.