McCarthy wants pay cut as State 'bust'

THE AUTHOR of the recent review on Government spending has told a conference the country is bust and that cutbacks are unavoidable. Speaking at the IPA conference yesterday, Colm McCarthy said the Government had no choice but to introduce a serious medium-term fiscal adjustment.

He said the Government could not continue to borrow 10 per cent to 11 per cent of GDP. The Government needed to take action on pay and social welfare.

Speaking to journalists after the conference, Mr McCarthy called for a new review of public sector pay. He said a third benchmarking exercise should be free to recommend pay cuts where necessary. The last benchmarking exercise had been prohibited in its terms of reference from recommending pay reductions.

Mr McCarthy acknowledged that staff in the public sector had already seen their pay reduced by 7.5 per cent under the Government’s pensions levy and that an examination of top level pay rates was currently under way. He said public officials were entitled to be paid similarly to people in the private sector but this might involve pay reduction.

Asked about the establishment of a new campaign by public sector unions and representative bodies to oppose the spending review recommendations on cuts, Mr McCarthy said: “A small reality is this country is bust. There is no shortage of compassion; there is a shortage of money. We are borrowing €400 million per week and a big component is the public sector payroll.”

Meanwhile, ESRI economist John Fitzgerald said the country was “massively over-priced” and pay cuts of 5 to 10 per cent over three years were needed in the private sector.

“In the public sector there has been a 7 per cent pay cut which is a good beginning. In the private sector, in order to hold our jobs or create jobs, we have to take pay cuts. It is not pleasant but it does help that prices are down 5 per cent...So, I think, a 5, 7 to 10 per cent pay cut over three years when prices are down 5 per cent – it is not pleasant – but if we want to deal with the unemployment that is where the answer lies.”