The long-awaited report of the Benchmarking Body on Public Sector Pay raises key issues for the Government and for the State's 230,000 public servants . Most attention, inevitably, has focused on the extent of the increases for the different groups. In the longer term the key factor will be whether the report can, as its authors intend, set a new direction in the determination of public sector pay.
The report recommends an average pay increase of 8.9 per cent. However there is substantial variation in the awards, from as low as 2.5 per cent to as high as 25 per cent. The individual merits of the awards for the different groups will be long debated and indeed the full reasoning for each is not included in the report ; the wide variation at least indicates that the group was looking in detail at the merits of each position, rather than settling for a broad average for all groups. In general higher-ranked public servants will do better if the report is implemented - whether this is recognition of their greater level of responsibility or an expedient move in recognition of the state of the public finances will be a key element of the forthcoming debate.
The report has important implications for the public finances, where above-target spending and weak revenue are threatening to end the era of budget surpluses. Exchequer figures due for publication today will give a clearer picture. However there are increasing signals that a difficult period lies ahead. This partly reflects a slowdown in the economy, but is due in no small part to poor budgetary management by the previous government. The tax giveaways were too generous and spending was allowed to spiral out of control, without the required focus on value for money. Now the price must be paid for this profligacy. If public services are to improve - and public servants to be paid more - then higher taxes may be needed. This is the fundamental choice facing the Government, even if the Minister for Finance, Mr McCreevy seems slow, publicly, to acknowledge it.
Public servants will feel, with some justification, that having signed up to benchmarking, they deserve to reap its benefits, no matter what difficulties face the public finances. That said, the Government now clearly has a responsibility to ensure that the emerging budget deficit does not balloon in the months ahead. Given the extent of the increases awarded, it will be difficult - but surely not impossible - to work out a payment schedule which does not undermine the exchequer position. What is vital, however, is that the spirit of the document is also adhered to. It states clearly that the old-fashioned reliance on obscure relativities between different pay grades must be broken once and for all. It also says that while 25 per cent of the awards should be paid, as agreed, without any concessions, that the remaining 75 per cent must be based on agreement to modernisation and change in work practices.