The extension to the Croke Park agreement brings with it a significant degree of pain for a significant minority of public servants. It also represents a not inconsiderable political risk for the Government and in particular for the Labour Party.
Until this week, nothing this Government has done by way of spending cuts or tax increases has impacted seriously on the income of a significant group of people. True, child benefit has been cut; registration fees for students have increased; the household charge has been levied. But all of this is small beer when compared to the cuts carried out in countries such as Portugal and Greece, which amount to little less than the destruction of the social system.
Of course, the Fianna Fáil/Green government did indeed inflict a lot of pain, not least on public servants. But the current Government is entitled to claim that the take-home pay of those in employment and the benefits of social welfare recipients are largely intact when compared to two years ago.
That is about to change. The terms and conditions of all civil and public servants will be appreciably altered if the agreement is ratified. Most will have to work longer hours; increments will be frozen; greater flexibility will be required. All of this is unpleasant, but not hugely so. What hurts is the reduction in basic pay, which will be required of a minority of their number.
The unions who are party to the deal will say that most civil and public servants will suffer no pay reduction at all – some will actually get a small increase when the reduction in the pension levy is taken into account. But the fact remains that individuals earning more than €65,000, about 20 per cent of the total head count, and those who rely on premium payments, will take a heavy hit.
For Labour this is uncomfortable territory. Public servants are key supporters of the party. Croke Park-plus is unwelcome; the notion of having to impose pay reductions by legislation is an unspeakable nightmare.
Snookered by the troika
Most Labour members of the Oireachtas accept that the fiscal deficit has to be cut. Many, including members of Government, seriously doubt whether more austerity is the way to do it but they are snookered by the troika deal and the result of the last election.
At the 2011 general election, a clear majority of the electorate voted for parties that promised to cut the deficit by way of spending cuts rather than tax increases. Indeed, opinion polls taken since then confirm that the electorate is still of that view. A plurality also tells pollsters that they want to see Croke Park revisited.
For its first two years the Government resisted cuts to public service pay. Cuts were effected by reducing head count. Frontline services were largely maintained by increased flexibility. Pay scales were altered but only for new entrants.
Some in Fine Gael have long argued that spending cuts would and should entail pay reductions for public servants. They claim they have a mandate for that view and they are probably right. They say there is no alternative. In that, they are clearly wrong.
It has become something of a cliche that people in Ireland are hurting. The assertion is rarely, if ever, contested.
Many people in Ireland are indeed hurting. A quarter of a million people have lost their jobs; at least 30,000 are underemployed; up to 100,000 have emigrated. Many people are hurting because of the credit crunch or negative equity.
But there are also very many people who are not hurting or who are hurting very little. There are large sectors of the economy which have been scarcely affected by unemployment and where earnings have been steadily increasing. The multinational sector is a case in point but the same is true of much of industry, other than construction.
In its most recent quarterly economic commentary the ESRI sets out clearly that Ireland is still a low-tax economy. Since recession hit there has been little in the way of income tax increases other than the introduction of the universal social charge.
It is clear that there is scope for an increase in tax on high earnings as a means of closing the deficit and also to give the Government the means to stimulate the economy by increasing capital spending. Why not take more in tax from all workers earning more than €65,000 rather than just public servants on that income? It wouldn’t be popular or palatable but it would spread the pain.
It won’t happen because Fine Gael won’t let it happen. Fine Gael has close to an overall majority in the Dáil. Better-off workers in the private sector are a key constituency for them and they know it.
Remarkable job
Labour is left with the task of limiting the damage. In that, they, and the trade unions who stayed to the end, have done a remarkable job. Most of the measures are equitable and many would be justified even if we didn’t have an economic recession. The standout exception is the reduction in premium pay.
The levels of premium pay in parts of the public service are too high. Nonetheless, many nurses, gardaí and emergency workers rely on these payments and consider them part of basic pay. Some sort of rebalancing is needed but a simple cut in premium pay is crude, to say the least.
When all is said and done, this agreement will most likely pass. Most civil and public servants will not suffer seriously as a result of its provisions. Whether Labour will suffer at the polls, only time will tell. Even the senior public servants who are the main losers of Croke Park-plus surely know that things would have been worse if Fine Gael had won those extra few seats.
This is not conjecture. They told us so before the election. Many public servants may not have appreciated at the time that “spending cuts” meant pay cuts. They do now.
DEREK MCDOWELL
is a former Labour Party TD