Permanent Problems and Temporary Fixes

There has been extensive discussion on this blog and elsewhere as to the cyclical/structural split in the Irish deficit, likely to be 14 -15% of GNP this year, and roughly the same in 2010 if the December 9 budget achieves the €4 billion adjustment to which the government is committed.

A portion of the deficit will be eliminated as the tax/GNP ratio is restored in a recovery, whenever it comes. But most commentators seem to be agreed that the structural component dominates, and will endure indefinitely at well above anything the Stability and Growth Pact, or lenders, will permit.

So permanent measures are needed to deal with this permanent component of the deficit. I don’t wish to start a debate about how big this component is – let’s pretend we all agree that it is, say, 9% of GNP. Government revenue needs to be raised, or spending reduced, by 9% of GNP over a period of years through specific, and permanent, policy actions.

This evening’s news reports suggest that a portion of the public payroll adjustment is to be achieved through a manouvre involving unpaid leave for public servants, which would achieve a cash saving in 2010. Twenty days out of c. 220, if that is the formula, would yield a big cut, perhaps most of the entire €1.3 billion being sought from this expenditure heading. But to qualify as a contribution to eliminating the 9% of GNP structural deficit, it would need to be forever. And if it is compulsory, and forever, it is a pay cut. An awkward pay cut to implement and monitor, and entailing a commensurate reduction in employee time input, to which there must be output costs.

If it is compulsory, but only for 2010, it is of no value in the context of fiscal consolidation. The government might as well place a temporary surcharge for a year on some item of tax revenue, and it all has to be done again, from scratch, the following year.

Winston Churchill remarked once:

‘It is not always enough to do our best. Sometimes we have to do what’s required.’

156 replies on “Permanent Problems and Temporary Fixes”

Great analysis Colm!

They still don’t seem to have grasped the gravity of the situation.
There is no way we are getting out of this mess unless we start to face up to the scale of our problems.

Am I right in saying that the measure will hit the low paid harder than the higher paid? That the effect of marginal rates of tax means that low paid (who probably don’t pay significant tax) will lose pretty much 5.38% in take home pay, while the higher paid will lose less than this?

I always get confused by average rate of tax and marginal rate of tax and the effects of lumpen cuts on these.

I also agree that we need some measure of permanency. In under two years we are going to have significant debt roll-over. It will have to be either paid back or rolled into new debt, probably at higher cost. We are in a golden period when debt rates are relatively low, but uncertainty about the state’s ability to pay is limiting the amount of long-term debt that can be issued.

When the short-term debt rollovers (t-bills and commercial paper amounting to some 80 bn euro, excluding NAMA) start to coincide with the long-term debt, we will be in a sticky situation…

It wouldn’t have to be forever. It would only need to be for a number of years during which the number employed in the public sector was reduced through natural wastage. The number employed in the public sector has been falling since December 2008. Between December 2008 and June 2009 it fell by 3,000. If the number employed in the public sector was reduced through natural wastage at that rate until end 2011, it would be down 18,000. Obviously, the process could be speeded up. I am sure it would be quite possible to achieve a reduction of 30,000 by end 2011 through natural wastage of 5,000 every six months instead of 3,000. Doing it this way means the government can have immediate savings equivalent to a much larger cut in the number employed in the public sector while allowing that much larger cut to be implemented on a permanent basis through natural wastage over the next couple of years. If I’m not mistaken, haven’t some states in the US (for example, California) chosen this route?

A key question (maybe theres a hr manager here) is whether PS are paid for 365 days or 260 days.
On the news it was announced as 12 days unpaid leave. on any basis that seems palpably inadequate for the magnitude required. And lets not forget that its on a gross basis as well.
We need to identify as Colm says programmes that can be cut, stopped, terminated.
For instance, there is little need for universities to be part of the PS. Some subsidy/call it what you like for the public good element is fine but there is no need for us all to be PS workers. Ditto there is no need for express bus services to be PS provided. Same argument as for uni;s – identify the market failure, deal with it. I think there was a report on this kind of issue some time earlier this year but it has fallen off the radar….
However it is clear from tonight that we are not being governed, we are at best being languidly paddled with the paddle mainly in the hands of the union reps. At least we still have a paddle but the water is getting browner and browner….

@Colm McCarthy
Public sector wages have already been cut once through the pension levy.
If we were going to cut them again we should have adopted the following sensible approach as advocated here by Kevin O’Rourke on 23 Jan 2009.

“The Government should announce that all public sector wages, which it controls, be cut by x%, where x is determined by real exchange rate considerations. It should strongly suggest that all private sector wages be cut by the same amount. Ideally we would all jump together, and so the wage cuts would come into effect simultaneously on a given date. St Brigid’s Day would seem appropriate.”

http://www.irisheconomy.ie/index.php/2009/01/23/deflationary-spirals/

If we had implemented this we could together as a nation have addressed our unemployment and budgetary deficit problems simultaneously. The government was so keen to attack the public sector that it pretended that private sector nominal wage rates were falling. This ignored both the evidence of rising mass unemployment and all economic history and theory. But it was a great weapon so they didn’t care.

This quote from Churchill describes our leaders very well:

“Anyone can see what the position is. The Government simply cannot make up their mind, or they cannot get the Prime Minister to make up his mind. So they go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all powerful to be impotent. So we go on preparing more months and years – precious, perhaps vital to the greatness of Britain – for the locusts to eat.”

I’m not wild about unpaid leave because it is not a structural measure, and is rescindable at the first sign of green shoots.

“Natural wastage” is also not a favourite of mine. All too often critical posts are “gapped” and redundent personnel retained because they cannot/will not be redeployed. Look at the folks in ESB who turned up to closed down power stations for years.

Reduction of leave entitlements; productivity assessment and improvement; compression of increment and grade pay increases while preserving starting salaries; effective sick leave management – these are structural measures.

@Brian Lucey

220 when it suits in the PS (e.g. vacation time – when stated in the contract (its not in mine!!) – does not include weekends, or more correctly assumes a 5 day working week). But I suspect 365 in this deal – the unions seem to feel that this won’t deliver the cut needed in full so 20 out of 365 would be short.

@Dreaded Estate

“This is a regressive measure those earning at the top rate will suffer a much lower rate pay cut.”

Exactly. Just as every other product of social partnership has also been regressive and why else, because the people negotiating the deal on behalf of the state are senior civil servants. Why would they negotiate for themselves and their retired colleagues a pay cut? Because YET AGAIN this unpaid leave protects the pensioners some of whom get incomes higher than their final salaries!

The absolute priority on the Union side and clearly on the government/civil service side is to preserve the salary levels of the management levels and by extension their future pensions. Everyone except them accepts that the structural deficit must be cut. They are determined to makes cuts that will preserve the gains of the Charlie McCreevy Economics.

That is why there will be no pay cut. The lower paid public servants are lowest on the agenda and of course, poor people who depend most on the public services, can take a hit in terms of the resulting slashing of services that will result from this unpaid leave.
Yet again it shows that social partnership is just members of the establishment cutting up the pie to suit themselves. It’s disgusting and does nothing for the long term financial stability of the country.

Ok, rant over. Apologies.

Unfortunately another typical Irish response to almost any issue – put off making the hard decisions and hope they will go away.

This to me is the worst possible solution. There will be no productivity improvements, no redeployment of work, no getting rid of duplication. A recession is an opportunity to critically examine what you are doing and make changes. No sign of the government doing this.

The cuts should not be spread evenly across all the public sector. Look at middle management particularly in the HSE and remove a layer. No one will notice the difference.

@Sarah Carey
“The absolute priority on the Union side and clearly on the government/civil service side is to preserve the salary levels of the management levels and by extension their future pensions. Everyone except them accepts that the structural deficit must be cut.”
Im not sure that the latter is the case. I suspect they too agree it should be cut. But not by them and not now. I also suspect that hard as I have been on the DoF they are pretty uncheered by this.
This has the makings of an unholy dogs breakfast this has.

@John The Optimist
“I am sure it would be quite possible to achieve a reduction of 30,000 by end 2011 through natural wastage of 5,000 every six months instead of 3,000.”

The problem is this will not be planned and will occur randomly. Let’s get rid of the departments and quangos that serve little purpose or are a luxury.

@Stuart
Again, there was a report done on this. Some UCD chappie was involved.
Its much much easier to do nothing (aka wastage) than something.

@ all

This is a cop out no matter what way you dress it up.

It is a blatant attempt to protect rates of pay so that pensions are not affected.

It does not address the long term problem of a bloated Public Service that because of benchmarking is overpayed based on our ever dwindling tax returns.

The solution is simple and plain hard economics should be applied to solving this, not politics.

A pay cut immediately starting at 5% for the lower paid and rising to 30% for higher paid. Consultant doctors, secretary Generals and our esteemed leader are not twice as good as their counterparts in Europe and should have their pay reduced accordingly.

And before anybody starts playing the poormouth, I have taken a 50% hit in pay and guess what you learn to adapt.

MB
Most of the public sector economists and commentators here will go “ayup” to your plan, with minor tinkering. But…we are not the government. It is a cop out but politically it buys time (to do what is unclear). For the government the only game in town now is to get through to next thursday or friday. I doubt that they have a plan , other than that, which is symptomatic of crises. Survival is the raison d’etre now.
Meanwhile, I wait with bated breath for the radical plans for PS restructuring from the government presumptive….

@ Brian

How much time have we got. The EU are not going to continue funding a country that plays politics while Rome burns.

The IMF or some direct control from Europe is not going to dither and probably won,t be as fair as me.

I don,t have to worry about the IMF directly but all you Public Sector employees do. I am like a little Iceland I took my hit hard and fast. It bloody hurt but I can now get back to re building my business.

Long road ahead but nobody died.

Spoil sport that I am, I will wait to see the details of any plan before indulging in a bit of Govmint bashing and woe is me and/or them.

If as seems likely this unpaid leave business is just to provide immediate savings until a permanent reduction in numbers can take effect and that in turn was coupled with a pay cut for those public service workers earning over say 100,000 + a medium to long term pay freeze for the rest, then I don’t see a problem with it. If it can keep the public service workers onside and at the same time help to achieve a minimum long term goal of a 20% saving in the total cost of running the services, then any thinking outside the box has to be welcomed.

Where’s the all-powerful FF propaganda machine that contributors on other threads keep banging on about? What I see on this evening’s news is a government cowering in the bunker while the unions completely control how the public message is framed. Reminiscent of the UK in the 1970s (Jack Jones and Hugh Scanlan) and that ended in tears ….

@All
What goes around comes around. The government issued a blanket guarantee for a bank that was not systemic. They admitted it themselves in (the original version anyway) of communications to the European Commission but vilified Morgan Kelly for saying it in public.

“Anglo Irish Bank is a focused business bank with a private banking arm. The Bank provides business banking, treasury and wealth/management services. It is not a universal bank and its stated strategy is niche rather than broad market. Each of its customers deals directly with a dedicated relationship manager and a product specialist.”
http://www.gavinsblog.com/category/irish-politics-and-corruption/anglo-irish/

As Morgan Kelly wrote, the government wanted to give a dig out to their developer buddies because of the alternative:
“Developers would have gone bust and commercial property would have become more or less worthless, but that is going to happen anyway, with or without Anglo Irish.” NAMA’s purpose is to avoid this terrible result by dumping the costs on the country.
http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html
The government villified the NAMA critics – while doing everything they could to maintain the culture of Irish banks.

I have a theory about why the government backed down. The trade unions may have threatened to oppose NAMA. That would have put the fear of God into our leaders. As Morgan Kelly told us in January:

“The proposed Anglo nationalisation marks a decisive watershed in Irish democracy. With it, an Irish government has coolly looked its citizens in the eye and said: “Sorry, but your priorities are not ours.””

Noel Dempsey said the banks had committed economic treason and were comparable to Cromwell. With his treatment of AIB and BOI Brian Lenihan has shown that he is perfectly happy to maintain our two major banks exactly as they were.
It’s time our rump government listened to these words from Cromwell:

“You have sat too long for any good you have been doing lately… Depart, I say; and let us have done with you. In the name of God, go!”

Address to the Rump Parliament (20 April 1653)

I am a Civil Servant.

I do appreciate that something has to be done to rescue this country from the dire mess its in.

I wouldn’t go so far to say that I fully accept the compulsory leave option, however the fact that I am taking a cut in pay (for that’s what it really is) its not entirely unpalatable due to the fact that I wont have to work for free. I am fully accepting of this provided that this is implemented in an equitable manner.

300,000 Public Servants x 20 days certainly will go a long way to reaching this €1.3 billion, but only if it is indeed the full 300,000.

I can already here the calls of “you can’t cut the school year any further…” and so the teachers will not have to take this cut. Crime is on the rise… for the security of the person and the state, we can’t impose this on the Gardai… Doctors and nurses, ditto.

Before long the magical 300,000 is being whittled down until eventually we might only have 50% of the required cut. What then. I certainly wouldn’t be able to take another cut like this, leave or no leave.

(As an aside and out of curiosity, I wonder how many jobs will be lost following this cut as a result of lost spending power and multipliers?)

I’m not sure if the following would work, or even if it has been considered (apologies for rehashing if it has).

What if the Government were to start reversing out all the Social Partnership Deals and Budgets (say those over the last 3-5) in an orderly but accelerated fashion over the next 2 years. These contributed in a large way to the financial mess we’re in at the moment. And I mean all the awards. Including the 19% pay rise that TD’s and higher Civil Servants received, the reduction in taxrates and widening of bands. It should be applied to all parties to the deals including social welfare recipients. Would it work?

Seems Laura didn’t really need her public services that much after all.

Well at least not on those days that her slightly-photogenic-in-soft-focus nurse will be off on unpaid leave.

@Cleitecloch
I have been saying for weeks that the purpose of FF’s war on public sector workers was to divert the blame for our economic collapse and distract attention from the €40Bn we will lose through NAMA and the €54Bn we will borrow (on top of the 15% of GNP deficit) to get a “trickle” of extra lending. FF’s strategy has succeeded brilliantly. The unions will now not oppose cuts in services and will agree to pay moderation for the next two years. Most importantly for FF the way forward for NAMA is now clear.

Public sector workers vote in large numbers. FF have already cut their pay once. Without a hypothetical national agreement to cut private and public wages were they really going to accept a second paycut in a year aimed only at them? This huge, months long, national civil war was probably over say net €300m. We are borrowing 180 times that through NAMA next year, 247 times when you add the deficit.

It’s WIN, WIN for FF AND the Unions. NAMA supporters should be singing in the streets.

We’ve enough economists around here to argue about whether the following is true: the choice of unions for how to implement the payroll cut shows that for the representative public sector worker, the constraint to work full time is more binding than the shadow value of additional income. Because if the payroll cut was implemented as a cut in the per unit (hour-day-week) wage, the income loss could be offset at the margin by working more units. But that’s not the choice the unions want to have: they want to keep the per unit wage constant and reduce the number of units.

20 days unpaid leave should also cause a corresponding loss of a little under 2 days holidays (you get holidays per days worked)… I wonder will it ?

Colm is right in that this is some sort of kick to touch…. and needs a longer term answer

Natural wastage is only a messy, partial solution… and even at that it ignores the issue

Efficiency gains will require changes in work configuration:
– way less demarcation “rights”
– way more redeployment
– increased work hours on standard time
– etc

Waste reduction projects will take time… and investment. The public sector won’t be able to manage the change on their own. Thus there _should_ be a mini-boom for all sorts of Business Process Improvement consultants (Lean, Six Sigma etc)

So triple bravery required after the kick to touch
1) Take on the PS Unions “owning” the worker & their duty demarcation
2) Pay expensive consultants for risky projects
3) Does the emperor have clothes: will PS managers be able to dynamically allocate staff… focus on prudential priorities rather than procedural norms ?

If the government has a plan… 2010 should see a radical transformation of Public Service bodies…. efficiency gains with minimal service losses… and some redundancies atop natural wastage ?

Adding to my above comment… the only scenario under which I see this “kick to touch” as being right … is if the government has suddenly found the courage to do what governments here never have

It reminds me of this:

“Above all, if you wish to describe a proposal in a way that guarantees that a Minister will reject it, describe it as courageous.”
– Sir Humphrey Appleby

The WWW supplied many claims to increased productivity.

These have yet to be made in Ireland?

Work from home.
Put classes on line and reduce teacher numbers.
Interview with doctors on line.

Abolish social welfare dept but pay tax credit in cash or bank.
Nurse practitioners: Half doctor privileges and can prescribe many medications.

Abolish army. Navy. Air force.

Legalize drugs and add taxes to a safe supply.

Why just the usual public/private arguments? Novelty? Not on this site.

Roll on the IMF, i’m actually looking forward to the good old public service getting there wages and pensions slashed at this stage, these people make me sick to the stomach with there greed.

Ken Rogoff asserts that there is a high probability of sovereign defaults over the next few years. Remember this shafting of Lenihan by Cowen as a determined step down that road.

It was a 365 day/yr when I exited the PS earlier this year, minimising the value of any outstanding leave.

@simpleton
how are the bond markets taking what the Indo calls “Brian Cowen last night caved in dramatically to public-sector workers, agreeing a deal to protect their pay scales, pensions and permanent job status.”
The Ten year seems, from what i can see, to be more or less unchanged.

@ Brian

not much movement this morning so far. Imagine the markets will wait for next week and all the full details before making their call on it.

@Brian

Eoin is right. No reaction.

Markets are funny things. They sometimes have the audacity to disagree with us. I think the point is one of timing: Rogoff’s arguments may well be right, but the default risk he explicitly talks about is still a couple of years away at least. I may think we have taken a step along that road but what do i know?

@ Simpleton/Brian

there was a Goldmans piece out on Monday saying they had met with the DoF last week and were convinced that the proposals to cut spending by 4bn were “credible”, believing they would be “implemented as planned”, but not sure whether today’s new will affect that view.

I think that there has been an awful lot of nonsense written here which is, quite frankly is ideologically driven, public sector bashing.
I think that it is time to spell out exactly what public services you dont want provided and stop the dissimiliation. At least then, the debate can be honest.

Some people will not be happy untill public servants are put to the stock and publicly humiliated for a crisis caused by corrupt bankers and neo-liberal political thinking.

Additionally, for those critics of social partnership-the unions are not the only social partners! Secondly, would public policy and democracy be really better served if government was by way of policy created in return for a fee to people like Peter Bacon and Colm McCarthy. I shudder at the thoought!

@Eoin,

Define credible. On best estimates this measure will save gross 800m. This is shy of the target 1.3billion. How will the difference be made up? My guess is on the taxation side of the budget. A 60% marginal rate on incomes above 100k ought to do it or a 2-3% temporary CT levy. Cuts in the PCP might help-but that is sacking private sector workers

What is the govt going to do in next 2 year -another 10 days off each year.

There are shades of CJH famous 1979 “we are living beyond our means” speech about this.

Does anyone agree that the latest twist in this saga has taken us even further into Alice-in-Wonderland territory? Or even that we have now entered a completely new, sinister, phase? I’ve observed mistakes made in many countries over many years. More often than not, these mistakes are only ever spotted by Harry Hindsight. The rare analyst who spots them in advance is usually a lonely figure.
Today, I don’t think that I have ever witnessed susch a collective gasp of disbelief by so many analysts and commentators. Everyone inside the social partnership bubble thinks all this makes perfect sense. Everyone outside is utterly convinced we have gone completely mad.

@ Vincent

I think its more Govt bashing than Public Sector that happens on this site.

As for pointing out what services we could do without why should we do without any.

A proper fairly proportioned pay cut would protect jobs and services providing the workers in the Public Sector were willing to work harder and cleverer for less. Would they be prepared to do this?

As for the problem being caused by the Banks, I do not think you would get anybody on this site that does not agree.

But knowing who is to blame does not solve our problems.

As for the unions not being the only social partner, you are right but they are the only ones willing to bring the country to a stanstill if they do not get their way.

@ simpleton

The lunatics have very definitely taken over the assylum.

How long before the IMF take over the lunatics?

@M.B
“As for the problem being caused by the Banks, I do not think you would get anybody on this site that does not agree.”
I disagree 🙂

The problem was caused for both the banks and the public finances by the property bubble – largely a political creation (in the form of permission/encouragement being creation).

The public finance problem was exacerbated by greed and ignorance (have it, spend it school, PS paid the same as plumbers, buying off conflict – all political decisions; the state is, after all, the employer in this case).

That the government is prioritising fixing the banking system at the cost of a slower adjustment in fixing the fiscal problem is a separate issue.

@M.B
Advice to any young Irish person currently working overseas who wants to think about coming home in the next few years: join the IMF

@ simpleton

It seems to me to be absolute fantasy.

The “days” will be taken over the next three to four years. I think I have that right.

So are salaries docked this year for a credit of future days?

Eh?

“The Mock Turtle

We called him Tortoise because he taught us.

The Mock Turtle

Reeling and Writhing, of course, to begin with, and then the different branches of arithmetic — Ambition, Distraction, Uglification, and Derision.”

@ Simpleton

we’re now more or less two years into the Irish recession, and despite all the constant flow of bad news and shock revelations, i can only describe the reaction in my office this morning as a combination of severe shock, profound disappointment, and outright anger. The phrase “a shower of useless *****” may have been uttered independently by different people on multiple occasions.

@ Jl

ill wait til the full details are released, but todays events are obviously disappointing in the extreme. I can only hope that there is some major adjustment to the non-base-salary pay elements like the allowances, overrtime, automatic pay increases etc etc to make up the shortfall. But if that was to happen (and seems to be to at least some extent) then the rank and file civil servants who work 9-5 have completely shafted the frontline nurses/gardai/firement etc. Even the unions are starting to eat their own.

@ Vincent

no one on the pro-keep-public-sector-spend-as-is side has been able to answer for me the following – what is the justification behind substituting one-off boom-cycle transaction taxes with recession-cycle personal income taxes? Can no one on your side of the column realise that the tax receipts which were used to justify public sector spending increases were a one off never to be repeated? Public sector spending simply must come down.

@Vincent

Following on from Eoin’s comments. One of the key points that has rarely been made goes something like this: When a public sector worker asserts, that they are hard working, well qualified, committed, driven by vocation and not a banker (so not my fault), all of this is true. Trouble is, none of this passes the ‘so what’ test.
Eoin’s point is the only one that counts. The money isn’t there. Never was, never will be. End of.

Hmmm, Cowen speaking in the Dail at the moment. Slightly more hardline than the news this morning would indicate, along the lines of “nothings done yet”. Could all be standard politicing of course, but also maybe not…

@ Vincent Byrne

Additionally, for those critics of social partnership-the unions are not the only social partners! Secondly, would public policy and democracy be really better served if government was by way of policy created in return for a fee to people like Peter Bacon and Colm McCarthy. I shudder at the thoought!

Over the past decade, governments have only seriously responded to collective power and there are many vested interests besides trade unions.

I have criticised IBEC for example for its silence on the private sector vested interests and many of them depend on wasteful public spending.

http://www.finfacts.ie/irishfinancenews/article_1018313.shtml

So there are many sacred cows to be tackled but without inspired political leadership which is required to bring change to the system, public servants for example will feel that they are being victimised.

People who have not been exposed to the fear of losing or job or running out of money in the modern economy, will never appreciate what they have got.

The Government is unwilling to admit that the first benchmarking review was a sham; the Labour Party is inclined to take a pro-union view and Fine Gael is reluctant to propose radical reform that would anger a lot of vested interests.

The Government doesn’t have even a basic plan for public service reform never mind anything else.

In April 2008 former taoiseach Bertie Ahern launched the OECD report on public service and said that an estimated 800 State agencies, commonly known as quangos, was “too many by half.”

Cowen set up a taskforce to review the proposals and it is apparently on a respirator.

The only change in the realm of the quangos was to cut the budget of the Equality Authority by 43%, which was an act of political vengeance by the Department of Justice. Nothing has changed for the other 799 and thousands of political appointees remain on handy earners but with no effective responsibility.

The question now is what level of public spending the economy can afford and what structure/level of tax is consistent with the positive development of the economy.

As for democracy, accountability and leadership, they would surely be good things.

When a system produces ministers who are unfit for purpose, is is not surprising that the private consultancy industry has become a branch of government?

http://www.finfacts.ie/irishfinancenews/article_1018589.shtml

@simpleton

So be honest then and tell us what public services you wish to do without.
ye have already secured one pay cut this year-nobody believes that another will satisfy ye-this is the old small government argument that got us here in the first place with unregulated financial markets.
Lets have some honesty about the debate.
If people want Democracy to be replaced by the dictat of people like Bacon and McCarthy let them be honest about that too.

@Eoin

Have you read Karl Whelan’s paper on the Policy Lessons from Ireland’s Latest Depression?

I’m not an economist but it seems to me from that paper that one-off boom-cycle transaction taxes were used to lower personal income taxes (as a way of buying elections) (see Figure 9 in the paper). But I take it reversing this is somehow impossible in your view.

So it goes like this:

Increases in PS salaries during the boom? Reverse them. We can’t afford them.
Decreases in personal taxation rates during the boom? Those are part of the natural order of things.

Do I have this right?

Put in this way, it becomes clear that this is, quite simply, a political question, to wit: who pays? Nobody here has made a credible case for why the public sector and only the public sector should pay. For that is what’s being asked.

Figures 11, 12 and 13 of Karl’s paper also paint a vastly different picture from the one painted by you and others on this blog as well as the entirety of the national media about public sector pay and expenditure relative to other nations.

Cue the Bacchae: “But it’s the GNP!!!”

Forgive me but the assurance of a few, not universally shared, that the GNP is the appropriate denominator is not something tens of thousands (or indeed the whole nation) should be hanging their entire livelihoods on.

@Vincent
Are you prepared, with precision, to say where the money is to come from if we don’t cut? Are you prepared to even consider the logical possibility that the taxable capacity of this economy is not within a country mile of its current spending capacity?
The unpleasant logic of spending bubble revenues is that everyone who was hired during that time – and therefore the services they provide – get fired. Or, pay gets cut. Or some combination of the two.
This is not about having a go at the public sector. It’s about simple, very simple, arithmetic. If rather unpleasant arithmetic.

@simpleton

“It’s about simple, very simple, arithmetic. If rather unpleasant arithmetic.”

More fool me. I thought it was about economics. Damn those macro boys confusing me.

@simpleton

Are you prepared to even consider the logical possibility that the taxable capacity of this economy is not within a country mile of its current spending capacity?

Are you sure about the taxable capacity of the country?

From OECD in Figures 2009:

Total tax receipts as a percentage of GDP (2006):

Denmark 49.1
Sweden 49.1
Belgium 44.5
France 44.2
Norway 43.9
Finland 43.5
Italy 42.1
Austria 41.7
Iceland 41.5
Netherlands 39.3
United Kingdom 37.1
Hungary 37.1
Czech Republic 36.9
New Zealand 36.7
Spain 36.6
Luxembourg 35.9
Portugal 35.7
Germany 35.6
Poland 33.5
Canada 33.3
Ireland 31.9
Greece 31.3
Australia 30.6
Slovak Republic 29.8
Switzerland 29.6
United States 28.0
Japan 27.9
Korea 26.8
Turkey 24.5
Mexico 20.6
EU average 39.8
OECD average 35.9

Disposable Income of Average Single Worker as % of Gross Pay (2006):

Mexico 95.0
Korea 89.4
Ireland 85.3
Japan 80.6
Spain 79.5
New Zealand 78.9
Switzerland 78.3
Slovak Republic 77.6
Czech Republic 77.6
Portugal 77.5
Canada 76.1
Australia 76.0
United States 75.6
Iceland 74.6
Greece 74.4
Luxembourg 73.4
United Kingdom 73.1
Italy 71.5
France 71.0
Norway 70.9
Turkey 69.6
Finland 69.4
Sweden 69.1
Poland 67.8
Austria 66.8
Hungary 64.7
Netherlands 63.7
Denmark 59.1
Belgium 58.1
Germany 56.3
EU average 69.9
OECD average 73.4

Disposable Income of Average Married Worker with 2 Children as % of Gross Pay (2006):

Ireland 108.6
Luxembourg 100.5
Czech Republic 99.8
New Zealand 96.9
Slovak Republic 96.3
Mexico 95.0
Iceland 93.1
Korea 90.9
Switzerland 90.9
Portugal 88.9
United States 88.6
Australia 87.7
Canada 87.2
Spain 86.7
Japan 86.4
Italy 84.3
France 82.9
Austria 80.9
United Kingdom 79.6
Norway 79.3
Hungary 79.2
Belgium 77.9
Sweden 77.2
Finland 76.9
Germany 75.4
Greece 72.8
Netherlands 71.7
Denmark 70.9
Poland 69.6
Turkey 69.6
EU average 82.4
OECD average 84.9

Here are some suggestions:

• Wealth tax like the French ISF.
• Increase in the required time spent abroad to be considered non-resident for tax purposes. Of course we could also go the full nine yards and follow the US in taxing the worldwide income of all citizens.
• Property tax based on valuation of the home.

@Ernie Ball
You miss the major implication of the personal tax rates. Taxes on the average lower paid must increase. Here’s some suggestions:
– remove the PAYE tax credit
– Halve personal allowances
– lower the lower and higer rate bands

The problem is not just the rich not paying enough tax, it is everyone paying enough tax.

Add to this, too many credits, particularly property related credits, so remove all mortgage interest relief, remove rent relief, remove tax breaks for property, remove investor interest relief.

You can probably add the horses to the reliefs that should be removed…

@Ernie Ball
I think that taxes should and will be increased in the future.
But I just don’t think it is possible to increase them enough to close the deficit.
What taxes would you increase, by how much and how much revenue would they generate?

It is also worth noting that total state spending in Ireland is currently 51.3% of GNP. Which would put Ireland at the very top of the lists you have given.

@Ernie
I asked about the taxable capacity of this economy, not the bubble one of 2006. What do you think spending as a % of GDP will be in 2010?

@yoganmahew
Scrap NAMA and the blanket guarantee.
Guarantee deposits only.
Nationalise BOI do deal with AIB bondholders.
Give others to bondholders.

Remove all tax breaks, crack down and jail tax evaders.
Introduce property taxes, carbon taxes & water rates.
Introduce higher tax rate on rich.
Extra revenue €2Bn.

Cut €4Bn in spending as per McCarthy.

Cut public and private sector wages and then freeze public sector wages until they come into line with other Euro area countries. Independent commission to judge when.

Result:
Borrow €60Bn less next year. Official deficit down €6Bn.
Country now ahead of the curve on budget deficit. Unemployment falling.
Perpetual happiness.

@ Ernie

the basic line coming from you is that the public sector has to be paid, in full, regardless of the suitability of where or how the taxes are levied. Previously it was from transaction taxes, now you want it from personal and corporate incomes taxes, and in the future you will no doubt believe it should be from carbon taxes, property taxes or whatever else is highly taxable at the time. The PS is just like the mob in your eyes, remember in Goodfellas, “Gimme my money…”?

This would of course be somewhat justifiable if the PS unions hadn’t actually been among the major cheerleaders and eggers-on for all the personal income tax cuts that you now complain about. In the same way that very few people complained about rising property prices, obviously very few people complained about income tax cuts. Well now its time for us all to pay the piper. We’ve already had income tax hikes, to 54% at the upper marginal level, and yet we haven’t seen any PS job or pay cuts outside of the pension levy which you should have been previously paying anyway.

@ Vincent

“what services would i cut”? Eh, none. A pay cut wouldn’t require any service cuts. Unpaid leave, however, would, and this appears to be the favoured route of the PS unions. So next time the unions tell us they’re “fighting to retain services”, well we’ll know that they are really just full of **** won’t we?

From a purely economic standpoint there are many measures that could be taken that would solve the problem in a very short period.
1 Halve all public servants’ wages.
2 Abolish all leave in the public service – except for Christmas Day.
3 Abolish public service pensions altogether.
4 Public servants who are too ill or too old to work could be put to sleep.
5 Public servants should not be allowed to have more than two children.
6 Abolish child benefit for public servants.
7 Children of public servants should be sent to work on their 10th birthday.
If these measures fail to make the required impact more Draconian could be taken to deal with the public service. If these measures do work then take the Draconian measures anyway.

The Dubai situation could be heralding the beginning of serious trouble for some EU countries like Ireland. Our CDS rates are rising rapidly just as they are for Latvia.
Competition for capital is increasing and our economic situation is looking less attractive to international financiers by the day.
It’s time for Mr. Cowen and Mr. Lenihan to rethink where they are leading us.

The current situation was flagged by Charlie McCreevy at a talk he gave to the annual dinner of the Institute of Taxation back in February this year.
He said the Government needed to produce a detailed plan of economic policy for the next several years; as such a plan was needed to help maintain international confidence in Ireland.

He said it was also essential that taxes on capital and work remained competitive.
“That will require a detailed and credible plan for reducing our indebtedness by laying out how, over a three- to four-year period, we intend to close the formidable gap between government income and spending,” he said.

He said the capital available for governments to borrow had never been so scarce.
“So it stands to reason that governments that bring forward the best-laid, the most detailed, and most credible plans for getting their budgets back to balance will be the governments that attract the capital at a sensible price; others will pay a hefty premium if, indeed, the capital is available at all.

Prophetic words indeed.

But his advice was not taken and very little has been done in this regard.
All government time and resources have been devoted to the NAMA project and the folly of that strategy is now beginning to unfold.

Gay Huey Evans, Barclay’s vice chairman of investment banking and leading banker for state funds, has said that sovereign wealth funds will be going for agriculture and other natural resource markets rather than financials in 2010 having had their fingers burnt in their investments in Western banks such as Citigroup and UBS during the early phase of the global crisis.
In 2010 they will be allocating a major part of a $94 billion investment programme in that sector.

So far this year agriculture, and energy especially, have drawn 61 per cent of total spend – or around $57 billion, according to Mr. Evans.
In 2008 the natural resources’ share was only eight per cent.

Sovereign funds have $3 trillion to invest.

The reason for this change in strategy is that many of these sovereign funds have come under pressure at home for losing billions of dollars on U.S. and EU banks.
Singapore fund Temasek lost an estimated $4 billion on Barclay’s and Merrill Lynch, while Kuwait lost on its Merrill Lynch and Citigroup bets.

China’s insatiable appetite for natural resources has spurred its sovereign funds to engage in multi-billion dollar deals in countries such as Australia recently. As a result the Western Australian economy, located around Perth, is booming and Clonmel based KENTZ Group recently won a $150 million contract in the region.

All throughout the past year Mr. Cowen you have repeatedly criticised people for being negative, will it ever occur to you that there are sound reasons for this sustained criticism.
You need to change your policies, there is nothing wrong with being wrong, the damage is only done when you don’t learn from your mistakes.

One simple way to make this temporary measure permanent and to test the waters for transformation of the public services is to reduce the holiday entitlement to the statutory minimum where possible. Then take it so the days left over are unpaid….

I seem to remember that certain public servants enjoy an extra days grace here and there because the pony and trap would take a full day to drop them back to Dublin. Given that technology has moved on, maybe this could be the first step of transformation… Should be non contentious 🙂

So they are forced to take these days off as usual but not get paid for them… And then going forward that practice can continue or they can turn up for work if they want to get paid… thats a permanent change, whats proposed isnt.

Its very simple to impose this, people take holiday leave and are entitled to under legislation, But for this temporary fix they could agree to forgo their salary for that period to eliminate operational difficulties. Otherwise, its all further strokes as people fight to be deemed essential or whatever.

The idea that there should be any discussion on how to organise the time off (some extra holidays for teachers) is a joke… The suggestion is being implemented as a way to appease the workers so some common sense is needed, a little bit of flexibility is needed.

Ive nothing against public servants; and admire how the unions have ran rings around the Fat Controller… Just like AIB have been doing etc.

Sorry Cearbhall, but do you have a date for when a government cheque will bounce?

Thats all the boys running the country understand.

@ COLM MCCARTHY
To be honest I think you were used by the government. There was huge public anger waiting to be voiced at the country’s budgetary and banking collapse. FF needed to prepare the country for cutbacks but they knew that when they opened their mouths there would be a storm of abuse. So they let you take all the outrage instead. It reminds me of Blackadder: they sent you out on Operation Certain Death. I remember hearing a news bulletin just before your report came out saying the government had adopted a strategy of letting you make the case for the report. They certainly did that. They acted like you were addressing a fiscal crisis for which they had no responsibility in a far away country. Then, when you had taken all the abuse, they distanced themselves from it. Now they seem to have scrapped most of it anyway.

We will have to wait for a credible government to come into office. They will adopt many more of your proposals.

@ Simpleton & Eoin

With regard to vincent and ernie you are wasting your time.

There is no in tray in the brain of a public sector employee when it comes to their terms of employment just an out tray.

It,s the way they are programmed. In their minds pay is a bit like upwardly adjusted commercial rents, it can only go in one direction but I believe they even made that illegal yesterday.

Now get back to work, Vincent and Ernie need to be paid.

@Eoin

The basic line coming from me is certainly not that the public sector has to be paid, in full, regardless of the suitability of where and how the taxes are levied. I remind you of something that the media and people on this blog are often quick to forget: the public sector has already taken a 7.5% pay cut this year. How often do I have to read in the media about the alleged ‘public sector premium’ from those using figures that don’t take into account this pay cut? Sentences like the following don’t really help your case: ‘yet we haven’t seen any PS job or pay cuts outside of the pension levy which you should have been previously paying anyway’. I see. So no pay cuts outside of that minor little 7.5% that Brian Lenihan bragged to his European counterparts about? Those cuts aren’t real, are they? But a couple of percentage points in tax increases on the marginal rate of the very rich? Those you’ll count. Those are real. Please.

And, again, it bears pointing out since a large portion of the population seems to believe something different: public sector workers pay taxes just like everyone else. And this is a key difference between the PS and the private sector sides of this debate. The private sector and their henchman, Brian Lenihan, are insisting that the PS, a minority, pay for everything while they pay nothing. The argument goes that those in private sector jobs have somehow paid by proxy because job losses have come, in the main, from the private sector. The PS, by contrast, has shown a willingness to pay as long as the burden is shared by everyone. It makes little difference to a PS worker if their take-home drops by 10% as a result of tax increases or if it drops by 10% as a result of increases to the pension levy. It comes to the same thing. The only difference is that a tax increase applies to everyone where the pension levy singles out the PS. In other words, the vested interests here are in the private sector.

I remember the successive partnership agreements somewhat differently than you do. I don’t remember the PS unions arguing for tax cuts. Rather, they were repeatedly told that wage increases matching either inflation or GDP growth were not on the cards and the tax cuts were a way of buying them off and, not incidentally, also satisfying IBEC and all manner of Reaganite right-wingers. The entirety of the private sector was happy enough to go along.

Finally, there have been plenty of PS job cuts in the form of fixed-term contracts not renewed when there was a reasonable expectation that they would be. But I guess those people don’t count.

@simpleton
The figures about take-home pay as a percentage of gross have not likely changed much since 2006 so it doesn’t matter that the figures date from the bubble era. The point stands: we are undertaxed.

@Ernie
Yes we are undertaxed. But it’s all in the 30000-70000 range. Do the maths. List the strikes you called when your taxes were cut to unsustainably low levels.

@MB
“With regard to vincent and ernie you are wasting your time.

There is no in tray in the brain of a public sector employee when it comes to their terms of employment just an out tray.”

You have evidence that I am a Public Service employee? Then again evidence based argument seems to have gone out the window for many of you who hide behind de facto anonymous blog names.

@Ernie & Vincent
I take it you are insiders (i.e PS) or if not have strong sympathies with their plight.

I’ve brought this up before but it seems to get ignored.
1. Why do all PS workers have to bear the brunt of the cuts evenly.
2. This deal seems to be more favourable to higher paid PS as they pay higher tax rates. Surely the lower level PS should scream this deal is unfair to them.
3. I don’t think any of us are arguing those at the bottom of the pay scales are overpaid or should have their pay cut. Some do believe that higher up levels are seriously overpaid (including university economists!) and should see big pay cuts.
4. Also you (Ernie) yourself agreed there is a layer (administration) in the PS that could go due to duplication etc. Let’s do it.
5. Finally Vincent, yes I think there are PS that we can do without or cannot afford at this time. Colm McCarthy identified a few that made sense.

If you guys are close to the PS you know where the bodies are hidden. Let’s use this recession to really reform the PS.

By the way I fully expect to pay more tax in the future whether property, wealth or income but it will be pretty disappointing if it goes towards an unreformed PS.

@Stuart

“Let’s use this recession to really reform the PS.”

I couldnt agree more, however, is any change management programme going to be successful that is based on unilateral withdrawal from agreements, imposed pay cuts, bans on promotion and advancement for an unidentified period and an unprecedented and orchestrated campaign of vitriol against the workforce? (Many of those against whom the vitriol is directed are legally prohibited from defending themselves if that would be deemed to be political comment!)Even Michael O’ Leary would not adopt this approach.

@Stuart

“I don’t think any of us are arguing those at the bottom of the pay scales are overpaid or should have their pay cut. Some do believe that higher up levels are seriously overpaid (including university economists!) and should see big pay cuts.”

In fact, all econometric studies done have found that the public sector premium is highest at the bottom of the scale – going back to the Boyle et al. study. Until the most recent ESRI one, all studies have found negative premia for high paid public sector workers.

As an aside, Goldmans have just issued their Top 10 trade recommendations of 2010. Among them….

Long Credit Protection on Spain, Short on Ireland, at 70.20bp, Target 20bp. After a decade of strong growth, Spain and Ireland have hit the same wall: a real estate ‘boom-bust’ that is putting public finances in the two countries under extreme duress. With greater labour market flexibility, Ireland looks better placed than Spain to outgrow its debt problems. The Irish have shown stronger resolve than the Spanish to deliver structural spending cuts. And the ‘bad bank’ solution chosen by the Irish (NAMA) represents a speedier and cleaner way to clean up financial institutions than the largely ‘behind-the-scenes’ approach taken by the Bank of Spain. We think there is more scope for the Ireland-Spain 5-yr CDs differential to compress, consistent with our valuation framework for EMU bond spreads.

.
Tax take €1.4 billion behind target.

Figures from the Department of Finance show that the Exchequer deficit for the first 11 months of this year was just over €22 billion, compared with just under €7.9 billion at the same stage last year.

Total tax receipts for the period were just under €30.8 billion, almost €1.36 billion behind the target set out at the time of the April Budget. The Government has already lowered its tax take forecast for the year to around €32 billion.

Total tax receipts are 20.8% below the figure for the same period last year, compared with a 17% drop in the first ten months.

http://www.finance.gov.ie/documents/exchequerstatements/2009/Analtaxnov09.pdf

@Aedin
“all studies have found negative premia for high paid public sector workers.”

I’ll let Ernie and Vincent argue the one about the low paid civil servants. Those under €30k are hardly highly paid.

This is the kind of stuff that I cannot dispute without a few facts. I do get more than a little suspicious with these studies – value placed on qualifications, seniority, experience for example

How many PS are paid over €200k per annum and what do they do to deserve that. That’s the first question I would ask. In a corporate setting the big businesses cut the middle layer of management and leave front line alone as best they can except when they decide to shut entire operations. There are big savings in middle management – not just salary but pensions, office space, admin costs etc etc.

@Cearbhall
CT is a big factor in the increasing drop in November on last year.

To end Nov 09 CT take was €3.8b, to end Nov 08 it was €5b. Down 24.7%

To end Oct 09 the figures were €2.8b in 09 versus €2.5b in 2008.

So in November €1b was collected in CT versus €2.5b last year in the month. The bringing forward of CT payments for large businesses is now evened out and you can safely say CT take for the year will be down around 25% reflecting declining corporate profitability. There is probably a mismatch here between FDI companies and Irish corporations.

I understand that where unpaid leave cannot be taken due to work pressure that the worker will work unpaid but will have a claim to take the leave as paid leave at a later date, i.e. by not taking the leave the worker earns a contractual entitlement. This would make the measure even more temporary and unconvincing.

In three years time many staff could have an contractual entitlement to 6 weeks unpaid leave which cannot be honoured. If they are made redundant then surely they will have a claim to pay for the weeks they worked in respect of which they were entitled to paid leave in lieu of having worked for no pay.

One wonders are we successfully fooling ourselves because we certainly aren’t fooling anyone else.

Regarding the tax take, and without wishing to be in any way boastful, my forecast, posted here on 2nd October, is looking pretty good. This is what I wrote then. The context was that some posters, including one particularly brilliant and very distinguished academic economist at TCD, were claiming that the tax take in 2009 would amount to less than €30.0bn. I challenged this view in my 2nd October post as follows (at the time, my post caused some bitterness as a number of posters thought that I was being personal – I apologised at the time for giving that impression and assured them that I was not, so I have no wish to re-open that controversy).

This is what I wrote on 2nd October:

“The slippage up to end-July was €575m (€10,179m collected against €10,754m projected). Now, today’s (September) figures show that the slippage up to end-September was €965m (€23,706 collected against €24,671). So, it is slipping by an additional €200m a month. If we project that to year-end, it brings the slippage for the whole of 2009 to about €1,550m, which implies a tax take in 2009 of €32.9bn.”

According to the figures published today, the slippage in the tax take up to end-November was €1,359, which is just €394 million more than the end-September slippage (or €197 a month, compared with the €200 million a month I predicted). If there is a similar slippage in December, the tax take in 2009 will be €32,844, compared with the €32,900 I predicted on 2nd October. Not bad!

Of course, what matters is not the tax take in isolation, but the deficit. Although the tax take so far is €1,359 less than what Brian Lenihan forecast in his April budget, spending is also less than what he forecast in his April budget. The slippage in relation to spending is €692 million. So, that leaves the deficit up to end-November at just €667 greater than what was forecast in April. Add on a little bit for December, and you’re talking about a deficit in 2009 approximately 0.5% of GDP higher than was forecast in the April budget. While this is no doubt deplorable, most other countries have seen far greater slippage since April in their projected deficits in 2009.

As my memory is going with age, I can’t remember exactly what Brian Lenihan forecast in his April budget for the deficit in 2009 as a percentage of GDP. I think it was 10.7% (if not, ignore the rest of this paragraph). He then revised this up to 12% in October. But, it now looks as though his original figure might have been closer. If the forecast was 10.7% of GDP in April, and the slippage since then is 0.5% of GDP, that leaves it at approximately 11.2% of GDP in 2009 (barring some catastrophe in the December figures, which is unlikely since December only accounts for a small percentage of the annual tax take).

@capsubsidy

The figures from Ronan Lyons that you link to (Public spending 55% of GNP in 2009!) are, shall we say, controversial and certainly not to be taken as fact. Indeed, as he himself admits, he’s comparing apples and oranges since Ireland is the only country with a 2009 figure on his chart.

And as Michael Taft points out, if the ratio of expenditure to GNP is a worry, cutting public pay is hardly likely to help much.

@ Cearbhaill

Do your figure include the refunding on tax paid in 2008. I, like most/all small businesses pay preliminary tax a year in advance based on the previous years figures.

This year I will receive 80% of that tax as a rebate. I would assume that would be the case for most businesses.

@Ernie

would cutting the pay of relatively highly paid and secure public servants across the spectrum and using the proceeds to boost the capital budget and thus re-employ construction workers be a good idea?

@All

You may have missed my earlier question: Would the following work?

What if the Government were to start reversing out all the Social Partnership Deals and Budgets (say those over the last 3-5) in an orderly but accelerated fashion over the next 2 years. These contributed in a large way to the financial mess we’re in at the moment. And I mean all the awards. Including the 19% pay rise that TD’s and higher Civil Servants received, the reduction in taxrates and widening of bands. It should be applied to all parties to the deals including social welfare recipients. Would it work?

@all
Interesting to hear Joe Duffy claiming that the private sector (implication as a whole) had taken pay cuts in tone that implied that only they had done so.

Error 1: The public sector all took a pay cut.
Error 2: Private sector wages are not falling. Outside of the bubble occupations/industries wages are not falling. There have been huge redundancies but that is not the same thing.

We need to cut wages in the public and private sectors. If we want to avoid high unemployment from economic shocks then as small members of a common currency area we are going to have accept that this is the price. Not just this time but forever.

@Ernie

Hardly apples and oranges, just 2009 apples and 2008 apples.

Regardless, the figures you present, are not inline with the Eurostat (unless you think those controversial) figures. In 2008 along spending/GDP was up to 42% already. Factoring in the increase in government spending of 2.7% and drop in GDP of 9% this figure moves to 47.2% And while the GNP/GDP spread may not be solvable by a public sector cut, it’s still a factor to consider.

@E34bn

Poppycock No. 1 “have been saying for weeks that the purpose of FF’s war on public sector workers….”
There is no war on public sector workers. There is a war on public sector finances.

Poppycock no. 2 : “Private sector wages are not falling”

Redundancy is a 100% pay cut

When are you going to get that?

@Sarah Carey

The question of whether private sector wages are falling or not is salient because we are facing a political question: who will pay? Those who have not been made redundant in the private sector are being asked to contribute what, exactly? Is their sacrifice one that is made by proxy so that others sacrifice on their behalf? In other words the oft-repeated inanity “redundancy is a 100% pay cut” is nothing but a non-sequitur.

The media (of which you are a member, I believe) most certainly have declared a war on the public sector. You’d have to be blind not to see it. Try picking up a copy of the Sunday Independent any given week and then tell me that the public sector are not being demonised. It’s just not a credible view.

Now, the government and the media and employers have been embarked for the last year on a campaign to pin all of the blame and all of the burden on the public sector because it suits them. Ask yourself what the exact interest of IBEC is in the question of public sector pay levels? You think they’ve taken some sort of principled stance in the national interest? No, they have two interests: they want downward pressure on wages and they don’t want the corporate tax rate to be increased at all. They want to make no contribution whatsoever. The same is true of those still employed in the private sector who, by and large, haven’t had pay cuts. They want someone else to pay. And there’s a convenient scapegoat served up by the media propaganda in the public sector.

@capsubsidy

Let’s say I accept your figures. How much of the increase from 2008 to 2009 is due to the €4 billion given to AIB?

@Ernie Ball

I work in the public sector. I could take a pay cut and I think most of my colleagues could too. I think we are paid too much for the work that we do. We got it good in the boom times and now it’s time to ratchet down the excesses. I just wish the govt would get on with it so we can give a dig out to those who really need it. I’m not saying all public sector workers have it cosy, but I would say there are quite a few, if I were asked for a percentage I couldn’t give you one, but I think it would be significant. I have seen how bureaucracy works and the customer (i.e. the taxpayer) gets forgotten. I think the pension levy was justified to pay for the pensions we get, why should the public sector subsidise the public sector pension bill so much? Anyway, those are just the thoughts of one individual. And for these reasons and more I went to work on the day of the national strike and felt fortunate to have a job to go.

@Sarah Carey
There is a war on public sector pay. What has been bigger news for the last few months: The €54Bn borrowing through NAMA or the €1.3Bn borrowing in public sector pay? We will get back more of the €1.3 Bn in income tax and vat than we will of the €54Bn borrowed through NAMA. But you would never know from the coverage.

We imposed a salary cap of €500,000 on bank executives pay. I thought it meant all bank executives. It turned out it was only the top guy, who in AIB and BOI is an insider, and in BOI on top of the salary he is getting €120k extra of a pension. Remember that when someone tells you that public sector pay wasn’t cut cause it was just a pension levy. Why was Boucher’s pension contribution not deducted from his salary but added to it then? One rule for us another for them.

The main weapon in this war was the claim that private sector wages were falling. Wage costs were falling through redundancies but wage RATES were not. The survey in your own paper showed 70% of workers – so the overwhelming number still employed in the private sector – had not had wage rates or hours cut. Bubble occupations were hard hit – but that’s FF’s fault. From the coverage though you’d think public sector wage demands had not reflected the galloping house/land prices FF encouraged, and bubble occupations who screamed most at the public sector did so well out of. Some say that the pining of newspapers for lost property advertising has distorted their approach to this and to NAMA. They’ll be disappointed – it won’t bring back the bubble.

My solution (as advocated here by Kevin O’Rourke) is that everyone public and private should have a wage cut. This would reduce the deficit and by making labour cheaper to employ would over time return us to full employment. Public sector wages could then be frozen until they came into line with our competitors.

Still doubting there was a war? There is one Sunday newspaper which was wall to wall public sector pay bashing for weeks on end. I am sure you are a well read person so you should know the difference between War and Peace.

@Ernie
Actually I’d be quite happy to see redundancies in the public sector rather than pay cuts.

I think this share the pain equally is a load of nonsense and won’t work. There are businesses doing well and businesses doing badly and businesses in between. There are public sector departments overpaid, maybe some underpaid and some in between. Some understaffed, some overstaffed, some just right.

One size does not fit all.

Taoiseach Beg has spoken. If he doesn’t get what he wants he will call a general election.

Meanwhile back at the ranch the leader of Fianna Fail is desperate.

And now a little pop song to disturb your sleep.

http://www.youtube.com/watch?v=f5M_Ttstbgs

“There’s something happening here.

What it is aint exactly clear.

There’s a man with a gun over there telling me I’ve got to beware.

I think it’s time we stopped.

Children, what’s that sound?

Everybody look what’s goin down.

There’s bad lines’ being drawn. Nobody’s right if everybody’s wrong.

Young people speakin their minds.

……….

Houray for our side.”

The sound is this.

The horsemen of the IMF.

It is the final task of Brian Cowen leader of Fianna Fail.

Mission accomplished.

A question.

What is the value of €7,000,000,000 of (your) cash given to AIB and BofI?

(Here’s a hint. They called it “Preference Shares”).

Answers on a postcard.

I’ll take it you all agree that the €4,000,000,000 “invested” in Anglo Irish Bank is worth ZERO.

Bids on the Preference Shares in AIB and BofI should be sent to the Department of Finance before the IMF occupy the country.

Oh, that’ll be €11,000,000,000 that the Department of Finance “invested” in “stabilising” our banking system.

Don’t we have the luck of the Irish to have Civil Servants who invest our money with such wisdom.

The Civil Servants who arranged that deal should be given a Knighthood.

“Irish banks, Allied Irish (AIB) and Bank Of Ireland (IRE), will probably have to be quasi-nationalised, since the government has no alternative but to transform its preferred shares into common ones to inject core capital into these establishments.

They will have to contend with heavier than expected losses, and NAMA, the bad bank, will have to increase its haircut rate on the toxic assets to be transferred to it. It appears that the level of toxicity was underestimated.”

http://seekingalpha.com/article/176027-shichisho-hokoku-the-japanese-also-have-a-right-to-stealth-qe

Yes that’s right children.

While you’ve been arguing about who’s right and whose wrong your government just gave away three years fiscal adjustment (€11,000,000,000) in hard cash to who knows what, because as sure as eggs is eggs Anglo Irish, AIB and BofI don’t have it.

Sure, they can’t repeat that trick every year and the service must improve. But anybody who doesn’t have their head in the sand must ask “Why”.

Why was €11,000,000,000 in hard cash given to the banks?

And that’s without NAMA !!!!!!!

Oh I just love the way redundancy is casually brushed aside as if somehow it doesn’t count – even though they include public sector workers on temporary contracts – I think they might have preferred if their colleagues took a pay cut so their job could be saved, but anyway.

Some other points – yes – pay reductions in the private sector are sectoral. In those industries where revenues have crashed companies have 3 options. Revenues have crashed in the public sector, so let’s see what it can do….

1. Make some staff redundant (David Begg knows all about this since that’s the route Aer Lingus where he is a director is taking) while preserving the basic salary level of others.
2. Wholescale pay cuts for all staff (David Begg also knows all about this since that’s the route the Irish Times, where he is a director, is taking). This has also happened in other sectors like advertising, property and finance.
3. Put others on part time – so their per unit wage has not changed but their take home pay has reduced.

Finally there are those involved in sales of any kind, property, cars, financial products, retail, whose basic salary maybe the same, but have lost income through commission.

But let me ask you this. Every round of pay negotiations includes the traditional moaning that pay must keep pace with inflation. Since we now have deflation, well a 5% pay cut isn’t a pay cut at all but simply keeping level with the price index. If that was agreed at social partnership then the IBEC members would take it too (and as SIPTU constantly remind us they represent the private sector too). SO that would answer the (legitimate) point that we need across the board “simulated devaluation” we’ve talked about before.

SO what’s wrong with a 5% cut?

By the way, as for this “the public sector is not to blame”. Oh really? The civil servants who let budgets rocket out of control. The civil servants who rubber stamped the pension deals. The regulators who didn’t do their jobs. Yes, they ARE to blame. Begg was on the board of the Central Bank FFS . What did he do? Did he express concern that the banks were over-lending? Show us the minutes of those meetings and tell me who’s to blame for the mess and spare me the moralising about evil bankers. It was the central banks’s job to prevent this David. Where WERE you?!

Look, there are two bottom lines here
1. It’s 1983. Let’s make it 1987. Please let’s not wake up in 5 years and do 1987 all over again. The quicker we do this the better. I don’t mind knuckling down for 5 years and engaging Project Thrift. But if i’m still at it in 5 years because the hard decisions weren’t taken now, THEN I’ll be pissed off.
2. As Colm and others have said – all we need is to go back to 2004. It’s not that long ago. It was a good time. Why resist and make things worse down the line?

The private sector is not against the public sector per se, but we can see that the permanent public sector have NO idea what’s it like to go to bed at night not knowing if you’ll still have a job when you wake up. There is no index for that.

And finally finally none of the “save the public sector” wing have yet addressed the issue of the public sector pensioners who a)are that generation who benefited from the wealth transfer from young to old via the property boom and b) got their pensions benchmarked and are costing us a bloody fortune (and don’t talk to me about hospital porters! )You know who I mean, and they are getting away scot free. It’s nuts.

@ Sarah

On your last point: my parents are retired public sector workers and are completely mortified that they’re being left untouched while their children are being hit with pay cuts and child benefit cuts. I may have had some role in educating them in this, but I suspect that there are plenty of public sector pensioners who feel the same. The idea that the reaction of well-heeled pensioners to the medical card withdrawal has resulted in a group of permanently-untouchables is amazingly widely accepted – I can’t understand this.

@Ernie Ball

The figures quoted by Ronan Lyons are pretty much on the money for Gross Spending as a proportion of GNP (as backed up by November’s pre-budget report). Even Michael Burke admits this. What is controversial is positioning Ireland at the head of the curve for 2009, as Gross spending will also have increased as a proportion of GNP in Sweden, France etc.

@Sarah Carey
You make a good point about public sector pensioners. I agree with you on paycuts across the board because I too believe mass unemployment demands a radical response.

“The civil servants who rubber stamped the pension deals.”
I would like them interviewed under oath.

“The regulators who didn’t do their jobs. Yes, they ARE to blame.”
The government ran this country as a run-away property bubble for a decade. Even in Spain good regulators could not stop the crash – they just kept the banks there healthier.

” Begg was on the board of the Central Bank FFS . What did he do? Did he express concern that the banks were over-lending?”

Agreed. He should go. As should all our insolvent bank board members and the senior managers.
“… tell me who’s to blame for the mess and spare me the moralising about evil bankers.”
No comment.
“It was the central banks’s job to prevent this David. Where WERE you?!”
They could not have stopped the economic crash. But you expect that Begg on his own could have opposed the government directors.

Final points:
Independent international sworn inquiry needed into banks insolvency and banks guarantee and NAMA.

McCarthy proposed €4Bn in cuts. Public sector pay and capital expenditure outside his remit. Proposed cuts of €2.3 Bn. Where did the other €2.3 Bn identified by McCarthy go?
Answer: They are keeping the Quangos as they are FF slush funds.
Jobs and contracts for the boys. Also, huge income from renting premises to quangos. Why aren’t the slush funds cut?

@ Sarah

PS worker, Union member, embarrassed and shamed by this theatrical nonsense by our leadership, who are also vastly overpaid. (Cough!)

Can I please have an X % cut now, done intelligently so that it can be a one off and we can focus of economic regeneration.

One point in my mind at the moment is that we arent looking at our situation in a long term prospective:

Take away boom tax revenues- obviously not coming back.

Everyone seems to be thinking pre-boom, but maybe we also need to think pre EU largesse.

If we look at it with this boom time tax and EU revenue out of the equation, then is this the long term situation

Not very well put…..

Al

@Al
Make FF cut the quangos too. Then we will save €6.3 Bn. Private sector pay rates need to fall by same amount as public sector – then we will cut unemployment.

@Greg
So we have put €11Bn Euro into the banks this year. We all now agree it is entirely wasted. The real government deficit this year is approaching 20% fo national income. Now government are telling us that NAMA money will not generate extra lending i.e. it is entirely wasted. Adding NAMA to deficit projected next year we get a deficit of 43% of national income.

This row over public sector pay is a complete side show.

Sigh. Ok, Am over that. Thanks for not having a go 🙂

I’ll go meditate now or something and make my homemade firelighters with grease and newspapers and pray that by next Wednesday FF have done the right thing. As the church goes down, I’d say the rosary is becoming more popular.

@Sarah
I am happy to cut all pay and freeze public sector pay till it corresponds to our competitors. But it is immoral for an evil government that drove a property and credit bubble for 11 years to disgracefully blame public sector workers for all of our downfall.
Pat Neary took over in 2006. Bubble deflated early 2007. Neary’s boss was private banker appointed by FF. His predecessor is still on ILP and Merrill Lynch boards. Major banks are same as before bubble. Neary left with huge payoff and fulsome thanks of board. Does any of this stack up?

Public sector workers past and present need to speak out.

@Sarah Carey

Nobody is “casually brushing aside” redundancy. Unemployment is a national tragedy and it forces onto the agenda the following question: what are we (all) going to do to support the unemployed and resolve the country’s fiscal and more general economic problems?

So we ask the question of a private-sector worker who still has a job and, if he’s typical, also hasn’t had his pay cut: what are you prepared to sacrifice in the national interest in this time of crisis? If he responds “I’ve already sacrificed because my colleague lost his job” we’ll treat the response as both absurd and entirely missing the point. Even so, it’s effective if one’s goal is to stir up emotions against the public sector. And that’s why people like you routinely come back with that non-sequitur.

If one wants another object lesson in the propaganda war in which you are, clearly, a participant, one need look no further than what was the dominant news story on the day of the strike last week. All we heard on the radio and read in the press the next day was that public service workers had taken advantage of the day off to go to the North to shop. As propaganda, you can hardly imagine better: not only are they betraying us by striking, the selfish bastards, they are doubly betraying us by cheating us out of their business. Of course even a moment’s reflection about the matter might lead one to a different conclusion. Every non-private school in the country was out of session that day and most parents would be unlikely to be able to arrange child care on that kind of notice. This necessarily meant a large number of parents would be faced with taking care of the kids for a day. Is it any wonder that a large number of them would think (erroneously) that they could beat the crowds in Newry by going on a weekday? I doubt more than a tiny fraction of those heading North on that day were in the public sector but that didn’t stop the Independent from trumpeting the betrayal all over its pages. And that’s in line with the main goal: demonise the public sector so that it seems only right and natural to make them, and them alone, pay. I could give you other similar examples of the demonisation of a minority but I’m afraid I’d run afoul of Godwin’s law for real this time.

As for inflation, you really need to read the press more often. First, none of the recent national agreements, including the one the government has now unilaterally abrogated, offered wage increases that kept pace with inflation. We now have deflation and this prompts you to ask: What’s wrong with a 5% cut?

To which I can only respond: nothing would be wrong with it. Except we didn’t get a 5% cut. We got a 7.5% cut. So I’ll take my 2.5% back now, if that’s what you’re offering, thank you very much.

But of course that’s another part of the propaganda war: the pay cut that isn’t one. No, we’ll call it a “world peace levy” and everyone will know that all we’re asking of public sector workers is that they make a small contribution in order to assure world peace. And wouldn’t you know it, the selfish bastards won’t do it! OK, so it’s not a “world peace levy,” it’s a “pensions levy.” It has about as much to do with pensions as it does with world peace, but that doesn’t seem to bother you and your friends. You believe, because you want to believe, that this has something to do with public sector pensions. It doesn’t. Those who don’t have pensions in the public sector still have to pay the levy. And the money is going into general government coffers and not being used for anyone’s pension.

As for those of us in the public sector having “no idea what it’s like to go to bed at night now knowing if you’ll still have a job when you wake up”: this is just more rank public sector demonisation. Of course we’re concerned about the unemployed, which is why, unlike many in the private sector, we’re willing to take another tax hike to help pay for their benefits. What we are not willing to do is take all of the burden while others take on none on the pretext that their neighbours lost their jobs.

@ERNIE
“So we ask the question of a private-sector worker who still has a job and, if he’s typical, also hasn’t had his pay cut:”

Could you start your proposition with the truth. CSO earnings data show average hourly earnings for Mining & MAnufacturing down 5% q/q while Fin Services down 6.1%. This relates to Q2 v Q1. Frankly, your attack on the private sector workforce and your constant defence of your vested interest are getting tiresome.

@ Ernie

“As for those of us in the public sector having “no idea what it’s like to go to bed at night now knowing if you’ll still have a job when you wake up”: this is just more rank public sector demonisation”

Easy on the violins and moral outrage there Ernie. This isn’t demonisation, its simply stating that the public sector live under very different conditions, and ones they possibly dont appreciate. If a single mother said to me “you have no idea how hard it is to raise a child” i wouldn’t accuse her of demonising me as a single male, but i’d understand that maybe she had a point about me not understanding that particular hardship. As such, perhaps you could stop playing the outraged-and-looking-for-sympathy card, and realise that private sector workers have far more moral right to play that particular role, even if we generally don’t.

@Ernie
No point in comparing Private and PS pay.. First of all capitilism (except for the banks of course who are a law unto themselves) will take care of private sector pay – and that money is not coming out of the public purse anway. If you or your PS colleagues feel so hard done by in the PS, we should be seeing a rush to the door – to take your chances with the rest of us. But is that likely now – or was it likely when the “Great Scam” of the benchmarking was rolled out? No need to send a postcard with the answer to that one.
I’ve said elsewhere – a major step towards the solution is to roll back the original benchmarking process. This will hit the higher paid – who organized the scam – hardest (and don’t forget to apply it of course to those retired)

@Eoin

Oh, for heaven’s sake. Do you think I’ve never worked in the private sector? Well, you’re wrong. Do you think I don’t have friends and relatives working in the private sector now? Wrong again. Think I don’t have friends who have lost their jobs? Wrong a third time. Above all, do you think I have no compassion? That’s 4 for 4. But you and Sarah Carey presume to give me lessons on all of this.

As for the claims about demonisation, context is everything isn’t it? It may seem innocent enough to you for Sarah Carey (who, by the by, has a much bigger mouthpiece than this blog in which to spout whatever propaganda she likes) to claim that public sector workers as a whole “just don’t understand.” It may also seem innocent to have claimed that they all went up to Newry on the strike day. But slot them in as pieces in a larger propaganda war being waged against the public service and they don’t look so innocent anymore. In any case there’s a big difference between “you have no idea how hard it is to raise a child” and “we can see that the permanent public sector have NO idea what’s it like to go to bed at night not knowing if you’ll still have a job when you wake up.” “We” can see that, can we? Who is “we”?

private sector workers have far more moral right to play that particular role, even if we generally don’t

Oh, that’s good! I’m going to dine out on that one. I’ll remember that next time I’m hectored about the “100% paycuts.”

@jl

What makes you think I’m defending a vested interest? I’ve already said I’d be happy to take a 10% cut in my take-home pay via a tax increase. And even though it makes no difference to my personal finances whether my take home pay is cut through such a hypothetical global tax increase or through an equivalent increase in the pensions levy, I nevertheless oppose any attempts to characterise the public service as the only section of society that should make sacrifices.

Contrast this with the typical private sector worker who hasn’t been made redundant, hasn’t suffered a pay cut, hasn’t had his hours reduced and who would really much rather see someone else pay. Just not him. Along comes the propaganda machine to point out a suitable candidate to make sacrifices and it suits him just fine.

Between the two of us, only the private sector worker has a financial interest in the difference between tax increases and pay cuts, not me.

As for the CSO earnings data, you sure you want to live and die by them? OK, then, the latest data show that from Q2 2008 to Q2 2009, average hourly earnings in industry increased by 4.2% and in manufacturing by 4.3%. I can assure you average PS earnings did not increase if you take the pensions levy into account. The CSO says the PS earnings rose 3.2% between June 2008 and June 2009. But they don’t include the 7.5% average pay cut in the form of the pensions levy in that. Didn’t of course stop the Independent from trumpeting the information: those greedy bastards are getting increases! Best of luck finding the information about increases in industry and manufacturing in that same paper.

Oh, but that doesn’t mean they didn’t report on the CSO findings. They did!. They cited the very same CSO report that showed increases in industry and manufacturing but also describesd a drop of 11.9% in earnings in the financial services sector. But they did so in order to make this claim:

FINANCE Minister Brian Lenihan has indicated that he will use the 11.9 per cent pay cut private sector workers have already taken as a benchmark for public sector pay cuts, the Sunday Independent has learned.

[. . .]
On Friday, the CSO published a report which showed that workers in the financial sector have seen their pay cut by 11.9 per cent and sources have said Mr Lenihan would be seeking cuts of that nature for public sector workers.

Get that? The 11.9% pay cut that those working in finance endured is now a cut that “private sector workers have already taken” and that therefore justifies cutting PS pay by a similar amount. Never mind that the very same report reports pay increases among other classes of “private sector workers.”

Still think there’s no propaganda war on?

Finally, the Irish Times survey showed that 70% of workers report not having had their hours or their pay cut. Given that the survey made no distinction between private and public sector workers and given that 100% of public sector workers have seen their pay cut, it stands to reason that the vast majority of private sector workers have lost neither hours or wages.

Tis all getting a little nasty…. isnt it?
Sometimes it is better to wait for a new post topic
Than playing this type of table tennis???

Al

Ps, Isnt this discussion occuring in a bit of a vacuum?
After the pay cuts, wont there be a need to look at the debt of all workers and their ability to pay, inability to pay, or oppurtunity cost of paying excessive debt (relative to any new wage level)

@Ernie

Those who don’t have pensions in the public sector still have to pay the levy.

That point is often made, but the legislation explicitly excludes those without any pension benefits. To be liable for the levy, a public servant must:

• be a member of a public service pension scheme or,
• be entitled to a benefit under such a scheme or,
• receive a payment in lieu of membership in such a scheme.

And the money is going into general government coffers and not being used for anyone’s pension.

And money used to pay current PS pensions is coming from the “general government coffers” and not anyone’s pension levy?

Ahhh, what harm ….

the northern peace process was famously described as Sunningdale for Slow Learners. We seem to be going through a similar exercise these days when it comes to managing finances.

The shame is that it will detract from any genuine suggestions for progress as now positions are so entrenched.

Good point Sarah on the pensions. Greg posted a wonderful sentence a few days ago about when the celtic tiger got too old to hunt, it turned and ate its young.

I have to say that I have seldom experienced the level of vitriol and polarisation in debate that has taken place in this thread. It has been accompanied by a staggering ignorance of public policy making and of the highly noble concept of public service and indeed of democracy itself. Many of the contributors have no real interest in public service reform despite statements to the contrary. As someone who does passionately believe in such reform and in public service I fear that the polarisation in this debate has set any hope of reform back by many, many years.

It is clear that the neo-liberals who destroyed our economy are intent on destroying our society.I would hope that this often excellent forum of information and discourse does not become an Irish version of Fox news!

At the end of the day our problems will be solved by engagement and negotiation.
Shame on the person who commenced this thread in an attempt to pervert and destroy a negotiation process attempting to achieve common ground on economic recovery and public service reform.

@ Vincent

“highly noble concept of public service”

no offence, but the PS lost the moral high ground when they decided they’d rather cut services than wages via the unpaid leave option.

@Bond.Eoin Bond

“The single biggest problem in communication is the illusion that it has taken place”
G.B.Shaw

@Vincent
If you read this thread you will see that your fellow public servant, Ernie Ball, called me a Nazi. Not much moral high ground there, methinks. Where were your protestations? Just because you think you live on some higher ethical plane does not mean that you do.

@simpleton

Are you so blind to humour? You said Godwin’s law was about to be instantiated and I responded that only a nazi would think that. You do know what Godwin’s Law is, don’t you? Given that my post immediately followed yours, was it not obvious that I was making a joke? You may find it feeble but it’s hardly charitable to characterise the post as me calling you a nazi.

But all charity goes out the window when there’s a propaganda war to be won, I guess.

@Ernie,

I remind you
@Ernie,

presume you tongue is in cheek there or is it?

I specifically asked you was your tongue in cheek and you did not answer. Unfortunately, no one can tell on paper whether one is being serious or humerous but you chose not to clarify. I have to agree, even though it pains me, with Simpleton’s take on things.

@Eoin

I could add that the PS lost the high moral ground, if they ever had it, when they decided to propose a flat % percentage reduction on all public sector workers through unpaid leave. But then it was a deal propsed by union fat cats to the highest paid public servants in Europe…”smoke filled rooms” anyone. I though only libertarians supported a flat tax.

@ jl

“Unfortunately, no one can tell on paper whether one is being serious or humerous but you chose not to clarify.”

These are useful.

😯 😆 😀 😳 😈

🙄

@jl
Thanks
@ernie@vincent
Public sector workers earn more than their private sector counterparts. Surely we can agree on that. Let’s generously paramerterise the debate at 15-25%.
Public sector workers have job security.
Public sector workers have much better and bullet-proof pensions.
Public sector workers have longer holidays and fewer hours.
Public sector workers are nice people, well qualified and dedicated.
So are private sector workers.
Do you want to join the dots or play spot the difference? Or just claim victimhood?
@Ernie
Never, ever, joke about Nazism. It really isn’t nice. Imagine if I was Jewish rather than just private sector.

@simpleton

I am Jewish, so watch who you give lessons to.

Anyway, you’re the one who brought up Godwin’s Law (which is itself a bit of a joke about nazism), not me.

I dispute much of what you write about Public Sector workers in the above, particularly with regard to the so-called “pay premium” which, even if it exists, is probably justified.

We’re also getting a taste of how “bulletproof” the pensions are every time Lenihan or some other gov’t minister threatens to tax them or otherwise tamper with them.

So, thanks, but I don’t need to join any dots or spot any differences. You might like to read the recent SIPTU paper on wage differentials, though.

@ Vincent

also re “highly noble concept of public service”

This does indeed happen in other countries. However there has to be some sort of tangible sacrifice for this act to be considered “noble”, or else its just another ‘job’. Paulson going to the Treasury springs to mind.

However, consultants earning €250k, gardai earning the same as accountants, and mid-to-higher management in the civil service taking home €125k doesn’t spring to mind when i think of noble sacrifices.

“Shame on the person who commenced this thread in an attempt to pervert and destroy a negotiation process attempting to achieve common ground on economic recovery and public service reform”

@ Vincent

We all know the purpose of the current negotiations. It is about saving the ass of a dicredited Taoiseach and protecting the economic interest of a rent seeking public service. Those asked to pay are generally lower paid, often times not paid, have less security of tenure and the propect of lower retirement income. As they are generally younger, they are now probably more indebted and locked into overpriced housing contracts. Moreover as the data show their incomes are falling faster from Q1 than the public
service workforce.

@Ernie

You nearly got there. You nearly addmitted the facts the public service is higher paid. For that progress, I salute you.
As an example of nobility in the public service look at the behaviour of the upper echelons in that section of the revenue dealing with the richest. They are deserting the field just when their skills needed most. It is a logical economic decision to depart for the retired workforce or the potentially more lucrative pastures of tax avoidance. Nobility it aint though.

@JL

“We all know the purpose of the current negotiations. It is about saving the ass of a dicredited Taoiseach and protecting the economic interest of a rent seeking public service. Those asked to pay are generally lower paid, often times not paid, have less security of tenure and the propect of lower retirement income. As they are generally younger, they are now probably more indebted and locked into overpriced housing contracts. Moreover as the data show their incomes are falling faster from Q1 than the public
service workforce.”

So you would prefer to have public policy made by the highly resourced rent seekers of the Galway tent and banker variety? The reality of pluralist democracy is that interest groups will always be with us. An engagement with all the strands is far superior to the “predator state” as described in the US by Kenneth Galbraith. (I have come to realise, however, that many of the people on here ranting about the public sector care little for democracy and wish to impose the type of state described in GAlbraiths excellent book).

Your solution for lower paid public servants is to impose a second blanket pay cut in a year ,in the same year that all promotional opportunities have been removed from them for an indefinite period?

Lets get real and honest here. It is clear that the cost saving is not that important to many of you or else the reaction to the unpaid leave proposal would not have been so severe. The reality is that many of you see that in the absence of the tools of monetary policy the alternative is to drive down wages in the private sector and for this to be done it must first be done in the public sector.

Just to get back on to the original article…. it seems permanent is the new buzzword…. well in some bond markets anyways…

have heard the politicians say it here; but also read something in the Financial Times about states within the United States who are attempting to raise money. The word permanent was being used in much the same context as here…

Cant find a link… but there you go…

@Vincent
You want the private sector to share the burden: a reasonable request. We say we are already doing more than our share. You say we are not. An empirical matter one would have thought.
When we lose our jobs we do not expect to see you manning the barricades. I haven’t seen much social solidarity on this score.
You object tp public sector pay cuts.

The only way I think you can square all this is to suggest that the percentage fall in private sector employment should now be matched by the same percentage fall in public sector employment.

A neat, fair solution that ensures social solidarity, if not partnership?

@ Vincent
clearly you are not looking at the data. Wages are falling in the private sector, down 5-6% Q2/Q1 09 -the latest data. Employment is falling in the private sector. After tax income is also falling in both sectors. Pension assets have fallen in the private sector so future incomes are probably falling.

Is it too much to ask that the cosseted rent seekers in the public sector share some of the burden too.

Whiel we are attributing blame for why we are here. I would sweep the top echelons of the banks from office-boards and executives. What about every body at the rank of AS and above in the civil service too and the CB plus those on state boards. Then we should have a general election to elect a govt with a new mandate to restore the economy.

You see, I am a democrat too. I would like to see authority residing where it should in the elected assembly of the people and not in the Galway Tent or the equally well connected Liberty Hall or IBEC on Baggot St.

@simpleton.

I suggest you start reading peoples opinions and not making them up.

I have not objected to public sector pay cuts-I have pointed out that they have already taken one and that the new proposal on unpaid leave is also a pay cut.
My principle point, that has been judiciously ignored is that the neo-liberals who destroyed our economy are now intent on destroying our society.

Having said that this thread is becoming boringly repetitive as you guys repeat your mantra again and again and with every repetition the truth and intellectual rigour diminishes.

@ simpleton

comparing quarterly figures isn’t a good idea – there are too many seasonal factors. Earnings went down between Q1 and Q2 last year too, but then bounced back up again in later quarters.

Vincent, unpaid leave is NOT a pay cut, though earnings are reduced. A pay cut is PERMANENT, unpaid leave is temporary. Refer back to the point of the article, it’s not that difficult. Im sure you are well aware of the difference, why do you think the trade union leaders are arguing for unpaid leave if its the same as pay cuts?

They are arguing because it will allow them to game the system and leave it so next year the cut is automatically undone. I dont blame them for trying it on thats their job; to spin for their members.

Just something to think about if we had 6 months unpaid leave for teachers, the OECD report would still show them well paid by ‘contact hour’.. (Ask Ernie) But obviously they wouldnt be well paid; Im using it as an example of how stats can be used…

So please apply some intellectual rigour to your own claims.

What exactly is a neo-liberal? You seem to have this as a term of abuse? I dont know what exactly you are getting at, you might have a valid point, would you care to explain?

Am I one? Is the writer of the article one? Would Jack O’Connor qualify? In his role in the trade union movement? In his role as Central Bank Director? Name a few…

As regards who destroyed our economy; the credit cant go to one group alone…. those who sat at the social partnership table and divided the stamp duty loot between themselves are not blameless… Or maybe they are all neo liberals also?

@ Garry

what’s truly ironic is that the biggest alleged neo-liberal of them all, Michael McDowell, wanted to end the stamp-duty addiction, and was castigated at the time (and ever since) for this.

@Gary,

I thought Bert was a socialist. If truth be told there was no ideology or intellectual analysis but complete systems failure. The Banking System turned itself into a large property hedge fund for which management deserve primary responsibility so shoud go. This was achieved with the connivance of the CB and the Regulator. So far only Neary has taken the fall but Begg and the current permanent govt and political class should go.

Then the windfall gains from this stupidity were doled out in the toilets to the SPs. Heads have to roll here as well. Why are Begg, McCloone still in the game with Cowen et al. Time to clean out the whole rotted rancid stable.

For those of us who earnestly hoped that there was opportunity in this crisis for achieving public service reform this is a black day. REform has been set back prehaps by decades.
Take a bow Colm McCarthy-you have done your country a deep and abiding disservice.

@Vincent

We’ve already been in continuous process of “reform” for the last two decades of partnership.

However, actual delivery on the promises is always just one more pay-rise (or averted pay-cut) away.

@ Vincent

Remarkable. You advocate that since the Unions failed to get their way, they should ensure the continuance of a broken model which fails to deliver a value for money service to the citizens of the country. That is quite some claim to fame.

@JL
Many changes of a structural and process nature have taken place in the Public sector in the last fifteen years. One of the major changes needed now is a cultural one. Many parts of the Public sector share a culture of authoritarianism, anti-intellectualism and social familialism with none other than FF and the CAtholic church.Untill the culture of the FF political masters is crushed it is unlikely that cultural change will take place.
This is a battle of cultures and last friday the past won.

@Ernie,
Some examples come readily to mind. In these cases public money was squandered with no benefit accruing to taxpayers. These would include electronic voting. PPARs. I am sure a perusal of various C&AG reports would come up with a few more.

Moreover, Dr James Reilly alleges that the Dutch expenditure on health care is about 3500 per capita whereas ours is about 5000 per capita. You would have to interrogate him on his figures.

@Vincent
I actually agree with you on this one. However, last Friday provides me with hope. We are going nowhere while deals are done in backrooms without trnspaency. We are where we are because of such institutions as the Galway Tent and the Siptu & IBEC hotline to government. The spoils of the Celtic tiger were divided up in places such as these out of the public eye. We need root and branch reform which involves all those in positions of influence over the last decade being given red cards. They failed, simple as that.

JL

I am involved in researching the policy making impact of social partnership including democratic deficits at the moment and am deeply aware of the failings and successs of the process.I would however advice caution and suggest that you read Kenneth Galbraith’s “The Predator State” to get an idea of the alternative to engagement with a wide range of both public and private interest groups.
The alternative is a disengagement from Public interest groups but the well financed private interest groups will always be there through paid lobbyists and will not share societal goals.

@ Vincent

“The alternative is a disengagement from Public interest groups”

Are you referring to the PS unions as being one of these “public interest groups”? The recent negotiations have shown us that the PS unions are no such thing. They are a private interest group of public sector workers. Their interests are quite clearly centred around their own pay and conditions, and not around the public interest. I don’t mean this as an insult or a slight or as a disparaging remark, but simply a statement of fact.

The problem with much of the ‘national partnership’ process in recent years was that it was portrayed as being in the interests of society as a whole, when in fact it was only in favour of the various interest groups (private & public), and sometimes as a side benefit met with society’s interests as well. The problem was that it was a process that was fuelled by cheap credit and boom-cycle taxes, which allowed the government to seemingly meet everyone’s needs (lower taxes, higher wages, more services/govt expenditure, lower unemployment) at virtually no cost (surplus/low deficit). We now can see quite clearly that much of the benefits of this process were either an illusion or a bubble. Taxes have risen and will continue to do so, wages will fall and must continue to do so, we have suffered a massive jump in unemployment and are unlikely to see significant levels of job creation anytime soon, and most people believe, rightly or wrongly, that the services we receive are either poor in quality or expensive in price (ie taxes).

That leaves the question mark over what to do with government expenditure/services, what their ‘real’ level should be, and how we fund that. The first real answer to that conundrum will be seen on Wednesday, especially in how the various stakeholders react to the governments latest attempt to bring the fiscal position of the State back to a more balanced situation.

Lest my argument be blemished by innaccuracy in citation allow me to correct my two references to “The Predator State”. The author is JAmes K Galbraith and not Kenneth.

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