Irish public sector workers take money and run

Senior public workers such as members of the Garda are taking rich pensions

Here's one that could make the Guinness Book of Records in the Most Stupid Government Decisions section (and if there isn't such a section, Ireland urgently needs one).

Or it could be included in that famous old newspaper feature Ripley's Believe It or Not.  (I used to love reading that as a kid, because it came up with the most bizarre, ludicrous stuff you thought could never be true and, of course, it always was.)

Well, I hereby nominate Taoiseach (Prime Minister) Enda Kenny and his government for Ripley's Believe It or Not on the basis of their ridiculous method of reducing the size of the state payroll here.

We have to cut the state payroll because our masters in the EU and IMF have made it a condition of continuing to give us the bailout money.  On this issue, at least, they are right because we just cannot afford the cost of all the state workers we have and the high pay rates many of them are on.  
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Ireland is still spending like in the boom time, but our revenue has collapsed in the bust over the past four or five years. The resulting huge gap in the state finances -- together with the cost of our banking collapse -- has made our country virtually bankrupt.

To bridge the spending/revenue gap we have to borrow billions every year, and we're in the IMF/EU program because no one else will lend that money to us.

The way for us to get out of this situation is to close our enormous budget deficit over the next few years.  A key part of that will be cutting the cost of the public service (workers paid by the state) which is more than one third of total state spending.

It's a huge annual bill, and balancing the budget won't be possible unless we reduce it substantially.  So it involves reducing the cost of our hospitals, schools, the army, the police, the civil service and the vast number of people on the state payroll working in various quangos and state bodies that you never hear about.  

That's the problem.   There are basically two ways of delivering a solution.  We can cut pay and pension levels in the state sector or we can cut the number of people on the state payroll (or we can do a combination of both).

It's not going to be easy.  After some minor pay cuts for state workers were implemented a couple of years ago, the government and the unions made a deal which ruled out any further cuts in pay in return for a no strike agreement.

This was called the Croke Park Agreement (because the negotiations were held in conference rooms at the famous football stadium), and the idea was to make the state sector more efficient and deliver the required cost savings without any further pay cuts or any forced job losses.

This was an extremely good deal for the state workers.  The rest of the economy was (and still is) deeply depressed, with many private sector workers having their pay and pensions slashed and many others losing their jobs, leading to a huge jump in the number of people on welfare (unemployment here is now 14.3%).  

Meanwhile, as all this mayhem was going on in the real economy, the state workers were completely protected. Their pay could not be cut.  Their generous pensions (paid for out of current taxation and/or borrowing) were secure.

And, to add insult to injury, they have been dragging their heels on the promised work changes that were supposed to deliver big savings to the state.  Every change in work practices, flexibility or redeployment that has been proposed seems to be a problem for them.  We're still waiting for any significant reform.

This is where we get to the Believe It or Not bit.  With the IMF/EU looking for action on our huge state sector bill, the government came up with a plan, and it's so ridiculous that it deserves a place in Ripley.
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Anyone with any sense would have started with the pay and pensions in the public service.   It's very simple -- they are too high so they need to be cut, as they have been in the rest of the economy.

Certainly there is room to cut.  Teachers, police, medical staff and many others earn more here than their counterparts do in the U.K.  In many cases the pay gap is 10% to 20%, or even more.

In the middle to higher ranks of the civil service, and for example among the top medical people like hospital consultants, the gap is even wider between us and other, much bigger, EU countries.

The unions always point to the majority of state workers and make the point that they are on modest pay (less than €40,000 a year) and have already taken cuts to help fund their pensions.  But it's not as simple as that.
First of all they have job security, which these days in Ireland is priceless.  And secondly, if you add in the real funding cost of their guaranteed pensions, their true pay levels would be about €20,000 a year more.  Private sector workers have to bear full pension costs, so why not state workers?

All of which shows that, in spite of the publicity from the unions, the truth is there is room for significant cuts in pay and pension levels in the state sector here.

The other reason why this is the correct approach is that it would allow the state to retain the maximum number of state workers to maintain the level of public services that we have.  You cut pay, but you keep the staff numbers.  That's what the government should be doing.

It should be telling the unions that the Croke Park agreement is history because it was a mistake and we're in a new situation.  But instead of that the government has opted to leave pay untouched and to get numbers down.

Because the Croke Park agreement rules out any forced job losses, this has to be done on a voluntary basis.  And this is where we get into the Ripley situation.

To encourage state workers to go the government recently announced an early retirement scheme, with a big carrot attached.

If workers accepted before the end of this month, their pensions would be based on pay levels before the cuts two years ago.   This would make them substantially more valuable, about 15% higher than if a state worker stayed on to the normal retirement age.

Also, the pensions would be based on final salary, not average lifetime earnings, which will be the system in
future.  And on top of that there would be large tax-free lump sums paid out to retiring public servants.

For people with five to 10 years to go, or for people with other plans, it was a no brainer.  So after a slow start there has been a surge in applications for the scheme.

With less than two weeks to go, over 8,000 state workers have signed up.  They will be getting an average lump sum of around €80,000 each, although many senior people are set to get even more, with retiring high-ranking Gardai (police) for example getting an average of €107,000 each.   The final cost to the state this year in lump sum payments is likely to be at least €700 million.  

Because the unions made it a condition of the scheme that it must be open to everyone in the public service, there is no restriction on who can apply. Anyone who does apply must be given the deal.

So the hope that the scheme would allow us to get rid of a lot of unproductive people in traditional civil service administration roles has not turned out to be the case.  And when you think about it, if you have a nice easy job, with a fat salary and a good pension to come, why should you apply?

In fact a lot of those applying have turned out to be people in front line, high stress positions, surgeons and midwives, senior police officers and senior teachers, and many others in key roles.

One of the most high profile was Paul Appleby, the head of the Office of Corporate Enforcement, who is directing the investigation into the former Anglo Irish Bank, the bank that played a major role in bringing the country to its knees and where all kinds of reckless and illegal activity was happening.

That investigation is now reaching its climax after several years, so the idea that Appleby would be given a big payout to retire early and walk away caused a public outcry here that was so loud that the minister had to step in and Appleby is now staying on for a while, hopefully until the Anglo probe is complete.

Then there is the case of the senior Gardai.  So many senior officers have decided to take the deal that there is real concern now that nailing the bad boys won't be as effective in the next few years.

With more violence, murders, drug problems and ordinary crime as the recession bites, it's not a good time to lose so many from the top tier in our police.

Probably the one that caused most alarm was the case of the biggest hospital in Limerick, where 47 midwives (out of 200) are leaving.  With our birth rate still very high, these are high pressure jobs needing experienced staff.

The hospital serves a wide area in Munster.  No one knows where the new midwives are to come from or what's going to happen.

How can the government have got it so wrong?  It seems the best and most vital people in the public service are lining up to take the money and run. The pen pushers and keyboard tappers will be left behind.

In the private sector when companies have voluntary retirement schemes, the company decides who gets the deal and key people are often refused.  The skill balance and productivity of the organization is protected.   What the government is doing ignores this completely; it is both stupid and irresponsible.

There is also a big question mark over whether it can really deliver the massive saving the IMF/EU want.  Since many of those who are leaving are skilled people (like midwives) they have to be replaced.

In the short term, many will be given the deal and then be taken back for a while, like the teachers of classes who are doing the Leaving Cert (high school leaving exam) this year.

The government has made such a mess of this that Kenny has announced "transitional teams" to oversee the change in places like hospitals.  But everyone here knows he is making it up as he goes along.

There appears to be zero planning.  The only policy appears to be not to upset the unions because the government is terrified of precipitating a Greek style confrontation on the streets.

Three or four thousand nurses and doctors are getting out of the health service.   Around 2,000 teachers are leaving schools.  So it won't be a good time to get sick or for kids to be looking for extra help with classwork.

The government insists that the level of public services won't be affected.  "We have to do more with less" is the catch phrase of the day.

Meanwhile, the remaining state workers will still be on pay and pensions that are much higher than in the U.K.

Calling Mr. Ripley ....  
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