Tackling the cost of the public service

Tackling the cost of the public service today is a major problem for the Gov. but it will be hard to see how they can do it effectively.

The Gov don’t want to tackle civil serivce pay but in time may may be forced to.

My view is that they will always go down the less painful route. Cutting civil servant pay would lead to strikes, etc. They will avoid this at all costs.

Easier solution, in the sort-term (2012 and 2013) is to

a) Announce a voluntary redundancy scheme.

I think this will be announced, for all public servants, later in 2012 or in time for Budget 2013, after the stampede to get out by the Feb 2012 deadline to avail of better terms.

James O’Reilly stated, shortly after winning the election and becoming Minister for Health, that he would bring in a voluntary redundancy scheme for the HSE. This would be similar to the one FF had, but that one was rushed and didn’t give people enough time to consider their options.

He has been notably quiet on this since then, probabaly because he was told loads will go by Feb 2012, and to wait until after then.

Any scheme should have a cap of, say €20K ex-gratia per person.

b) Postpone increments for a few years.

This is very contentious. The amount it would save per year, gross, is debatable. Brendan Howlin has said prelimary estimates are c. €250m for 2012.

This figure cannot be very accurate, simply because the Gov hasn’t a clue as to how many public servants will retire by end of Feb 2012. Many are waiting until the min. notice date (end of Jan 2012) before showing their cards. So we must wait until later in the year to assess this cost.

Even if €250m was correct, puiblic servants pay tax like everyone else, so you can take away a third or so off this figure. €150m, net, may be more accurate.

It is worth noting that only 37% of civil servants were entitled to an increment in 2011. This figure will likely drop in 2012, with the pending retirements. Of these 37%, some 53% are clerical officer and service officer grades, the lowest paid workers.

Brendan Howlin has said many times that to stop increments you will simply penalise the lowest paid workers more. You also penalise the youngest workers, as these are the most likely to be lower down the scale and entitled to an increment. He is clearly against it but the media and backbenchers have been rumbling more and more lately.

One solutuion, so far not mentioned, would be to postpone increments for workers on gross salaries over, say €50K. The problem though is that this will be less than 15% of those entitled to an increment, and therefore not make much savings.

I would be opposed to stopping increments for the lowest paid public servants.

When Aijai Chopra arrives for his next review in the coming weeks, I wonder how much more the lead Irish civil servant he deals with gets paid than he does?

But you also have to bear in mind that most public servants are not civil servants. For instance, the health service would employ far more people than the civil service, and the most populous health service grades are nurses.

I don’t mean this as criticism. I sometimes fall into the same trap myself, as they way these stories are presented quickly rushes us into considering the ‘plight’ of the civil service clerical officer, a soul as sad and endangered as the Panda, apparently. We are invited to shed a tear for the 12 months that an 18 year old school-leaver clerical officer must spend earning the starting salary of something like €23,000, and not think at all about the almost certainty that this 18 year old’s earnings will ultimately rise to €35,000 by age 30, if he really can’t find a better job in the meantime.

I’m not sure that stopping increments is the best way of doing it, for anyone. I’d feel an across-the-board cut for everyone is the only reasonable approach. I don’t think that any group can be exempt from that, and I don’t think its justifiable to pay too much for staff to perform low-skill work on the off-chance that one of them might have ten kids. We’ve the family income supplement to support anyone, in public or private sectors, who cannot provide for their children from their income.

Considerably less

If you think Irish CS are overpaid, have a look at the salary levels in the ‘international civil service’ - EU institutions, UN, WB/IMF etc

I was looking recently at a secondment opportunity in the WB/IMF group of institutions. Net pay was approximately 300% higher than the equivalent grade in the Irish CS.

An interesting question.

AJ Chopra is Deputy Director, European Department, International Monetary Fund. According to the IMF website (link below 1st May 2010) this would attract a base salary of USD$304,590 which equates to €233,483 using xe.com.

I would assume that he would be met by the Secretary General of the Department, post currently vacant, but whose new appointee will earn 200K

imf.org/external/pubs/ft/ar/ … able54.pdf

I’m not sure a new VER will be a success given the take up in the civil service of the ISER, is there anyone else who wants to go? Also, there was a low take up in the HSE for a similar scheme.

You’d be surprised on a take up of a VER scheme if they followed the last early retirement scheme and didn’t penalise those leaving between 50-59 years.

The similar scheme you allude to is the FF one I mentioned above. HSE staff only had around 6 weeks before Xmas to decide on going or staying. Many expressed interest but ultimately stayed on.

An advantage of cutting pay is that it both reduces the cost of employing each public servant and also reduces the number of public servants. As pay gets cut, other jobs become more attractive and some of those in the public service who are capable of getting a good job elsewhere will jump ship. So it achieves the same as voluntary redundancy (you get rid of some of those who have somewhere else to go) but it saves you money rather than having to pay people to leave.

Another strategy that can work well to reduce public service numbers is to continue the promotions freeze. As people realise that they are never going to get promoted, some of those who are capable of getting a job elsewhere will leave. For example, when the promotions freeze first came in there was a big exodus of lecturers from the computer science department in UCD. Four or five of them got professorships in other countries rather than hanging around UCD never being promoted. The universities are keeping quiet about it, but anecdotally there seems to be a steady stream of academics moving out of the country or into industry (or both). These people are typically well paid, so each departure saves a lot of money.

In general, if you want public servants to quit and go elsewhere, you need to think a little bit about who you target. If you freeze increments, you are targeting those who are eligible for increments, that is younger, cheaper staff. If you freeze promotions then you are targeting those who are doing their job sufficiently well that they have a chance of promotion. A general pay cut, on the other hand, makes the public service less attractive to all public servants, and you may get a greater number and variety of public servants leaving.

BG.

Leaving aside the t&c’s of a VER, I just don’t think there are enough people in the Civil Service left who would be interested in a VER to make a significant impact. I agree with you on the last HSE one, I don’t think they were given enough time to make a decision.

You may be right. Most of the overhang from the last incentivised scheme will be gone this Feb. Still, if you got another thousand or two out the door, it’d be worth it.

Possibly but given the EU Presidency starts in a few months when we join the Troika I doubt if senior civil servants want further upheaval with our Presidency about to begin.

Only those in Depts like Finance would have a role and therefore care about the Presidency tbh. Plus, the vast majority retiring presently (before Feb) are COs, EOs and HEOs, not the top grades.

And you’d be really surprised just how many are retiring in their 50s and taking the actuarial reduction for going early.

We have to grasp the nettle of the pensions in the civil/public service.

Cease new entrants to current defined benefit pension immediately with the intention of phasing it out for ALL state employees.

New joiners get DC pension, same as everyone else.

Tax any pension over 50k PA at a rate of 90%.

No pensions payable until people reach 65, same as private sector.

That would help. A lot.

I’d vote for that!

Presently, anyone who joined post 2003 cannot get a pension before 65. If you go early, you will have a big actuarial reduction. Pre 2003 can go at 60.

The new pension scheme - where your pension is based on career average earnings - will only apply to NEW public servants. The unions would never allow it to be done to current members.

If you highly tax pensions over 50K, nobody with talent would join PS in the first place. You’d be stuck with a lot more wasters.

Currently, only lump sums over 200K are taxed. This limit could be reduced to 150K or 100K, but it would only make a few million.

Plus ca change … :-GC

Look at this story from December:

Nearly a half of businesses on the island of Ireland are winding up, contracting or simply trying to survive according to a survey published today.
finfacts.ie/irishfinancenews … 3683.shtml

Reducing the size of the CS/PS really means adding to the unemployment line, because there is no growth in the economy to absorb the redundancies.

And if the government is working on the assumption that the Euro will fall apart or that the European economy experiences some other cataclysm in 2012, then maybe the best policy is to keep taking the 18 billion and keep pumping money into the CS/PS, because right now it’s about the most active part of the economy, cost-cutting there will have drastic knock-on effects.

Ergo, the government gets 18 billion for structural funds (less 3.1 billion PN repayments without interest) which it splashes about in the CS/PS to keep the schools, hospitals and services running, ensuring that someone at least has some money so there is some spending going on in the country (and the insiders can still go to L’Ecrivain) in a bizarre interpretation of the already-bizarre trickle-down theory, and the dole queues are not enlarged.

In normal times this is Ahernist lunacy. But in the short-term, in the midst of the storm, is this an arguable policy?

No.

Replacing one form of lunacy with another… That’s quite a plan.