Government on track to meet targets due to cuts in public service spending

Ireland’s Public Service Agreement 2010–2014, known as the Croke Park Agreement, has shaved a further €891 million from the cost of the public service in its second year, having delivered savings of €597 million in its first year. These savings have come mainly through redundancies, but also from reforms and increased productivity. The latest review of the agreement shows that although government backbenchers have opposed the cuts, there have been no industrial disputes.

Background

The Croke Park Implementation Body, set up to oversee the implementation of Ireland’s four-year Public Service Agreement between the Government and public service trade unions, has reported that €891 million in payroll and non-payroll savings have been made in the second year of the agreement, on top of savings worth €597 million in its first year. This makes a total of €1.49 billion in savings over its first two years.

The agreement, widely referred to as the Croke Park Agreement, commits the Government to maintaining existing pay rates and avoiding compulsory redundancies in return for a broad trade union and employee commitment to reform and change.

Review of savings

The implementation body published its Second Progress Report (3.4Mb PDF) in June 2012. It reports that 11,530 staff left the public service during the review period (April 2010–March 2012).

The vast majority of those who left were older workers close to retirement age, most of whom will not be replaced. They came from every part of the public service, including the two largest areas – health and education. Categories included: nurses and teachers; managerial, administrative, clerical and technical staff; general and craft-related workers.

Largely as a result of these departures, savings have been made worth €650 million in the Exchequer’s pay bill in the second year of the agreement. Even when an estimate for possible planned extra recruitment is factored in, in the second year pay bill savings still amount to more than €520 million. This brings the combined savings in the pay bill over the first two years of the agreement to €891 million, and the report’s authors believe these are sustainable reductions.

‘Efficiency savings’ totalling €369.8 million were delivered over the same period. These savings should also recur on a sustainable basis, according to the review.

The review shows that public service numbers have been reduced by 28,000 (8.8%) since 2008 – falling to 292,000 from a high of 320,000. Over the period 2009 to 2015, the review finds that the Exchequer pay bill is expected to be reduced by €3.8 billion, or by €3.3 billion net of expected increases in public service pension costs.

There are also examples of initiatives taken nationally and locally, but the review says the pace and ambition of change needs to be ‘systemic’ in order to fully address the fiscal challenges that lie ahead.

Industrial peace

The Minister for Public Expenditure and Reform, Brendan Howlin, said: ‘We should not lose sight of the fact that the Croke Park Agreement has enabled these savings to be delivered in a climate of industrial peace across the public service.’ The review provides strong evidence that the public service is consistently ‘doing more with less’, he added.

The Implementation Body Chair, PJ Fitzpatrick, acknowledged the commitment of staff and their representatives in managing the challenge presented by the departure of 8,000 staff in February.

Patricia King, Vice-President of the Service Industrial Profession and Technical Union (SIPTU), the country’s largest union, said the review ‘confirms that those workers at the lowest pay levels across the public service have contributed substantially to the reforms in work practices to date through roster changes, redeployment, the extended working day and loss of allowances’.

The Irish Business and Employers Confederation (IBEC) welcomed progress made on reaching the cost-saving targets, but added that much more needed to be done to deliver world-class and affordable public services. Brendan McGinty, IBEC’s Director of Industrial Relations and Human Resources, said: ‘A number of issues still need to be addressed, including the payment of increments, reform of the allowances system and an overhaul of outdated sick leave policies. A more progressive approach to performance management is also needed.’

Commentary

A critical issue for supporters of the agreement is the considerable degree of media hostility towards it. Similarly, at the political level, the agreement is looked on with some scepticism by a core of backbench members of the leading Government party, Fine Gael (FG), but continues to receive largely strong backing within the Fine Gael-Labour coalition cabinet.

Opposition by some FG backbenchers is driven by an ideological preference for cutting public sector pay rates as opposed to increasing taxes in general, as well as the belief of some that the agreement is not delivering sufficient change and reform. In contrast, Labour backbenchers are strongly supportive of the agreement because the party has traditionally supported public services and because public service workers are a crucial part of their electoral support base.

Opposition parties, by and large, back the core terms of the agreement. Former lead government party Fianna Fail, which negotiated the agreement in 2010, supports its provisions but the other main opposition party, Sinn Fein, would like to see wage cuts for any public service workers earning above €100,000 per annum. It adheres to all other provisions of the agreement.

The Government will seek to maintain the agreement as long it can meet its overall fiscal targets. However, with €3.8 billion in cuts promised in the Budget this December, it will come under pressure on its commitment not to cut core income tax or basic social welfare rates, and to maintain its commitments under the agreement.

Brian Sheehan, IRN Publishing