Civil service pay talks start as employers propose reform of public administration

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In October 2001, annual pay negotiations began for Portuguese civil servants. A key issue is increases in real pay, given differences between government inflation targets and the actual inflation rate. The talks opened at the same time as a debate on the reform of public administration and liberalisation of public services was launched by the AEP business association, including a call for the cutting of hundreds of thousands of civil service posts.

As has been the case in previous years (PT0010117N), in 2001 civil service pay negotiations began in October. The pay of civil servants is set by legislation, following negotiations with the trade unions (PT0004192F). Trade unions have submitted their proposals the Ministry for State Reform and Public Administration. The issues presented by the unions for public discussion are:

• the speed of the negotiation process;

• real pay increases;

• the quality of work; and

• career restructuring.

Pay increases

Increased pay is one of the key issues in the civil service pay talks, while a rise in meal allowances has also been requested. The General Confederation of Portuguese Workers (Confederação Geral de Trabalhadores, CGTP) and the General Workers' Union (União Geral de Trabalhadores, UGT) have called for annual pay increases of 6.0% and 5.3% respectively, but the government's counterproposals are not yet known.

Civil service pay increases are negotiated with reference to the predicted rate of inflation. The Ministry of Finance (Ministério das Finanças) has already announced that the predicted inflation rate for 2002 is 2.8%. According to the unions, given a real inflation rate of 4.3% for 2001, civil service workers saw their purchasing power drop by around 1.1% during the year, as their pay increase was 3.71%.

The proposed state budget for 2002 points to a pay increase of between 2.5% and 3%, which would imply zero growth in the purchasing power of public servants for 2002, even if the Ministry of Finance's inflation predictions are met.

In October 2001, the government met the trade union confederations to discuss pay policy, ahead of the parliamentary debate on the 2002 state budget. Both confederations were assured that there would be some room for negotiation, without the existence of a so-called pay ceiling at around 3%

UGT voiced concern over

• the need for monitoring mechanisms in respect of inflation growth for 2002; and

• the possibility that tax levels for employees will not be reduced next year, which would prove detrimental.

CGTP stated that the proposed state budget for 2002 , which has a direct bearing upon the annual civil service pay decision, outlines a vision of a country that is 'running on empty', plagued by low pay and unstable employment.

The State Professional and Managerial Staff Union (Sindicato dos Quadros Técnicos do Estado) has voiced its concern about the large-scale departure of qualified workers from the civil service. Many have left their jobs as the result of the public sector pay strategy adopted in recent years, which has gone some way towards improving the pay of lower-paid workers but has failed to introduce any sort of salary incentives for technical workers.

The business view of public administration reform

Also in October 2001, the Portuguese Business Association (Associação dos Empresários de Portugal, AEP) published a study entitled 'A new ambition for Portugal'. It is a detailed report that aims to 'rethink the state, invigorate private enterprise and mobilise civil society' in Portugal. Its objectives are to:

• identify the main blockages in the Portuguese economy and the constraints imposed by the state that hinder the development of a strong and modern society;

• outline a strategic vision for the country; and

• identify certain political priorities and define the guidelines that should underpin change - in other words, an attempt to reorganise the political system, improving administrative organisation in terms of its rationale and operational nature

The aspects of the report that relate directly to workers in the public administration include:

• various suggestions for the liberalisation of the public services, with a greater openness to private enterprise in areas such as health, education and social security, with the state acting in a regulatory capacity; and

• claims that there is an excessive number of public sector workers

The specific measures proposed by AEP would have an impact in various areas, such as:

• a greater use of private healthcare in order to be able to meet the needs of national health service patients, the abolition of fixed retail rates and the free sale of certain medical products, with chemists losing their exclusive distribution rights;

• abolition of the principle of universality for the granting of social security benefits that are not based on income tax levels and the co-financing of contributions;

• The closure of Portuguese Investment, Trade and Tourism (Investimentos, Comércio e Turismo de Portugal, ICEP) delegations abroad and the appointment of commercial attachés to embassies;

• privatisation of notary offices;

• upgrading of polytechnic-level education and tripartite management of continuing vocational training; and

• a reduction in the number of civil service Directorates General, public institutes and political posts, in addition to the implementation of a review system for the public administration based on service productivity, including a resulting reduction in the number of public sector workers. According to AEP, this proposed measure merely reinforces and anticipates a statement to be made by the Minister of State Reform and Public Administration concerning the existence of a surplus of 200,000 public sector workers, which will be redressed within 10 years by controlling the number of workers retiring from the public sector and the number recruited into it.

This last suggestion provoked a certain amount of reaction, with CGTP outlining a need for reflection upon the rationalisation of public services, as opposed to their privatisation. The union also stated that the business community needed to reflect profoundly on its own responsibilities within the national context, and not merely upon the role of the state.

AEP also wishes to see the creation of a 'New ambition for Portugal observatory', in which the social partners would participate. This would provide a permanent and objective assessment of how the report's key guidelines were being pursued and promoted in various areas of Portuguese society.

Commentary

There is fear among civil service workers that they will be affected by the consequences of a restrictive 2002 state budget, drawn up in order to meet European Union goals. Over recent years, civil servants have seen their purchasing power fall as a result of real inflation rates being higher than those predicted. According to current predictions by the Bank of Portugal (Banco de Portugal), inflation will be between 3.9% and 4.5% in 2001.

Trade unions continue to argue that pay moderation is not the correct strategy to pursue in Portugal. CGTP promises a tough year ahead marked by industrial conflict.

With regard to the AEP report, it is worth pointing out that the business community does not normally carry out studies of such a comprehensive nature and make its findings so commonly known. AEP is a member of the Confederation of Portuguese Industry (Confederação da Indústria Portuguesa, CIP), but has come to play a key independent role in industrial relations issues (PT0106149N). (Maria Luisa Cristovam, UAL)