Critical talks on €1 billion public sector savings

Talks between the Irish government and unions have begun on an extension of the Public Service Agreement, 2010–2014. More commonly referred to as the Croke Park agreement, it was originally signed in June 2010, setting out ways to make budget savings in the public sector. The new talks are over fresh reforms to extract a further €1 billion worth of savings from public sector costs by the end of 2015. The government says the cuts are vital, but acknowledges the process won’t be easy.

Fresh talks on budget cuts

The opening phase of talks between the Government of Ireland and the public service unions on securing a further €1 billion in savings under the Croke Park agreement have taken place. A meeting was held between the Irish Minister for Public Expenditure and Reform, Brendan Howlin, his officials and the trade unions on November 28, 2012.

The Minister said the aim of the talks was to achieve additional reductions in the cost of delivery of public services from the public service pay and pensions bill between 2013 and 2015.

The opening talks are expected to be followed by the commencement of an intensive process of negotiations in early 2013. The existing agreement, meanwhile, remains in place.

What the existing agreement says

Under the Croke Park agreement there can be no further wage cuts or compulsory redundancies for Ireland’s 292,000 public service workers for the four-year duration of the agreement. These commitments are in return for trade union and employee agreement to cooperate with major workplace change, redeployment and co-operation with a range of wider public service reform measures.

An ‘implementation body’ was established to assist in the smooth running of the agreement and to help resolve disputes between unions and management. It has identified a total of €891 million in annual payroll and non-pay savings delivered in the second year of the four-year agreement. This is in addition to savings of €597 million achieved in the first year, giving a total of €1.49 billion over two years up to June 2012.

Separately, in a move that is independent of the Croke Park agreement, the government is hoping to reduce the number of public service employees to 282,000 by the end of 2014 from a pre-crisis peak of 320,000 in 2008, and has agreed a formal voluntary severance arrangement with trade unions.

When all savings are combined, the Department of Public Expenditure and Reform has said that over the entire period 2009–2015, the Exchequer pay bill would reduce by €3.8bn. This figure falls to €3.3bn when expected increases in public service pension costs are taken into account.

The further €1 billion now being sought can be added to that estimate.

Big cuts already achieved

Minister Brendan Howlin told the Irish Parliament (Dáil Éireann) on 5 December 2012 that reducing public expenditure and numbers, while continuing to provide key public services and social support was not easy. He said:

The Croke Park Agreement has been essential in supporting this reform. The value of a stable industrial relations environment in achieving a fiscal consolidation of this scale should not be underestimated.

Minister Howlin noted that public servants had already had two pay reductions – which pre-date the Croke Park agreement – totalling an average of 14%. Top salaries had been reduced by up to 30% and capped at €200,000.

Howlin added: ‘We have also reduced the salaries for new entrants to the Public Service by a further 10%.’

In addition, the Minister said public service pensions had been reduced, saving over €100 million annually. Legislation for a new Single Public Service Pension Scheme had been approved to reduce costs further. Despite these and other achievements, however, he said that additional productivity and cost extraction measures not envisaged under the current Croke Park deal would be required to ensure the government met its commitments.

Union reaction

The public service unions are being led in the new talks by Shay Cody, General Secretary of the Irish Municipal Public and Civil Trade Union (IMPACT). Cody is also Chair of the Irish Congress of Trade Union (ICTU) public services committee (PSC).

He told management that unions were willing to try to find an agreement, but three criteria would have to be met:

First, management would have to prove that its proposals would make genuine savings. Second any measures would have to be fair, which meant they could not fall disproportionately on any group of staff, particularly those on low and middle incomes. And, thirdly, the outcome would have to pass the tests of ballots in IMPACT and other unions.

Commentary

The weekly specialist magazine Industrial Relations News (IRN) suggested that a revision of the Croke Park agreement could emerge in time for a ballot of all public service unions by late spring, but may not be actually implemented until the early summer. IRN also reported that Kieran Mulvey, Chief Executive of the Labour Relations Commission (LRC), who oversaw the talks that led to the current agreement in 2010, was again likely to play a prominent role.

Much of the pre-talks speculation had centred on the prospect of public servants working extra hours in return for maintaining existing earnings. Securing such a concession from the trade unions holds out the prospect of significant savings in areas like the health service, but will be a difficult concession to secure from the unions. Nurses, for example, currently work an average basic week of 37.5 hours, which they negotiated and secured incrementally after a long and arduous battle over the last decade.

IRN has reported that other items likely to be explored by management in the current talks include grading, premium payments and new performance systems.

Brian Sheehan, IRN Publishing