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Review Body and Public Pay

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It is clear from the reaction to the recent Report by the Review Body on Higher Remuneration that its approach of comparing public sector salaries with the private sector is inadequate. Why should Irish Secretaries General be paid more than their equivalents in almost every other country? If TD salaries are very high by international standards and linked to those of Principal Officers, what does this say about salaries at middle levels in the Irish public sector?  Buried in the Review Body's report is mention of a recent survey, covering 13 countries, that indicated that the remuneration of office holders in all the countries is WELL BELOW (my emphasis) below that of jobs of comparable weight in the private sector. Why should Ireland be so different?

It will be interesting to see if the current review by the OECD of the Irish public sector will include salary comparisons when it benchmarks the Irish public sector against other comparable countries. If it doesn't do this, how can it hope to assess effectiveness and performance given that pay and pensions account for the bulk of public expenditure.

Aside from Review Body awards and benchmarking, the main driver of politician and public sector pay has been the various national agreements which appear to mainly benefit the public sector. Because these agreements provide percentage increases across the board, workers at the lower end of the scale only receive small monetary increases and the gap between top and bottom salaries gets wider on an exponential basis. Is it any wonder that, notwithstanding the smallness of the State, our political and administrative leaders are, thanks to these percentage increases, amongst the best paid in the world?

For the future, the Review Body must be instructed by the Government to take account of comparable public sector salaries in other EU countries and national agreements should make provision for percentage increases to be applied on a sliding scale so that the lowest paid get the largest percentage increases.

Lead letter published in the Irish Times on 7th November 2008.

Benchmarking and the Ambassador

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Following the German Ambassador's remarks about salary levels for senior civil servants and consultants, is there any chance of the Review Body on Higher Remuneration in the Public Sector benchmarking Irish salaries against comparable jobs in other countries? The grounds being that if our salary levels at the top are not comparable, there is little prospect of the economy as a whole being competitive.

Letter publsihed in the Irish Times on 24th September 2007.

Nurses Pay - Symptom of Deeper Problems

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The central issue in the nurses dispute is not that they may be paid too little but that other people get too much, too easily.

For example, the Taoiseach and his cabinet are amongst the best paid in the world; unjustifiably high fees are charged by many sheltered professions offering critical services; price gouging is widespread amongst many local private and public services; house prices are set by an unholy alliance of builders and bankers with predictable results; wage inequities have intensified due to continual use of percentage increases under successive national agreements which, in addition, have mainly applied to the public sector; and superfluous tax reliefs have ensured that people who should pay the most tax can actually pay the least.

The net result is that competitiveness has declined alarmingly and consumer price increases are amongst the highest in the world. The remedial action is straightforward - hold back wages and prices.

The starting points could be benchmarking mark two which must roll back the first one and more; the next national wage agreement must deliver absolute rather than percentage increases; the income tax system must be rebalanced to ensure that the higher rate applies to all higher incomes; meaningful powers must be given to regulators and the Competition Authority; and, most critically, the next Government must be willing to play hard ball with vested interests in the national interest. Predictably, none of these actions feature in election promises.

Letter published in the Sunday Business Post on 15th April 2007.

Benchmarking Data

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The CSO's recently published National Employment Survey found that average public sector pay was 40% ahead of private sector pay back in 2003. As this survey was completed before benchmarking increases averaging 9% started to take effect, the implication is that average pay could now be about 50% higher for the public sector than for private sector. This is on top of secure employment and underfunded, earnings-related pensions.

The survey findings, even after taking account of undoubted differences in education and experience, undermine the first benchmarking exercise which, based on unpublished studies, has already resulted in mutli-billion euro handouts to the public sector.  Will the second benchmarking exercise roll back these unjustified pay increases and restore equity between the public and private sectors or will it just further widen the gap?

Letter published in the Sunday Business Post on 4th June 2006.

Prescription for Pensions

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David Clerkin's piece on pensions (12th March) has highlighted inequities in public and private sector pension arrangements and in the role of the National Pension Reserve Fund.  Tax payers, predominantly in the private sector, are contributing over �2 billion a year in taxes to pensions. Unfortunately, this is not for their own pensions. About half their contributions go to pay "gold-plated" pensions of public servants and politicians, and the balance goes into the National Pension Reserve Fund. 

The following suggestions would put some fairness into national pension arrangements and help resolve the looming pensions crisis:

  1. The next round of benchmarking should take full account of the cost of public sector pensions. In addition, the public sector should progressively introduce self-funded schemes for all its employees.

  2. State organisations with pension deficits, amounting to a billion euro, should be required to sort these out internally and not be baled out by the taxpayer and by raising prices to consumers.

  3. The role of the National Pension Reserve Fund should be clarified as regards the expected distribution between public sector and social welfare pensions. This should take account of the fact that the vast bulk of the payments into the Fund effectively come from private sector workers notwithstanding that the main beneficiaries will be the public sector. Indeed, a fundamental reassessment of this organisation should be conducted on the grounds that the State effectively borrows over a billion euro year to invest in this Fund while it has a deficit in infrastructural funding which is being addressed via expensive and inefficient public-private partnerships.

  4. As TDs and Ministers are amongst the best paid and, probably, best pensioned in the world, they should fund their own pensions over and above a single basic scheme. The sums involved are not large but there is a principle involved and a lead should be given.

This prescription is likely to be painful but, as everyone knows, it is better to start pension planning earlier rather than later. So, before introducing mandatory pensions, the Government should create an equitable starting point.

Letter published in the Sunday Business Post on 19th March 2006.

On 7th March 2006, I made a submission to the Review Body on Higher Remuneration with a copy to Brian Cowan TD, Minister for Finance.

It urged that the Review Body should take account of and publish international comparisons when it devises new salary levels. Here is the submission . And, here is the Review Body Report which made virtually no effort to make any international comparisons.  

Benchmarking TDs

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Unless something unexpected happens, the Dail will have sat for just 58 days during the first nine months of  this year notwithstanding perpetual crises in law and order, health service, infrastructure, environment, responsibility and accountability. Based on the minimum annual salary of €87,000, the salary cost per TD per sitting day will exceed €1,120. If we double this to cover expenses, then the cost  reaches €2,200 per sitting day. Finally, if we  assume (generously) that actual attendance in the Dail chamber may average 20%, then the direct cost of maintaining a TD's presence in the Dail chamber rises to about €11,000 a day.

It is noteworthy that UK MPs are paid about the same as TDs notwithstanding that MPs have much larger effective constituencies (66,000 versus 18,000) and that their Parliament meets for many more days a year (150+ versus 90+) and sits for proportionately more hours than the Dail.

Is it any wonder that the electorate think TDs are overpaid and that the Dail is in urgent need of root and branch overhaul.

Benchmarking

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Fintan O'Toole omitted to mention benchmarking as a possible addition to his list of public sector "white elephants". It is costing over a billion euro a year and rising in line with future wage increases - about €13 billion over the next ten years. Introduced ahead of the last general election, no evidence has ever been published to justify benchmarking other than a series of innocuous, post-award, self-serving reports. For the same expenditure, we could have employed about ten percent more gardai, teachers, health workers and so on.

Given that there is talk of a new round of benchmarking appearing ahead of the next election, surely there is an urgent need for an independent, transparent review of the basis and benefits achieved to date.

Letter published in the Irish Times on 12th March 2005.

TDs and Benchmarking

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Now that the Dail has resumed sittings, let us have some real performance improvements from the Dail and politicians to justify benchmarking. Some suggestions in no particular order of importance:

1. No double jobbing as TDs are paid to do full-time jobs. Earnings from nixers and consultancy work should be used to reduce Dail salaries.
2. The Dail's annual holidays should be only 4-6 weeks. Normal office hours should apply from Monday to Thursday with Fridays reserved for constituency work and clinics.
3. The number of TDs should be rationalised - one TD per constituency is adequate.
4. All expenses and allowances paid to TDs should be accounted for in the same way as applies to the self-employed.
5. TDs should have the same tax allowances as all other workers or self-employed persons. Tax certificates should be supplied before taking a seat in Dail and every year thereafter. No cert, no seat.
6. Official transport should only be used for official business. Unofficial or party use should be reimbursed to the State.
7. TDs should have the same pension entitlements as most working people and should be eligible for redundancy payments when they lose their seats.
8. The productivity of TDs should be tracked by the quarterly publication of their attendances and speaking records in the Dail and at committees.
9. The Dail's effectiveness should be monitored in terms of sitting days, bills proposed & passed and output of committees.
10. Backbenchers should have greater flexibility in respect of Dail contributions and votes. Free votes should become the norm rather than the exception.
11. If backbenchers cannot become more active and productive in the Dail, their hours of work and pay should be scaled back.
12. There should be greater public accountability of TDs' performances via annual public meetings with constituents.
13. To ensure that TDs have real mandates, elections should be rerun if fewer than 50% of the electorate in their constituencies cast votes.

In return for these implementing changes, the salaries of the remaining TDs should be substantially increased to reflect their enhanced roles. As is often said, change and good example must start at the top!

Lead letter published in the Irish Times on 2nd October 2003. It was also read out on RTE's Morning Ireland and discussed with Joe Duffy on RTE's Liveline.

Benchmarking & Productivity

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Benchmarking was an election gimmick and Enda Kenny is correct to call it into question. The cost of benchmarking over the next ten years, at current prices, could be about €13, 000,000,000.  If used productively, these funds would enable us to reduce class sizes, repair leaking roofs, open and fully staff more hospitals, police our streets, reduce traffic congestion, care better for the elderly and lots more.

It is extraordinary that the private sector acquiesced so readily to benchmarking given that at least one month's income tax paid by all private sector workers will, for every year henceforth, be used to fund benchmarking.

Many of the action plans linked to benchmarking merely represent "good management" or "normal progress" and should be done without any reference to benchmarking. They do no relate to labour productivity unless performed by existing staff in addition to their existing tasks.  In the private sector, productivity means higher output for the same input or maintained output from reduced input.

As the justifications for benchmarking awards are, inexplicitly, a State secret and economic conditions have, in any event, rendered them obsolete, we cannot afford any more fudge and we must insist that the same definition of productivity be used by the private and public sectors.

Letter published in the Irish Times on 22nd September 2003. 

Public Sector Productivity

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Your correspondent Ms X (16th September) suggests that the jury is still out on the matter of productivity and benchmarking. She describes, as an example, a commendable action to be taken by the CSO to assess the usefulness of statistical data held in Government Departments. To my thinking, this merely represents "good management" or "normal progress" and should be done without any reference to benchmarking. It is not related to labour productivity unless performed by existing staff in addition to their existing tasks.  In the private sector, productivity means higher output for the same input or maintained output from reduced input.

It is extraordinary that the private sector acquiesced so readily to benchmarking given that at least one month's income tax paid by private sector workers will, for every year henceforth, be used to fund benchmarking.

As the justifications for benchmarking awards are, inexplicitly, a State secret and economic conditions have, in any event, rendered them obsolete, we cannot afford any more fudge and we must insist that the same definition of productivity be used by the private and public sectors. Genuine productivity increases should be rewarded.

Cost of Benchmarking

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I am tired of seeing statements to the effect that the cost of benchmarking is €1 billion or so. It is not a once-off investment as it will recur and grow year-on-year. The cost will be about €25 billion over the next twenty years when inflation and pension increases are taken into account. On this basis, benchmarking will absorb over one-tenth of all income taxes to be collected mainly from the unsheltered, unbenchmarked private sector. Time for a wake-up call?
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