Public Sector Pay: Where are we now?
The speech below is from Minister for Public Expenditure and Reform, Pascal Donohue. He was speaking at the IRN Conference in Dublin on Thursday 9th March on “industrial relations in a time of heightened expectations’
- You can read an analysis of the speech here
- You can read a letter to the editor to the Irish Times here
- You can read SIPTU Health’s submission to the Public Service Pay Commission here
I find the theme of this year’s event — ‘Where are we now? Industrial relations in a time of heightened expectations’ — both apt and timely in the current context. But before getting into that in more detail, I’d like to ask you all to take a minute to reflect on where we are coming from.
This country has come through a deep crisis over the last decade — but it has done so in a climate of widespread industrial relations peace across its public service.
To my mind this is a huge achievement — especially when we see the unrest that other countries have endured — and one that probably doesn’t get enough credit.
There is little doubt that industrial peace during those difficult years contributed in a very tangible way to restoring Ireland’s international reputation and creating the conditions for economic recovery to take root and for jobs to return.
It is easy to take this for granted and we should take care not to do so. It took a huge investment of time and effort by all concerned to deliver and sustain industrial peace during this challenging period.
This deserves to be acknowledged.
Three collective agreements have provided the framework for that to be achieved — the Croke Park Agreement, the Haddington Road Agreement and the Lansdowne Road Agreement.
Together these agreements have enabled the delivery of an ambitious agenda of public service reform, together with significant savings and efficiencies in the public service pay bill.
Ensuring that both formal and informal lines of communication between the parties were fully utilised was critical during these very difficult times, as well as proactively using the dispute resolution mechanisms provided for within the agreements to overcome problems as they arose.
More recently, for example, we have re-invigorated the oversight structures under the Lansdowne Road Agreement and this has helped us to respond effectively to the challenges faced in recent months.
THE CASE FOR COLLECTIVE AGREEMENT
As I speak to you today, we are preparing the ground for negotiations on a further collective agreement. So a valid question to ask at this juncture is: Do we need a new agreement? I believe we do.
Why? Because a collective agreement encompassing as many parties as possible is the surest way to guarantee a stable and fair industrial relations environment into the future.
More broadly speaking though, an agreement and the stability it brings is, I believe, important for successfully managing a small, open economy such as Ireland’s which has a high level of external economic challenge: it furthermore provides clarity and certainty around the management of the Exchequer pay bill which accounts for over a third of all public expenditure.
Industrial relations stability also helps Ireland to continue to attract foreign direct investment, delivering much needed employment.
I think you will agree that stability is essential in a time of such global flux and uncertainty as we now face.
An agreement is positive too for those workers within that agreement. Remember, a natural response to the fiscal crisis we faced might have been compulsory redundancies, but we didn’t go down that road.
Sacrifices were undoubtedly made, but through the various collective agreements, we made every effort to minimise the burden of pay cuts on the lower paid and to prioritise these groups in the restoration of pay.
What the agreements give to public servants is a fair deal and a level playing field.
They ensure no lay-offs but they also ensure no leap-frogging.
For me, the inherent fairness of this approach is really important. We shouldn’t set public pay based on a reactive response to those who shout loudest or who are better placed to exert influence.
We have to ensure an equitable approach that considers all of our public servants on equal merit.
An inclusive collective approach is the best way to do that in my view.
Step outside of that framework and you are stepping into an “I win — you lose” negative and perverse type of situation in which there will inevitably be more losers than winners.
And one group guaranteed to be losers in that ‘win — lose’ scenario is the public who cannot afford to be used as pawns in this way.
MANAGING EXPECTATIONS
To return to the theme of the conference — we are at a time of heightened expectations. Of that there is no doubt.
In many ways though, this is a by-product of a growing economy that is emerging from a difficult period.
So, in that sense, rising expectations are an indicator of success — it shows that people generally are confident that things are moving in the right direction.
However, we need to temper these expectations or we will end up right back where we began.
We have to ensure that the huge sacrifices of our citizens, including the public servants who have worked longer hours for less money, are not lost.
Thanks to prudent planning, we are in the relatively better position of having escaped the fate of many of our neighbours in Europe: we are a country in recovery, with steadily declining unemployment and steadily rising economic growth.
With recovery taking hold, it would be unforgivable, therefore, to seek to return to the type of decision-making which necessitated the very difficult sacrifices in the first place.
Nor is it realistic to think that we can meet every present demand or every past grievance that surfaces.
If we want to see the end of financial emergency legislation for good, then we can’t make reckless fiscal choices.
I believe a collective agreement encompassing public service pay and further reform will be key to ensuring that we grow expenditure and pay in an affordable and sustainable strategic way.
It will allow Government to strike a balance between affordable pay increases for public servants and other social priorities including improvements in housing and health care.
An agreement can also ensure that we continue to deliver further public service reform and service improvements for citizens.
I have made the case for a collective agreement, but I would like to sound a note of realism about what is possible from a fiscal perspective.
And here I am very anxious to avoid any suggestion that I may be commencing the negotiations process in public — which is a matter for a later time.
But nevertheless, there are fiscal realities and constraints within which we as Government must operate and I would like these to be better understood — which is not easy given their complexity!
In simple terms, even if we didn’t have obligations under the EU fiscal rules, there would be an onus on us to manage our pay policy in a disciplined and prudent fashion.
The current rules mean, however, that notwithstanding heightened expectations and strong economic growth, resources remain significantly constrained over the medium-term.
We are still running a deficit for example — in 2016 we were still borrowing close to €7m a day to fund the delivery of public services. And we are still working to meet our Medium Term Objective under the Fiscal Rules by 2018 which, if achieved, may provide Government with more latitude in future years.
So constrained resources mean difficult choices have to be made.
A growing but ageing population means we face increased demand for public services, whether in health, education or social protection.
Investment has to be made in these services to meet this demand, as well as in other areas where pressures are emerging as a result of a growing economy — childcare, housing and infrastructure for example.
In a public service context, our frontline services are under immense pressure, with staffing levels still in the process of being consolidated.
Government recognises this and is working to address these pressures by investing in the recruitment of additional front-line staff.
Increasing staff numbers, however important and worthwhile, add to the costs of the Exchequer pay bill.
As do pay improvements for public servants which is a sign of a normal functioning efficient economy and rightly aspired to by all interests concerned.
So a balance has to be struck here between these two important levers if we are to maintain control and stability over expenditure in the coming years and comply with our fiscal obligations.
PRODUCTIVITY AND REFORM
This speaks to the need to focus on further productivity and efficiency improvements in our public service in the years ahead.
I have mentioned the significant programme of savings and reform that were achieved under both the Croke Park and Haddington Road Agreements.
These savings and reforms have allowed us to legitimately say that we were ‘doing more with less’.
They have also contributed in no small measure to ensuring that the normal pay increase expectations on the part of public servants and their representatives can be realised both now and into the future.
The reform and productivity measures in the previous agreements have delivered — and continue to deliver — real results in terms of supporting the delivery of front-line services on which all of our citizens depend to varying degrees — at a time when public expenditure was reduced.
Some examples of what I’m referring to include:
The additional hours secured under the Haddington Road Agreement, which remain critical to enabling us to meet increased demand in front-line service areas and to improve services to the public generally.
The establishment of streamlined shared service operations across the public service, such as SUSI in the education sector and the National Shared Service Office.
Consolidation and re-organisation to deliver efficiencies involving the merger of agencies and creation of streamlined structures, such as the Education Training Boards and in local government.
Moving more services online, including motor tax and Revenue’s myAccount for example.
Developing integrated one-stop shop solutions for the public, such as the INTREO office network in the Department of Social Protection.
Reform is also about improving the work environment for public servants through initiatives aimed at improving our approach to learning and development and facilitating opportunities for greater mobility.
You may think the urgency has passed in relation to all of that but let me assure you it hasn’t.
Because the only way we can respond to both the increased demands on our public services and the expectations of public servants to see their pay start to grow again — within the limited room for manoeuvre we have on the public finances — is to look again at how we can further improve on productivity and efficiency gains in the public service.
This means building on the structural reforms and work practices changes introduced under previous agreements.
My Department are now in the process of drawing up a new three-year Public Service Reform Plan which will set out our vision for the next wave of reform.
We will be looking to consolidate the good progress made to date and to set out the further steps that need to be taken to realise our goals around ensuring we deliver top quality public services in a cost effective way.
Of course, public servants are taxpayers and citizens too — something often conveniently forgotten by those seeking to foster division — and will make their own minds up on how the available fiscal space should be allocated across pay, staffing, tax reductions, childcare, housing, health and other priority areas.
MOVING FORWARD
There is perhaps a feeling in the air — given developments over the last year — that we can’t continue as we have or that collective agreements in the public service have had their day. I disagree.
This is an incredibly short-sighted way of looking at things. It is effectively refusing to make choices that are necessary for the greater common good. That approach — if universally applied — would be very destructive and counter-productive.
Everyone ultimately loses in this scenario.
For all of the reasons I have outlined — not least the need for inherent fairness and balance — a collective approach is as important as ever.
We can — and must — continue to do the hard work together to maintain industrial peace, with all the benefits that brings to our public servants, our economy and our society.
And we must also collectively continue to try to balance competing priorities with an awareness of their implications elsewhere.
Those who seek to prioritise their own narrow agenda over a wider settlement are shirking this broader responsibility toward fairness and balance. These same people will criticise any agreement as a ‘sell-out’, rather than recognising that one can be pragmatic and remain principled. We simply cannot afford to listen to such people.
Before we begin negotiations, we await the report of the Public Service Pay Commission.
This report, due soon, will provide a key input to the talks process by providing evidence-based objective analysis on a number of key issues, including how the unwinding of the Financial Emergency Measures in the Public Interest — or FEMPI — legislation should proceed, as well as for example, the issue of the value attached to public service pensions.
The process of moving to a post-FEMPI world commenced under the Lansdowne Road Agreement and will be further advanced under any new agreement.
This is an important development because it signals a normalisation in our approach to both pay and industrial relations in the public service and is an indicator in itself of our re-emergence as a normal functioning economy.
For me, the priorities are simple — we need an agreement that is affordable, sustainable and fair.
However, the very real fiscal limitations we face, coupled with the many competing demands, including on pay as I’ve outlined, when set against the expectation levels that are prevailing, make these forthcoming negotiations arguably one of the most challenging.
CONCLUSION
It will not be easy to secure an agreement in such circumstances. I recognise that. I do not underestimate the challenge.
But let me conclude by saying that the Government is clear that it wants to reach an agreement and will put its best foot forward in an attempt to do so.
Pragmatism, realism and compromise will certainly be required on all sides.
If our experience with Croke Park, Haddington Road and Lansdowne Road is anything to go by though, I know there will be no shortage of these qualities on offer over the coming weeks and that should give us the confidence to collectively succeed in achieving a mutually acceptable outcome.
