Head over to our T
The Croke Park resurrection
Read more about: Economy 
A couple of weeks ago, it looked like the Croke Park agreement on public sector pay and numbers was dead. The pent-up frustration of the union rank and file (in contrast to their leadership) coupled with the price tag for the Anglo bailout and Eurostat’s confirmation of what we already knew — that the Anglo bailout is real money — seemed to have fatally undermined it. And yet it’s still in play, especially now with the IMPACT reversal. Here is the full text of the government “clarification” that seems to have changed things. One interesting thing is how it shows the hold that pension preservation has on the thinking of the unions.
The de-linking of current pensions from current earnings is now shelved till at least 2014, and there’s talk of undoing the pension levy over time. New entrants to the public sector workforce might be subject to new arrangements sooner than 2014, but the incumbents are protected (which is very stylized “insider” behaviour, but there you go). So what do we learn?
First, the government actually wants this deal. I had said before, probably too cynically, that it was nothing more than a poison pill for an alternative government since it shoved critical decisions to 2011. But now those decisions are off the table even longer and yet clear efforts are being made to get ratification. This may be a sign of a government that is privately more optimistic about the economy and public finances than they are saying (although they are starting to say so now too), and so the apparent concessions in the agreement might be easier to meet than they sound.
Second (and related), this is a government fairly sure that it has found a soft spot in the union position: pensions. They have gotten through pay cuts, the pension levy, recruitment freeze, allowance cuts, the use of NPRF as a banking sector hedge fund, and of course the broader horror story of the 25 billion for Seanie and Fingers, and all with barely a hint of Greek style mass protests. But as long as pensions themselves are not touched, the majority of unions have stayed onside. This is the classic game of chicken except with one driver knowing for sure what gets the other driver to swerve first.
See Michael Hennigan over on irish economy
A very good piece with a few new interesting insights.
Shoving critical decisions off the table until 2014?- Does this imply that there is a thinking that the decision will be easier in 2014 and FF think they themselves may be already back in power after a short sabattical across the floor….. OR they know a tougher decision will be necessary then and hope that FF wont have to make that decision?
Your interpretation that there may be more optimism ” than they are letting on” is interesting- Is there also optimism ( or false hope) that FF may come out of an election much better than polls now show?
You are implying that their crystal ball is now a little rosier than commentators… but could it not just still be a case of closely-vested negotiators on both sides looking after each other in the understanding that at the end of the day it will be private sector and export revenues that will foot the bills for the lot?
So are they optimistic, prescient or deluded ?
Is the deal still too soft in the light of everything..?
Des, good questions. Here’s an eye-catching quote from higher civil servants union Peader Carpenter
He said as soon as the economy recovered public service unions “will immediately be seeking a restoration of previous pay levels”.
I have a hard time believing that as soon as we get a positive growth number, which could be as soon as 2nd quarter of this year, that undoing the pay cuts will be on the agenda. So it looks like a case of divergent expectations. Another odd thing is that our plan to get the deficit down to 3% of GDP, as submitted to the European Commission, now looks seriously out of date. There’s been no word on how the reclassification of Anglo as government spending will be handled, and the U-turn on the pension-earnings linkage surely has implications for the path of government spending.
From the comment Betty refers to, and also Stephen Collins today, I see there is a theory that the apparent concessions to the unions is taken by some as a sign that the old don’t rock the union boat Cowen is back in the saddle. I don’t think we should be running our fiscal policy to appease the financial market boy racers, but with the Greece crisis in full swing, it’s a strange time to be signalling that the cheque book might be open again soon.
It would take a strange person to interpret the failure of the government to make yet another cut, as an indication that the cheque book might still open.
Des, when the public sector stop paying taxes?
Niall, never forget that public sector workers’ taxes come from salaries that come from taxes. A lot of your public sector salary is filtered back AS tax, admttedly in many cases now an inequitable taxing system hits the lowest hardest BUT at the end of the day it is current expenditure from exchequer coming from taxes in.
If the country was a business we now would have no overdraft and a current expenditure ratio to revenue which would render the business bankrupt. AND yes I know whose fault that is but the numbers dont lie.
Des, I don’t work in the public sector. I’m just sick of this crap I keep hearing about the private sector paying for the public sector when all tax payers pay for it.
While I’m mentioning my pet peeves, the other great joke is the idea that the private sector workers has been harder than the public because of job losses. The unemployed have been hardest, and that is made up mostly of ex-private sector workers, but these are percisely the workers that the government have taken money away from.
There’s a silly little narrative being pedalled by the likes of the Sindo that what we need to do is get the private sector out from under the tyrany of the public sector. They’ll talk about permanent jobs in the public service and pensions, and how we need a smaller public service (in spite of the fact that we have a relatively tiny one at the moment)while all the time, they ignore the fact that we have an unsustainable tax base, and it was by blindly putting our faith in certain parts of the private sector that we ended up in this mess.
Comparing Ireland to a business is interesting. Of course we’re not a business, but the metaphor can illuminate. If we were a business we’d be something akin to a monopoly. When you’ve already made payroll cuts, and cut down expenditure, and you require money to expand, the smart choice would probably be to put up the price of your product. In the case of a country, the products it sells tend to be public services. That would mean tax increases across the board, as oppossed to politically motivated attacks on minority sectors.
It’s madness to cut unemployment benefits and the pay of public servants on under 30k while at the same time leaving those on over 100k proportionally untouched, espcially in the case of those in the private sector. Even if you forget about fairness, the simple fact is that the unemployed and the low paid spend what they get paid. They don’t have any other choice. The well paid do not put the money back into the system. They save it, especially in times like this and the economy requires increases in retail spending.
Note that the Croke Park deal is now being used by FF as a stick with which to beat Labour. FF coming between Labour and the unions. The more things change, the more they stay the same.
@ P. O’Neill
Collins is full of bullsh*t (doubly so, as a former PD diehard to boot). This, for example:
“The Greek tragedy is a stark example of what can happen to a country if government and society do not face up to ingrained structural problems.”
Or this:
“Cowen tried might and main to avoid the breach with the unions even to the extent of toying with the ludicrous proposal for extra leave days as an alternative to pay cuts.”
The furlough is a well-known method in the private sector for dealing with not having the money to pay employees – as Collins undoubtedly is aware.
I take Niall’s point “There’s a silly little narrative being pedalled by the likes of the Sindo that what we need to do is get the private sector out from under the tyrany of the public sector.”
This is obviously a plug for privatisation. And it seems there a lot of people who would like the billions we spend on health and education to go to some multinational investors in the other side of the world who, having ripped off the private sector now want to rip off the public sector. But that would git rid of the yoke of most the public sector!!!!.
@Des Groome
Stimulating questions in response to P’s insights into what’s afoot between the unions and the government. We all know that the main virtue of this deal is the certainty it provides: certainty for the public that public services will not be disrupted by industrial action; and certainty for public servants about what will happen to their wages and pensions over the period of the agreement. For lower paid public servants there is the possibility of having some of the wages they lost being restored, provided that another black cloud doesn’t descend upon us due to an unwanted eruption of the international economic volcano, which would wipe out any prospect of economic recovery in the near term.
All this government – or any alternative administration taking over from it tomorrow morning – can do is work with what’s within our control at national level and hope that the international environment in terms of trading conditions and even the relative strength of the euro and sterling etc. will broadly favour us until we find our feet again.
So I don’t share the cynicism that’s going around about the details of the Croke Park deal and whether it concedes too much (or too little, depending on your point of view!) to particular groups within the public service. To me it seems to be reasonably well balanced between the interests of public servants and the interests of our society as a whole. In any case, what’s the alternative? I’ve yet to hear any alternative being advanced that doesn’t include the likelihood of wholesale disruption of public services, which would probably have a far more detrimental effect on wages and conditions of public servants in the medium term than could possibly ever arise from implementation of the proposed agreement.
I think some of the harder chaws, on both sides, who like to promote this ‘private’ versus ‘public’ sector division tend to forget that all of us citizens have a strong vested interest in the delivery of good quality public services, or as good as we can afford, in health and education and the care of vulnerable groups within our society. If the Croke Park deal will help secure that then, wimp that I may be, I’m all in favour of it. If postponing reform of public service pensions for another couple of years is the price that has to be paid, then I’m not going to worry too much about that either. If Ireland was facing a default then our ECB and IMF ‘rescuers’ would tear up the agreement anyway without even bothering to read through it. Securing this deal is part of the overall recipe for avoiding the likelihood of such a default, so it’s a small price to pay.
On the broader question you raise as to how securing this agreement might affect Fianna Fail’s electoral chances, I feel it’s impossible to predict how people will be thinking about all this a year or more down the line. Eighteen months before the UK election, the British Labour Government looked like they were trussed, stuffed and heading for a roasting at the polls. They lost the election alright, but the Tories didn’t win it either. It’s obvious that people went into the polling booths and voted for who they thought was the best candidate in their local area, and not who the pollsters, the spin meisters or the media or anyone else thought they should. I’ve come to the view anyway that the political media here, as in the UK, have become too much a part of the establishment. We have oh so many editorials and columnists with partisan political perspectives crowding out the commentary pages, rather than a media presenting an appropriately detached critique of ALL the political elite, their proposals and policies on behalf of the average Joe Citizen.
Veronica: You say we should have a “detached critique of ALL the political elite, their proposals and policies” but above that you say that no one has an alternative to the Croke Park agreement.
A detached critique of the political elite and the Croke Park agreement suggests the greatest smash and grab since the great train robbery. Is it necessary to rob the poor (those who actually provide goods and services) and give it to the rich (investors) who can write their own wage/salary cheques?
All of a sudden the media are very quick to let us know what the “markets” will do as a result of our actions. They were nowhere to be seen when we were getting in hock up to our necks. In fact they obviouly thrived on this lunacy.
If there is no alternative to what is happening to people’s lives at the moment then we are very stupid indeed.
I think some of the harder chaws, on both sides, who like to promote this ‘private’ versus ‘public’ sector division
Enquiring minds might like to know who, exactly, Veronica thinks the “harder chaws” supposedly promoting this on the union side are?
Thanks everyone for the comments.
Looking back over the week, it has been a bizarre one in terms of pensions. First the government apparently concedes no change in public pension arrangements before 2014, contrary to previous policy. The Eamon O’Cuiv — whether on a softening-up campaign, or a solo run, or both — putting OAP cuts in the table. And now over the weekend he’s sounding like public pensions might be back on the table, at least in terms of some form of overall income criterion. But it’s hard to see the principle on which public pensions are more sacrosanct than OAP — while fully acknowledging that the tradeoff could also be seen as all pensions versus the 25 billion for Anglo and INBS.
EddieL,
“Is it necessary to rob the poor (those who actually provide goods and services) and give it to the rich (investors) who can write their own wage/salary cheques?”
You’ve touched on a point there that is making a lot of ordinary people, myself included, increasingly angry. That speculators who are set to gain billions from betting against countries like Greece, Portugal and Spain and threaten an entire currency system with collapse is not acceptable. The IMF has made a proposal to levy banks’ profits and bonuses and the EU has attempted to introduce regulation of hedge funds. But that move, as I understand it, was blocked by the UK. It’s also a separate issue to reducing our own deficit, which we would have to do anyway.
Earning 30bn euro in taxes while spending 50bn is not sustainable as anyone with a grain of common sense will acknowledge. This deal is just part of the overall strategy to get out public finances back on track. There are plenty of commentators too who think the terms of the proposed Croke Park deal are way too generous to the public service unions and more than the country can afford. I don’t agree with them. My argument is that the certainty this deal can deliver outweighs its inherent flaws. I’m supporting it because the alternative – industrial disruption that will impact on public services and the rights and entitlements of citizens who depend on those services, plus further wage cuts imposed without agreement – is far worse both for our economy and society.
Why are we stuck on this notion that services both public and private can be provided without paying for them. Private providers go out of business when we do not want to pay for their services, but we expect the public services to go on providing even thought we do not want to pay for it – obviously an unsustainable proposition.
The only solution to our present predicament is to go back to what was tried and tested 60 years ago. Provide public services where sustainable taxes were available to pay for them, look after the poor, protect native industry and production, protect workers from exploitation etc.
Obviously our present position is daft to say the least, taxing only the poor, borrowing to pay off the debts of the wealthy, importing nearly everything from China, a financial services sector producing nothing, returning to the bad old days of slave labour etc.
EddieL,
Hmm…I don’t think all was that rosy in the Irish republican garden 60 years ago that anyone would want to go anywhere near it, especially not anyone classified as ‘poor’ or as a worker in native industry. And as we’ve seen in recent times, we had our very own specialised system of child slavery, presided over by so-called charitable religious institutions, that has now cost the present day taxpayer more than €1bn in compensation payments to its child slave victims, which in itself can’t even begin to redeem the devastation caused to those lives. The average life expectancy of a male born in 1950-52 was 65 years, compared with 75 years for the period 2001-03; and 67 for a ’51- ’53 female, compared with 83 for one born in ’01-’03. Nostalgia for some so-called golden age past is inappropriate.