Wednesday, 9 July 2008
Dáil Eireann Debate
7. Deputy Enda Kenny asked the Taoiseach the projected cost to his Department of the implementation of the recommendations of the Review Body on Higher Remuneration in the Public Service; and if he will make a statement on the matter. [17133/08]
8. Deputy Eamon Gilmore asked the Taoiseach the estimated cost to his Department of the full implementation of the recommendations of the Review Body on Higher Remuneration in the Public Service; and if he will make a statement on the matter. [19443/08]
9. Deputy Caoimhghín Ó Caoláin asked the Taoiseach if he will report on the implementation of the recommendations of the Review Body on Higher Remuneration in the Public Service; and if he will make a statement on the matter. [20934/08]
The projected cost of the implementation of the recommendations of the Review Body on Higher Remuneration in the Public Service to my Department is €115,099 for 2008. This includes costs in respect of departmental staff and special advisers in my Department. These costings are supplied in the following table.
The first phase of the increases recommended for the pubic service under the report of the Review Body on Higher Remuneration in the public sector has been implemented since September 2007. The Government has decided that all the pending increases for ministerial and parliamentary office holders and for other senior public servants recommended by the Review Body on Higher Remuneration in the Public Service will not be implemented. The issue will be reviewed in September 2010 but without commitment at this stage to the outcome.
|Costs in respect of:||Departmental staff||Members of Government|
Deputy Enda Kenny: I do not know what the value of reviewing the issue in 2010 is without an indication of what the outcome might be. Given the economic circumstances in which we find ourselves and the attitude thereto, why did it take so long to make this decision? Is back pay ruled out? If a review is conducted in 2010, will it have an impact on ministerial pensions, for instance, in the period between 2008 and 2010? Will that issue be included in the review? Does the same apply to county managers, judges and members of the higher ranks of the public service, who are included in that category?
The Taoiseach: It refers to all the people who are affected by the review body’s recommendations, including all those to whom the Deputy referred. I do not envisage that any retrospection will be contemplated. We are talking about requiring a Government decision to activate this matter. The Government has made the decision that no further increases will be paid to those who already received the first payment. Politicians who did not receive any payment will not receive an increase and the issue will be revisited by the Government in September 2010, without any commitment.
Deputy Eamon Gilmore: What parts of the recommendations of the review body have been implemented? As I understand it, pay increases were recommended for a range of senior public servants, including senior politicians, that is, Ministers and office holders, as well as judges, senior civil servants, chief executives of State bodies and county managers. Has any part of the review body recommendations been implemented? Does yesterday’s decision mean that no further part of the recommendations will be implemented?
The Taoiseach: Those who received payments under 5.5% in the review body recommendation were paid that amount in September 2007. Those whom it was recommended should be paid more received 5% in September 2007. There was a proposal that they would get another 5% in September 2008 and the remainder in September 2009. The Government made a decision early this year to defer that for a further year so the second increment for those who got a first increment in 2007 would be due in September 2009.
We have deferred the whole thing and said that there will be no payments for anybody still awaiting some form of payment until September 2010 when a Government decision will be needed to see whether it will be activated in any way in the future.
Deputy Eamon Gilmore: I do not know if the Taoiseach has the figure with him but could he tell us the total cost of implementing the recommendations? How much of that has been committed to being implemented or to being paid and, therefore, what is the annual saving as a result of yesterday’s decision?
Deputy Leo Varadkar: It seems that the decision to defer these pay increases to 2010 is just another example of the Government operating on a wing and a prayer rather than taking the opportunity for real reform. Essentially, the Government has recognised that there is a crisis in the public finances and has just put many things off and long fingered them for a few years in the hope that something will come up next year or somehow another €10 million will magically turn up.
My question for the Taoiseach is really simple. Why has he not done what he should have done, namely, cancel them permanently and reassess the whole basis for the review body on higher remuneration which based its recommendations on erroneous comparisons with the private sector? Why did the Taoiseach not take the opportunity that exists for real reform, cancel these pay increases permanently and set up a new system whereby pay increases for higher civil servants, judges, etc., are linked to performance and reform and not this erroneous link with the private sector? Why did he just take the easy and soft option and long finger it to 2010 so that we can go back to the same old flawed policies?
The Taoiseach: To link it to performance with whom? That is the question. I take the view that public servants should be paid a remuneration commensurate with the responsibilities of what is available for similar jobs in the private sector. In that way, we try to ensure that we have more cross-pollination between the public and private sectors. We will get more people from the private sector coming into the public sector and vice versa. This is good for careers, experience and people understanding the disciplines that may apply in both sectors and the ethos of the public sector. I do not agree with the Deputy’s premise that there is a flaw in comparing those at the top end of the public sector with the lowest quarter of those with commensurate jobs in the private sector.
I also agree that there is no question of those in the highest echelons of the public sector obtaining, seeking or being granted remunerative packages like those in the highest reaches of the private sector. It would go against the ethos of public service. However, we must also ensure that there is some process of arbitration and evaluation. Those terms of reference for the review body on higher remuneration are set out on each occasion it is asked to decide. It was over seven years since the body was asked to do so for these categories of people who include chiefs of staff and higher public servants. Ministers are, of course, included in that. The developments in the private sector in that time brought about a situation where even looking at the lowest quarter of comparable jobs in the private, not the middle or higher end——
The Taoiseach: People who are well qualified in this area are members of that review body. They might know a little bit more about it than the Deputy, although he might be surprised to hear that. They were in a position to make comparisons which stack up in terms of the process and methodology. That is the situation.
We know all the pompous arguments made thereafter and the political hay that was sought to be made on the head of it. The fact is that if one wants to avoid anomalies or a situation where we allow public sector pay to trail way behind comparable positions in the private sector — I am not talking about the upper echelons which are at a rate of pay that is way beyond my comprehension but people who are in comparable positions — one needs to find a means by which one has some method of assessment and evaluation.
That is the wider policy issue. As I said when I became Taoiseach, I believe this is a matter that needed to be considered in the context of upcoming pay talks, the question of social partnership and its demonstrable effect. In view of the deteriorating situation in the public finances, the Government made this decision, felt it was timely to make it in the context of having received the Exchequer returns and was making decisions in any event in respect of wider expenditure issues, which was the right thing to do. It is also timely given that we have now finally come to the point where perhaps the pay discussions element of the social partnership talks will probably get under way this week.
Deputy Leo Varadkar: Public sector pay does not lag way behind private sector pay. Numerous studies carried out by people who know more about this than the Taoiseach or I show that this is not the case. This is one of the erroneous arguments that has crept into the Government for some reason.
We can agree to disagree on that but I do not understand why the Taoiseach does not use the opportunity of these massive pay rises to shoehorn real concessions and reform from the people who stand to benefit. I do not understand why he is simply saying that we will defer it to 2010 when the economy will, hopefully, go back into growth, there will be enough money and we can go back to the way things were. Why does he not use it as an opportunity to say that these pay increases will not be paid unless we get real reform and concessions from the people concerned, for example, longer sittings and working hours for judges? The only opportunity the Government has to shoehorn reform is pay yet it is not prepared to use it. I do not understand that.
The Taoiseach: I do not accept that we do not do that. The wider pay agreements are based on ensuring industrial peace and that we have ongoing reforms in the public service that are agreed to by the trade unions and staff representative bodies. Continuing reform is ongoing. The OECD points out the need to accelerate that, particularly at times when resources are tight and in view of the commitments we have all made in the social partnership Towards 2016 agreement, which is a ten-year framework agreement. This entire agenda is a centrepiece of how we can proceed.
The way one achieves objectives in this regard is through working in partnership and finding solutions with partners on these issues. The OECD report provides an excellent background and framework within which we can advance that agenda. The question of continuing civil and public modernisation is part of the non-pay element of pay agreements. As we saw with the announcement yesterday, we must engage with those stakeholders to bring about the changes that are required in the interests of greater efficiency and effectiveness.
Deputy Eamon Gilmore: I have a few questions arising from the decision not to implement the recommendations and to review them again in 2010. Are there pension implications arising from that decision? Does the Taoiseach have an estimate of the number of persons covered by the review body who are likely to retire between now and the review date in 2010? Is it the intention of the Taoiseach to continue the review body mechanism as the means by which pay is determined for the top end of the public service? Does the Taoiseach accept that the idea of comparison to the private sector is a false comparison?
In the seven year period leading up to this review, top executive salaries in the private sector have gone mad. Chief executives of banks and major companies pay themselves in millions while their employees are on the minimum wage. A major gulf has developed in pay culture in the private sector, which is unprecedented. Over the past decade in the private sector, here and worldwide including the United States, there is the idea that chief executives and top executives of private sector companies are so wonderful that they pay themselves in millions while they pay many of their employees the minimum wage. It is nonsense for the public sector to replicate that or make comparisons based on it. The issue that must be addressed is the major gulf in earnings between those at the top end and those toiling at ground level.
The Taoiseach: The comparison made in respect of these recommendations was not comparing those who were the subject of the review body to the highest echelons of the private sector. I agree that this would be absurd. It took the lowest quarter of those in comparable positions.
The average increase recommended by the review body was 7.3%. The review ranges from a number of posts that received no increases to one post, manager of Dublin City Council, the pay of which was increased by 36.2%. For half of those covered, such as Civil Service assistant secretaries and related grades, including university professors, the increase is 5.5%. When one takes away the hyperbole that surrounded the report when it was published, the period being examined was seven years. This is a fair point to make. Looking at the substance of the recommendations, they were arrived at by comparison between public service posts to posts in the private sector with comparable levels of duties and responsibilities. These were based on the lower quartile of the private sector rates and further reduced by 15% to allow for the superior value of public service pensions relative to the private sector.
Concerning members of Government and other political office holders, the review body considered that direct comparison to the private sector was not appropriate and that the salaries of senior public servants was a more relevant comparator. In their case, therefore, the comparison to the private sector is an indirect one. As the review body points out, the overall effect of the review is that the salaries recommended are below the average level of salary for comparable posts in the private sector. The increases reflect, in a modified form, what has happened to pay in the private sector.
Regarding the argument that pay in the private sector is dependent on performance, the salary levels recommended by the review body are based on the basic fixed pay of the private sector salaries. The review body recommends performance related payments for many of the public service posts covered but the maximum possible is 20% of pay. The review body states that this is much less than the proportion of pay available for many in the private sector.
While I recognise that the findings of the review body attracted some criticism, and I am aware of the sensitivity of the issue in terms of public service and national pay policy, there has never been a time when increases for these posts were regarded as timely. The period of this review was seven years; under benchmarking, it was four or five. The question of why there should be a separate pay review for higher public servants has been determined by negotiation between management and trade unions and, where necessary, with recourse to third party adjudication by the Labour Court or the arbitration board.
Recently, the benchmarking process was established by agreement between public service employers and trade unions. The top posts in the public service are in a different position —their pay cannot be determined through the industrial relations machinery because they are the managers in that context. Standard increases under the national pay agreements are applied to these posts but the local bargaining or similar provisions of these agreements cannot in practical terms apply to these top public service manager posts because they would negotiating with themselves and we could not have that. Instead, the pay of these posts is determined by Government and adjusted on the basis of recommendations by an independent review body that is requested to carry out reviews from time to time. The last such review was conducted in September 2000.
The review body estimated the cost of the increases recommended, if they were all made, would be €16 million annually or 7.3% of the pay costs of those covered. That is a weighted average increase. The level of increase varies from group to group.
Regarding recommendations on pension arrangements, as part of the general review the body commissioned a detailed examination of the value of public service pensions for the grades covered in its remit by reference to pension arrangements in the private sector. The key finding was that the pensions of the groups covered are significantly more valuable than the pensions of the comparable groups in the private sector. The actuarial advisers put this at 15% of salary and applied a 15% discount to reflect the value of public service pensions. This is a fair reflection of the process and I hope it answers some of the questions.
Deputy Eamon Gilmore: Why did the Government decide to review it in 2010? The decision is not to implement the recommendations to make the payments. Why did the Taoiseach decide to review this in 2010? Could it not be addressed by making a fresh reference to the review body in the future rather than reviewing the implementation of these recommendations?
The Taoiseach: The last review was September 2000. We are saying that we will not pay the rest of the increases and will examine the situation in 2010 if the situation has improved for those who claim they have an independent review body recommendation. This was always implemented under successive Governments in the interest of trying to maintain confidence in pay determination for this important, albeit smaller, group in the public service and to confirm there is a process in place that is not being abandoned but whose recommendations cannot be implemented in view of current economic circumstances. That is a fair, reasonable, sensible approach.
Deputy Andrew Doyle: Can the Taoiseach confirm that the review body’s recommendations do not apply to State agencies, such as the HSE? Given that the paper on cost-cutting measures yesterday referred to reviewing all State agencies in respect of activities, staffing and costs and that the higher pay remuneration package will be put on hold until 2010, is it the plan to incorporate this into the review? For instance, the HSE has employed a new PR person who may turn out to be the best value for money but it is not proven as yet. We will ensure the measures he recommends are acted upon.
The Taoiseach: The review body refers to this category of people in respect of this report. What bodes for the future, I cannot state. If we want to get people of commensurate ability into the public service to deal with very important issues, we must have an attractive enough remunerative package to have the person do the job. It is an indication of what happens if one leaves a very anomalous situation between wage rates in the public and private sectors at high managerial posts. The requirement is often for Government, agencies or Departments to seek to obtain specific approvals in respect of remunerative packages to bring on board the people chosen by the committee established to find the person with the requisite skills to do the job.
This is why in our effort to show probity, with which I agree, in the context of the decision we made in terms of the present economic circumstances, the need to avoid creating further anomalies arising out of that is an issue which must be considered for the future. A pay review recommendation body examines all these issues in the context of categories of people and at what grades they should be, based on an updating of whatever responsibilities they may have in a Department in which traditionally they may have had less responsibilities in the past. All these issues are dealt with independently at that level. This is not an easy area and we must be careful to find ways and means of arbitrating on these issues in a way that ensures the best of people are available to do these very important jobs, which is the purpose of the exercise.
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