The latest public sector pay deal to cost €887m a year
THE latest pay hikes proposed for public servants will cost the taxpayers €887million a year by the time they’re fully implemented, it has emerged.
A deal, which was agreed between the Government and public service union bosses yesterday, would see 250,000 State employees getting a pay boost of between 6.2% and 7.4% over three years.
However, it was given a frosty reception by Neil McDonnell, chief of Irish Small and Medium Businesses Association. He described it as ‘wealth transfer from the private sector, where workers are paid 40% less’
For 50,000 State employees hired after 2013 with inferior pensions, the gains would be even higher, with increases of between 7% and 10%.
If accepted by union members, €178million will be added to the public sector pay bill next year, followed by another €370million in 2019 and €339million in 2020. Public Expenditure Minister Paschal Donohoe yesterday claimed the agreement was ‘affordable’ and would not eat into plans to reduce the high taxes workers pay.
‘It will not affect tax reform or plans that the Government may have [for Budget 2018],’ Mr Donohoe told the Irish Daily Mail.
‘I’m saying that the part that tax reduction will play is as important as ever.’
He said there was an emergency brake in the deal if the economy should overheat and the rises – of a standard 2% per year – should become unaffordable.
However, ISME yesterday pointed out that the disparity between public sector and private sector wages.
A Central Statistics Office survey this year revealed that public sector workers are paid 40% more than those employed in commercial concerns.
Mr McDonnell said: ‘There is a legitimate affordability issue – Ireland is still borrowing money, hundreds of millions every month. We are breaking the fiscal compact by using GDP as a yardstick, when it is totally distorted by multinational inputs.
‘We should indeed be spending – but on the capital side, not the current side. We should be investing in infrastructure. The public sector pay deal is wealth transfer from the private sector, where workers are paid 40% less on average, to the public sector.’
But the minister said the package was ‘fair to everyone, and fair to those who depend on frontline services that are so important to the country. I believe this is an agreement that is fair to the taxpayer.’
The 90% of public sector workers earning €70,000 or below would see their docked wages restored to pre-crash levels, he said. Mr McDonnell said public sector pensions remained gold-plated, even if their generosity had dimmed slightly in recent years.
‘They are still defined benefit, not defined contribution, even if it is now based on average career earnings, rather than final salary.’ The unfunded pensions liability is now €410billion, nearly twice national debt, which is €215billion, having been €35billion before the financial crash.
Mr McDonnell warned that the deal would cause envy in the private sector and put pressure on competitiveness. ‘These are always used as benchmark figures for private sector negotiation,’ he said.
‘But there are firms in certain sectors that are decreasing their pay this year, and I would say that the vast majority of people [in the private sector] have not seen a pay increase since the crash.’
Comment – Page 14
Private sector paid 40% less