Wednesday, September 24, 2008

Surfing the Tsunami

The recent draft agreement between the Social Partners was an exercise in buying time. Buying time for what I'm not quite sure. Time is not on our side, not least because of the financial tsunami now threatening the global economy. In most regards the draft agreement is a short term agreement dealing with short term issues: leaving all the hard stuff - like pensions and public sector reform - to another day.

This is a pity because the single largest source of inequality in Irish society now emerging is that between those with public-sector pensions and those without. Even among those with private pensions, the prospects for their future material wellbeing are not looking good right now. As reported in today's Irish Independent, the recent stock market turmoil has wiped billions off the value of the pension funds that private sector workers are dependent on. Sure, fund values can recover - but the value of the ISEQ yesterday (€51.4 billion) is just 40% of its value at its historic peak in February 2007 (€127.3 billion). It will be a decade (and, more likely, much, much longer) before we see a return to even this nominal value. Pity anyone retiring in the next ten years.

But not our public sector employees. As the Minister for Trade and Commerce John McGuinness TD put it recently - in an extraordinary speech:
The public service is the back office of this country. It spends money hard earned by others. At its higher levels it should be advising ministers, bringing forward initiatives and indeed restraining short term political impulses. It is honest, impartial and full of good people. But it is now so protected by its unions that it has largely become a reactionary, inert mass at the centre of our economy. Its culture destroys ambition, resists change and is now so insulated from reality that information can be withheld from a Minister, unfavourable reports are doctored and answers to parliamentary questions that come too close to the bone are masterclasses in dissemination and obfuscation, which can deny our T.D.’s the information they need to get to the heart of a matter.

... As a consequence, there are far too many well paid but unhappy square pegs in round holes throughout the public service. Furthermore, most State institutions are not subject to many of the controls and regulations which are hung around the necks of private individuals and commercial enterprises.

... I am particularly concerned by the fact that the public service continues to employ, adding more and more people who are almost impossible to let go and who will in due course be getting inflation proof salaries and pensions. In today’s world this is madness, if it was ever sensible, and I believe the government should tell the unions that the pay and conditions of new employees will be substantially different, thereby drawing a line under an arrangement that I consider an abuse of the taxes paid by the owners and workers in the private sector.

The State and its employees should broadly be subject to the same rules and regulations as everyone else. If this is not done we are running a two tier Ireland. We are reinforcing the belief that there is something exceptional, something a cut above the rest, about being an employee of the State.

That attitude, the lack of accountability, the lack of professionalism and the virtual impossibility of being sacked is destructive. It steals individuality, encourages arrogance, forces compliance to a culture, drains enthusiasm and denies the people, politicians and wealth creators of this country the benefits of a modern, high powered, creative arm of the state that is vital to our continued success. The Public Service has to be immediately, radically overhauled because we cannot afford it in its present form.
Sorry for the lengthy quote - but you have to admit it's a refreshing change from the bland platitudes that accompany most discussions about public sector reform. Curiously, the Minister's speech is not available on the Department's web site - an oversight I'm sure ...

At a time when the public finances are increasingly fragile, little is being done to mitigate the huge burden of public sector pensions on present and future tax payers. Ireland is not alone in this regard, of course. A similar divide between private have nots and public have lots is emerging in the UK. And if you think the current financial turmoil in the United States, with $1 trillion of imploding bad debts, is bad then consider the consequences of that country's $99.2 trillion in unfunded liabilities for social security and medicare.

Maybe we should all get a nice job in the civil service until the storm has passed.

1 comment:

  1. Good man John McGuinness, I'd heard about the speech, but inexplicably was hard pressed to find it's content. I'd love to have a civil service defined benefit pension coming my way as opposed to the stale rolo and chewing gum wrapper that my DC pension will probably end up as, so I'd be between two minds, chuck the nice add-ons for the state-ys just after I get a job with them (like that'll ever happen)

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