Public sector reform must be priority, says ISME

The next government needs to clamp down on public service pay and push for improved performance from the State's employees, a high-profile business lobby group warned yesterday.

Setting out its agenda for the general election, the Irish Small and Medium Enterprises Association (ISME) said public sector reform had to be a priority for the incoming government.

Chief executive, Mark Fielding, pointed out that the public service pay bill had increased to €16.7 billion last year from €10.2 billion in 2002.

The benchmarking windfall that public servants received during that time accounted for €1.32 billion of the rise.

"The average public sector wage, at €45,689, is 45 per cent higher than the average industrial wage, which is currently €31,322, and this differential is widening," Mr Fielding said.

"Public sector pensions accounted for 9 per cent of the total pay bill at the end of 2005," he added.

"Over the period 2000-2005 the pension bill has increased from €750 million to €1.37 billion, representing an increase of 82.5 per cent over the period and still rising." Mr Fielding argued that the benchmarking exercise, which saw public servants receive substantial pay rises in return for pledges to improve productivity, value for money and quality of service, had not delivered on any of these things.

ISME wants the new Government to review the "flawed" benchmarking process. Mr Fielding said that, in any case, public service unions, including those representing nurses in the current dispute, were ignoring it.

He claimed that the Government was afraid to take on the public service unions, and said that this had created a situation where these unions can hold the State to ransom.

"It is about time that the nettle was grasped, with the incoming Government mandated to get to grips with the public sector for the benefit of everyone," he said.

ISME also wants the new government to tackle the Republic's falling competitiveness.

Mr Fielding said the rising cost of energy, commercial rates, transport and labour have hit small businesses, particularly those in the already vulnerable manufacturing sector. "Consequently, production costs are increasing by an average of 10 per cent annually, and margins continue to erode," he said.