The Government and social partners who met last week are starting to turn their attention to the next partnerhip deal. Benchmarking II is looming. But, as Economics Editor Marc Coleman, shows, we don't know if Benchmarking I - supposed to bridge a claimed gap between public and private sector pay - was value for money because key data that underpinned it remains secret.
In 1776 the American settlers of the 13 colonies revolted at being taxed by Britain without being adequately represented in Britain's parliament. Among their sympathisers was one Irishman by the name of Edmund Burke, who enunciated the colonists cause of "No taxation without representation."
Several decades beforehand, another philosopher, Jean-Jacques Rousseau, outlined a vision of a social contract in which different social groups would be willing to co-operate, provided their interests were fairly represented. More than 200 years later these ideas of the enlightenment are brought to life by a very practical issue facing Ireland today: the issue of benchmarking.
Last year the Government committed itself to conducting a second benchmarking exercise. Discussions on this will occur in parallel with talks between the social partners that began last Thursday on replacing the existing social partnership agreement with a new one.
But the question has to be asked: Do we need a new benchmarking deal?
First things first. How much did we spend on the first one, and what did we gain by it?
Benchmarking I was agreed in 2002 and awarded an average rise in public pay of 8.9 per cent. This was on top of the usual annual pay increases that public servants receive. Public-sector pay is now approximately €1.1 billion higher than it would otherwise be.
Its impact on the ordinary punter must be coupled with the increases in numbers in the public service since benchmarking began. Table 1 shows that the exchequer pay and pension burden has risen by around 40 per cent since 2001. As a share of overall tax revenue, it has jumped from about 36 per cent to about 40 per cent. This reflects the impact of benchmarking, but also of a rise in the number of public servants.
Benchmarking I was justified by a feeling by many in the public-sector unions that, having helped to nurse the Celtic Tiger in its infancy, they had been devoured by it. By the late 1990s private-sector pay was - allegedly - outstripping public-sector pay, and valued staff were deserting the public service. Graduates were sniffing at Civil Service jobs that were once trophies of career achievement. Significant pay rises, it was argued, were needed to restore morale and attract new blood.
It also aimed at tackling the problem of the age-old problem of wage relativities. No sooner would a government agree a pay increase with bus-drivers (for example) than another group of public-sector workers would sulk, and demand the restoration of whatever relativity had just been altered. Finally benchmarking attempted to tackle the thorny issue of reform and productivity in the public sector.
Did the public service pull its weight during the Celtic Tiger? Were public servants underpaid relative to those in the private sector, and was significant reform achieved by the benchmarking exercise? Or was it just a cynical exercise specifically timed to give public servants a reason to vote for the government? Let's take these questions one by one.
The role of the public sector in economic growth in any country is hard to pin down. Some economists say the Celtic Tiger occurred in spite of rather than because of the public sector. This isn't totally fair. Over decades the education system painstakingly cultivated a capable labour force, while the Industrial Development Authority coaxed foreign companies to provide it with jobs. Neither were the economic problems of the 1980s initiated by the public-sector unions.
And although the delay in solving those problems can be attributed in part to their intransigence during the mid-1980s, the Irish trade-union movement has, compared to trade unions in most European countries, been relatively enlightened when it comes to co-operating with government in the national interest.
Public-sector unions are nonetheless open to more recent criticism. In 1998 unions in Telecom Éireann attempted to pressure the Government into seeking a derogation from EU rules requiring greater competition in the sector, which is a vital part of the Irish economy.
When the IDA made it clear that the stance of unions was seriously endangering the prospects for significant foreign investment in Ireland, the Government refused to seek a derogation. Nonetheless the incident revealed how the interests of public-sector unions can be in conflict with economic progress.
An Post is a more recent example of how reform remains slow. Businessman Paul Kavanagh recently resigned from its board, citing frustration with the slow pace of reform in the organisation. This comes at a time when An Post is struggling to implement changes in its mail delivery and collection division of the kind that could lead to significant cost reductions in the troubled company. A dispute over work practices and pay increases has resulted in recent court action.
This seems to indicate a throwback to the bad old days of Luddite opposition to reform, although trade-union claims that the quality of An Post's management is a key problem in the company cannot be ignored either. Whoever is right, An Post remains a test case of the public service's ability to modernise.
The more contentious issue of benchmarking is whether public servants were underpaid. In June 2002 the Public Service benchmarking body conducted a job evaluation survey involving 4,000 public servants, comparing their remuneration with equivalent workers in the private sector.
The data were gathered and analysed with a view to justifying benchmarking pay increases. Controversially, the data were not published. The reason cited for non-publication was that information on private-sector pay had been given to the Government on a confidential basis and could not be disclosed without compromising those involved.
This view is not universally accepted. One of the benchmarking body's members, Jim O'Leary, resigned from it. Although originally citing time constraints as the reason, he subsequently wrote a paper entitled Benchmarking the Benchmarkers, or What Are We Getting for Our €1.1 Billion? which took a dissenting view from the final benchmark body report.
In that paper O'Leary suggested he had been privy to information that he "could only have discovered as an insider" but which he was prevented from publishing for confidentiality reasons. The implicit criticism was that the results of the job evaluation studies did not support the pay claims made in the final benchmarking report.
A subsequent paper by O'Leary, Rory McElligott and Gerry Boyle, Public-Private Wage Differentials in Ireland, 1994-2001, concluded that pre-benchmarking public pay levels were actually 11 per cent higher than those in the private sector. A more recent statement by the Irish Small and Medium-sized Enterprises association, Isme, asserted that public-sector pay was now 41 per cent higher than private-sector pay.
Impact, a leading public-sector union, has criticised the comparison. The figures in the second O'Leary paper, they argue, compare apples and oranges in that they compare public-sector workers with workers in industry. Public servants are better educated and more capable than industrial workers and should earn more than them, according to Impact. Better to compare public-service pay with more educated workers in the private sector, they say.
But such information was gathered in the so-called job evaluation exercise of the benchmarking body, only to be suppressed. The question of whether, on average, public servants were underpaid before the benchmarking exercise will remain a mystery until those data are published.
What also remains open to question are the very different rates of pay increase awarded to different types of public-service worker. Table 2 illustrates wide differences between the awards recommended by the benchmarking body for just some of the many types of staff in the public service. The reasoning behind these differentials remains, as yet, not fully clear. A real benchmarking exercise would provide fully comparative information on this.
Since the conclusion of the first benchmarking agreement, the Government has committed itself to increasing transparency in this area as part of the current Sustaining Progress partnership agreement.
The so-called O'Brien report deals with public-service pay levels for the small number of highly public servants who are not covered by benchmarking, such as judges, ministers and semi-State chief executives. In its submission to Cabinet last week it took account of the more generous pension benefits accruing to those covered by its recommendation. This sets a good precedent for any subsequent benchmarking exercise to follow.
Another issue is whether pay differentials, even if they existed, have actually hampered recruitment. Isme says 26,000 extra public servants have been hired in the last four years, suggesting that the State has no problem in attracting new staff. But Isme figures on Civil Service recruitment relate to the years following the benchmarking exercise and may be an indication that it has succeeded in its exercise.
But cultural and organisational factors are also a problem in retaining staff. Frustration among public-service staff with high levels of bureaucracy and inertia may be a far more serious barrier to recruitment and retention than alleged pay differentials.
The final question relates to the benefits of benchmarking.
The Civil Service Performance Verification Group has received three reports from the Department of Finance so far. The latest was issued in May. According to the reports, benchmarking has resulted in considerable progress in delivering improved customer service via the internet.
Examples of real benefits to the public include faster processing of motor tax and increased efficiency in the passport office. However, in spite of progress in so-called customer front-line, these reports are less enthusiastic about reforms in high-cost and labour-intensive back-office parts of the public service. There are concerns in the Department of Finance about the efficiency of several Government departments including the Department of Health, a focus of recent adverse news coverage.
The essence of benchmarking should be checking the performance of staff against reasonable standards with a view to improving performance. Of all the studies on benchmarking, perhaps the most balanced comes from John Fitzgerald of the Economic and Social Research Institute. He finds that benchmarking will benefit the Irish economy to the extent that it targets those areas where pay increases are really needed.
The first benchmarking exercise has broken the age-old linkages between pay for unrelated types of work. In doing so it has opened the door for public-service pay increases to reflect what really matters, including productivity gains, openness to reward, individual and teamwork effort and supply and demand for comparable types of staff.
The door is open. The question is whether the Government will walk through it. Whatever its flaws, benchmarking is an opportunity. The public service has many dedicated and hard-working people within its ranks.
A 2003 study by the National Centre for Partnership and Performance shows that 72 per cent of public-sector staff were in support of embracing significant change and increased responsibilities. Benchmarking II could be just what the doctor ordered for Ireland's public service.
One thing is clear. Any second benchmarking exercise must improve on the lack of transparency in the first one. If it is not, then Irish taxpayers may conclude that that is a case of taxation without due representation.