Pay rises for best-paid public servants cast a cold light on budget choices to come

To govern is to choose and, as anyone who has every served in government will tell you, many of those choices are highly unappealing. And there are consequences to everything you do. That doesn’t excuse any ministers from the responsibility to make the best choices they can, but understanding it helps us in turn understand how our country and its political system works and get beyond a cartoon version of politics which does nobody any favours — not the governed, the governors or those who aspire to the job.

There was a perfect example this week of a choice between two unappealing alternatives. The final wave of pay restoration to the best-paid public servants in the country is due to be introduced from next Friday, a step that will result in pay increases of 10-15 per cent for 4,000 of the public service’s top earners, who were already on salaries of more than €150,000 when the cuts were introduced. Nice.

Because the date for this great event is, unusually, prescribed in the legislation (rather than being subject to ministerial order), the Government would have had to pass countermanding legislation through the Oireachtas before next Friday — the Finance Miscellaneous Provisions (Shafting of Fat cats) Bill 2022, or something like that. Difficult, but that was indeed the intention in Government until relatively recently, when it was forced to consider two undesirable consequences of pursuing that course of action.

The first was a legal challenge to the legislation, though it is far from clear what form this might have taken. Government sources say they were advised that it was not permissible to amend or delay the terms of restoration. I don’t quite understand this. The whole purpose of legislation is, er, to change the law. Of course, the Government isn’t releasing its legal advice.

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The second consequence of blocking the pay rise would have been to torpedo any chance of reaching agreement on a new contract for hospital consultants. The doctors’ representatives made it clear to the Government in recent months that if their pay restoration was nixed — and 90 per cent of those affected are consultants — the chances of agreement on a new contract would go with it.

A new public-only contract, and with it the recruitment of hundreds of consultants, is a key plank of health reform plans; without it, there’s little chance of effectively tackling waiting lists, overcrowding and congestion.

The doctors are used to playing hardball with politicians, and they don’t bother to affect the deference that other well-connected insiders such as the Civil Service and the semi-State sector feel compelled to show their political masters from time to time. In truth, the consultants have been bossing the politicians for decades. This is why we have a) extremely well-paid consultants, and b) politicians who get the blame for the health service.

Having reluctantly concluded that it had to go ahead with the pay restoration, the Government was then faced with the fallout. It could hardly have come at a worse time. Just as the Taoiseach and his Ministers were telling people who depend on welfare, or are struggling on low incomes, or are finding themselves making choices between fuel and food, that they must wait until October for further State help, the Government had to explain why it was giving its best-paid people hefty pay rises. People managing on 20 grand a year were watching people get 20 grand pay rises. The timing wasn’t the best, admitted the Tánaiste, not previously noted as a master of such understatement.

The story was klaxoned on the front pages. You can imagine what it was like on social media. RTÉ, an organisation that has seen the odd controversy over excessive pay itself, piled in with gusto. Backbench TDs were livid. The opposition got out its torture implements. It was every bit as bad as Government backroomers feared when they identified the danger several months ago.

The episode will shine an unforgiving light on the budget choices that are shortly to come and which ministers are already trying to influence in their favour. These are always hard but they are especially treacherous this year, mixed as they are with a super-inflationary environment, the end of Covid-era fiscal looseness, rising interest rates, special spending demands (such as on mica redress), defence, victims of institutional abuse, Ukrainian refugees, climate measures, childcare, and a public sector expecting a whopper of a pay increase.

Will the government take any pre-budget action?

Listen | 40:35

Jennifer Bray, Jack Horgan-Jones and Irish Times Economics Correspondent Eoin Burke-Kennedy join Pat Leahy to discuss the long wait until October's budget and the mounting pressure on political leaders to ease the cost of living for Irish households. The group also discuss the proposed pay rises for top earning public servants, which is expected to provoke a strong backlash from Opposition politicians and the public.

It’s true that the Government has, as Eoin Burke-Kennedy of this parish told us on the Inside Politics podcast this week, some extra fiscal firepower — the hidden effect of inflation. Leo Varadkar seemed determined to tell everyone else, promising the biggest budget ever. But as he will discover, no matter how much money he thinks he has, he and his colleagues won’t have enough to keep everyone happy. Those days are gone.

How the question of public-sector pay will be answered will be an instructive one. Last week, the unions turned up their noses at a 5 per cent increase over the next 18 months, plus the one per cent they are due in October and the one per cent received already this year; not bad. By Wednesday, Varadkar (him again) was signalling there might be a better offer. You can bet there will be.

Every one per cent increase to public pay costs about €250 million, according to the Department of Public Expenditure. There are low-paid workers in the public service for sure, but the middle-ground workers there have less claim to inflation-busting pay increases. And higher-paid public sector workers have a thin case indeed for hefty pay increases that will come at the cost of tax cuts for all workers, or funding for welfare and services desperately in need of it.

Will the best-connected people, the insiders, do best? The last week suggests that’s exactly what’s going to happen.