Turlough O'Sullivan of IBEC grossly exaggerated the decline in public finances, writes Jack O'Connor
Fair play to Turlough O'Sullivan. Never one to miss an opportunity, he latches on to the publication of the Exchequer returns for the first half of the year to launch another attack on workers.
His article (July 3rd) argues that a modest deterioration in the public finances merits the complete abandonment of the public service benchmarking agreement. Given IBEC's insistence on rigid terms for "compliance" in the current national agreement, his call on the Government to renegotiate a key part of the agreement within three months of signing off on it is breathtaking.
Certainly, there has been a deterioration in the public finances. But this was not unexpected. Throughout the boom years of the late 1990s, it was accepted that the economy was expanding unsustainably, that there would inevitably be a slowdown in growth, and, hence, renewed pressures on the public finances. But Mr O'Sullivan's opportunistic scaremongering grossly exaggerates the extent of this decline. The facts are as follows . . .
Exchequer returns released on July 2nd, 2003 indicate that tax receipts in the year to date are somewhat behind budget. But this may be as much a reflection of a weakness in the Department of Finance's budgeting process as of a crisis in the public finances. While the latest returns may be below those budgeted for, tax receipts in the first six months of 2003 were up 9.2 per cent on the equivalent period in 2002. And, even though the 2002 figures were artificially inflated by once-off non-tax receipts related to the euro changeover and McCreevy's plundering of the social insurance fund, total Exchequer receipts in the first half of 2003 are significantly up on the same period last year.
As a result and contrary to Mr O'Sullivan's depiction of a crisis in the public finances, the Exchequer current account remains strongly in surplus. This is set to persist, with the ESRI forecasting a current surplus of well over 3 per cent of GNP, diminishing only slightly in 2004.
As for the suggestion that public service workers are being exceptionally well rewarded as a result of the benchmarking process, if we include the three phases of the PPF, plus the extra 2 per cent, and the payment of a quarter of the benchmarking award (backdated to December 2001), pay for public sector workers has increased by an average of 20 per cent (compound) since January 2000.
The latest CSO figures show that average pay across all categories in industry rose by 25 per cent in the period since December 1999, as did. pay for managerial workers. Sothe public sector worker has not fared any better overall in recent years.
The public sector benchmarking agreement will begin to address this anomaly, but two factors must be borne in mind. Firstly, public sector workers will have to wait until January before the general terms of Sustaining Progress are paid to them. Secondly, the phasing of benchmarking will mean public sector workers will not see the final payment of the award until the middle of 2005.
With general pay forecast to increase by 4.4 per cent and 3.8 per cent in 2003 and 2004 respectively (ESRI Quarterly), it is easy to overstate the extent to which benchmarking will align public sector with private sector earnings.
And, of course, Mr O'Sullivan also omits to mention that the benchmarking payment is contingent on the achievement of significant measurable improvements in the delivery of public services. These have to be accountable, responsive to change, customer-focused, cost-effective and driven by quality, performance and results.
Apart from his general misrepresentation of benchmarking and the state of the public finances, Mr O'Sullivan's article is also highly selective in identifying income tax and excise duties as particular concerns. The facts speak for themselves. Income tax was just 3.9 per cent (or €115 million) below budget for the first six months of 2003 with the relatively small number of self-employed responsible for a whopping two-thirds of the shortfall. Meanwhile corporation tax was 4.8 per cent (or €136 million) behind forecasts. Mr O'Sullivan's attempt to distract attention from corporation tax is easily understood, given that Ireland already has the lowest taxes on company profits in Europe as well as the lowest level of social payments for companies.
At the same time Ireland also provides substantial public subsidies to the corporate sector in an unparalleled range of tax breaks, as well as support from a wide variety of public bodies dedicated to servicing the needs of private companies. Such feather-bedding occurs in an economy with one of the lowest levels of public expenditure in Europe. But Mr O'Sullivan would not dream of suggesting that these supports should be scaled back in light of the deterioration in the public finances.
He would prefer that the haemorrhage of medical personnel from our health service should continue rather than try to ensure that the pay of nursing or emergency personnel be improved. This may not mean much to Mr O'Sullivan or his colleagues in IBEC because they probably avail of private healthcare. But for most people the quality of our public services is a real issue - sometimes a life-and-death issue.
We do share one area of common ground with Turlough O'Sullivan - inflation. We have been extremely concerned at excessive price inflation in the services sector, but with this difference: we want action taken now. We are far from happy with the lethargic approach to tackling restrictive practices in the professions. Practices in the licensed trade need even more urgent action in the light of clear evidence of profiteering. But they also require the imposition of temporary price controls until such measures can take effect. Regrettably, IBEC is opposed to halting profiteering in this way. In tackling inflation, as in everything else, actions speak louder than words.
Turlough O'Sullivan asks that the same realities apply equally to everyone at work in the mistaken belief that public service workers are doing better than private sector workers. Now that we have set the record straight, I would ask for the same realities to apply between employers and employees, and between people of wealth, on the one hand, and the men and women of no property, on the other - so that we would begin to see some semblance of fairness in our society to accompany the obvious prosperity.