THE RISK and reward of politics, where every five years voters decide the fate of outgoing Oireachtas members seeking re-election, can often make it a cruel trade. It is not, however, a trade that fails to reward handsomely or to compensate adequately those who do engage in public life, as well as those who have done so and retired.
Taoiseach Enda Kenny, Government Ministers, TDs and Senators – even after modest salary cuts last year – are not just well paid. They are better paid than many others in society, whatever benchmark is used: national or international. Mr Kenny, with a salary of €200,000, earns more than British prime minister David Cameron, and Dáil deputies receive substantially more than their peers at Westminster or in Europe. The contrast in pay levels is striking, given the difference in population size of Ireland and Britain and the administrative responsibilities of their respective governments. But, given the weak and hugely over-indebted state of the Irish economy, in receipt of a €67 billion international bailout, the pay differential is impossible to justify.
Pay is one part of the remuneration of politicians. Pensions, often described as deferred wages, are another. Here again, the high rewards of office are matched by generous pension benefits in retirement, almost wholly paid for by taxpayers. This paper yesterday highlighted the pay of politicians when added to the value of their pension benefits. Given the parlous state of the economy, these are no longer affordable. By 2016 – the end of the Dáil term – if all 15 Cabinet members were then to retire, their pension entitlements, if secured by buying annuities today, would cost €36 million.
When the value of the pension benefits accruing to Ministers is added to their pay, their total annual remuneration can exceed €400,000. But because pension costs in the public service – which includes politicians – are recognised only when they are paid each year, the real cost, as measured by the net present value of the accrued pension liabilities, remains masked. The latest available estimate, for 2009, put the figure at €116 billion for the public service.
The real cost of public pensions is obscured when only the annual pension cost is recognised. This is in marked contrast with the transparency that surrounds defined benefit – final salary – pensions in the private sector. There some 80 per cent of the defined benefit schemes are in deficit, as pension fund investments have underperformed. Most schemes are closed to new members. Contributions both by employers and scheme members have risen sharply with retirement benefits greatly reduced. Some schemes face being wound up, as the Government’s four-year annual pension levy further depresses investment returns, and jeopardises their survival. The crisis in private sector pensions is apparent, and will have adverse consequences as benefits are further reduced, and as insolvent schemes are wound up.
The crisis in public service pensions has been ignored, not least by a Government that has failed to lead by example by cutting its own pay and pension benefits in line with what a country with a soaring national debt and in receipt of a bailout can afford. Government Ministers could restore some lost moral authority by showing some willingness to take some pain, by tackling such an obvious inequity.