herald

Saturday 16 December 2017

Dan White: Why public servants need to swallow a pay cut -- or suffer a worse fate

Nothing like it has happened before. Frustrated, tired and worried citizens who'd paid hard-earned money over for a holiday, or who needed to go on a business trip, decided enough was enough.

When public servants in secure, permanent jobs pulled the shutters down, the public got angry. With their trips in jeopardy, a group of the people caught out by the actions of Passport Office staff staged their own protest, refusing to get up and leave.

The question now is, does that sit-in last Friday mark a turning point? Ever since the Government cut public sector pay by between 5pc and 8pc in last December's Budget, the trade unions have been conducting a campaign of low-level disruption in an effort to reverse the cuts.

Instead of taking their members out on strike, the unions are trying to have the best of both worlds, with go-slows, not answering phones and shutting down offices which deal with the public. This allows them to continue drawing their salaries -- at average hourly rates of 47pc above those in the private sector -- while still keeping up the pressure on the Government.

In the early days, the general feeling was that the unions were showboating for the benefit of their members and that, once anger at the pay cuts had subsided, they would quietly abandon their campaign.

Consider the facts: This year the Irish Government will have to borrow €18.7bn to pay its bills. A large part of the cost of running the Irish State, about €18.6bn, consists of public sector pay. With public sector pay accounting for a third of day-to-day public spending, any cuts that didn't include reductions in public sector pay wouldn't be worth the bother.

Following the favourable reaction by the financial markets to last December's Budget and the intensifying Greek crisis, fears that Ireland might be about to go bust have faded. Ireland, Brian Lenihan assures us, has turned the corner.

Don't bet on it.

While NAMA will take most of the banks' bad construction and property loans off their books, it does nothing for the thousands of homeowners stuck in negative equity. This will almost certainly result in the Irish banks having to take a massive haircut on their €150bn of home loans, forcing the Government to pump even more capital into the banks.

Meanwhile public sector workers aren't the only people who have had to take a pay cut. The most recent figures from the CSO show that most private-sector workers have had to take pay cuts ranging from 2.5pc to 7pc. And that doesn't count the more than 250,000 workers who have lost their jobs since the recession began.

Faced with these facts there has been very little sympathy for the public sector trade unions. Last Friday's events should serve as a long-overdue wake-up call to the public sector trade unions.

With the EU having now apparently washed its hands of Greece, IMF intervention, possibly as early as this week, is now virtually inevitable.

Any failure by the Government to stick to its programme of public spending cuts will quickly result in the bond markets turning off the tap.

Now that the EU has made it clear that there will be no bail-outs for eurozone members this would quickly force us to go cap in hand to the IMF, which would demand huge public sector job cuts and pay reductions for those who kept their jobs.

That's why the public sector trade unions should accept last December's pay cuts as the least bad option and call off their industrial action now.

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