Gardai should strike — and be damned

I agree with the central point Horgan was underpinning by his revelation, that gardai were already being paid an awful lot of money even before they won fresh wage concessions. But I wonder whether he didn’t make a conceptual error in assuming that pension contributions are generally made out of after-tax income.

The general rule of our income tax code is that you can deduct contributions paid into your pension fund from your taxable income. In return, pension income that later comes from that fund will then be subject to income tax. This latter point is regularly missed by left-wingers who yelp at the “pension expenditure”, or reduced income tax income, that results from payments into personal pension schemes. But the pension payments that come out of those schemes will be taxed; income tax is being deferred rather than avoided. To complain about the sum of tax income forgone when people put their money into pension schemes, while ignoring the tax income raised when people draw down their pensions, is dishonest­ drivel.

Horgan was on surer ground when he wrote that, according to the Pensions Authority calculator, a person aged 20 who wished to fund a standard garda ­pension — a €25,000 annual pension after 30 years’ service — would be required to contribute €30,000 a year. That is equivalent to 44% of average garda earnings.

One of my favourite writers was the late Gore Vidal. He came up with a truth that one dare not admit in public when he wrote that “every time a friend succeeds, something inside me dies”. He also stated that the four most beautiful words in the English language were: “I told you so.”

In October, I wrote: “The second benchmarking report, published in 2007, stated that ‘a fair rate for the employer cost of the bulk of the public service pension is just over 20% of salary. A comparable rate for the private sector is around 5%’. Back in 2007 interest rates and investment returns were higher than today. That means the net cost to the state of defined-benefit pensions may have risen, despite the employee levies that have been raised in the meantime.”

I did tell you.

Last week’s garda pensions story illustrates a central weakness of much left-wing political rhetoric. They argue passionately for more money for public services. But most of the extra money ends up in boosting already ample public sector pay levels.

Consider the 2017 budget. Of the €1.225m hike in current spending budgeted for 2017, public sector pay and pensions will rise by €768m while welfare payments are to go up €229m. More than 80% of the budget increase in day-to-day government spending will be on higher public sector pay and welfare. Less than 20% of the expenditure increase in the budget will be on those improved public services left-wingers crave.

Horgan’s report also drew attention for his proposal that industrial action by gardai should be deterred by cancelling the right of striking members to accrue additional pension benefits for five years. I’m not sure about his logic here either.

The big problem with this government’s reaction to threatened garda action is that it feared a strike would be a terrible development. It had to be averted even at the cost of jeopardising the government’s credibility and its entire public sector pay policy. I do not share ministers’ horror at the prospect of garda industrial action — for gardai already cause me sufficient horror when they are at work.

Consider a 442-page report just over a year ago from the Garda Inspectorate which found “a number of key challenges with the current structure of the Garda Siochana. This includes the minimal and often ineffective internal changes made to the structure of the Garda Siochana in response to recommendations made in many previous reports and inquiries”.

So reports that made grave findings about the gardai — think the Morris ­tribunal — were followed by changes that were “often ineffective”.

The Garda Inspectorate’s report ­concluded: “The current governance structure is unclear and there is no specific lead or unit for governance and driving organisational performance. The inspectorate has consistently found gaps between the development and implementation of policy and an absence of effective governance, leadership and intrusive supervision needed to ensure that policy aims are actually delivered.”

When did you last see one arm of the state — in this case, the Garda Inspectorate — conclude that another — An Garda Siochana — suffers from “an absence of effective­ governance”? Sadly, that conclusion­ matches my personal experience of walking around Dublin.

For instance, on any number of city centre streets, pedestrians are being ­harassed by people pleading for money — even though the activity is supposed to be illegal. And I reckon that about one in 20 drivers on roads in the suburbs is either on the phone or texting. How often have you seen traffic lights change, only for a stopped car not to respond to the green light because its driver was fixated on a mobile phone? Gardai struggle to put a stop to such obvious wrongdoing.

For me, the issue with the suggested strike was not how it should be averted, but how would we notice one had started? We would hardly have picked up on it in our daily lives but, in the parallel universe ­occupied by security correspondents and former security correspondents, the airwaves would have been bunged up with successive commentators telling us how terrible it was that the gardai were on strike, and what terrible things were ­happening on the street as a result.

They were the ones who told us the story about the garda who was so poor he was living in his car. And remember all those tales of how under-resourced the force was? The Horgan report shows that, during the years of budgetary austerity, the spending on gardai faced considerably lower cuts than general public spending.

The story of An Garda Siochana is a parable of public sector waste and mismanagement. There are thousands of good guards who enter the force with idealism but get ground down into cynicism as they must endure management ineptitude.

The gardai are also guilty of distorting public debate as the force channels information to its favourites in the media in return for soft coverage. Meanwhile millions and millions of euros are squandered overpaying gardai when that money would be better spent on more deserving causes.

PS: The government decision to introduce rent controls is an example of politics trumping economics. Professional economists are virtually unanimous in believing rent controls are destructive. In a poll of 464 economists published in The American Economic Review in 1990, 93% of US respondents agreed “a ceiling on rents reduces the quantity and quality of housing available”.

The Swedish economist Assar Lindbeck commented acidly that “next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities”. Lindbeck is a socialist.

Despite the compelling intellectual arguments against them, rent restrictions are politically popular. A recent report for the Communications Workers Union in Britain quoted a Survation poll that indicated only 6.6% of the UK public opposed rent controls.

From an investor’s perspective, Dermot O’Leary of Goodbody Stockbrokers argued the motivation to enter the Irish private residential sector was down. This may have negative implications for supply, queering the state pitch to entice large-scale institutional investment into the rental sector. We may also see higher rents in the future as landlords seek to protect ­themselves in advance from future policy interventions.

Investec’s Philip O’Sullivan argued that expectations of rental inflation were below the government’s proposed new limits and would have little practical impact. The danger is that, once the principle of rent controls has been conceded, the likelihood is that rules are likely to get only more onerous for landlords in the future.

Politics may trump economics in the short and medium run. Economics is likely to trump politics in the long run, as negative side effects of these measures outweigh their intended results.