As anybody who works for an intelligent company knows, special pay increases — as opposed to general pay increases made available under a national deal — are awarded for good reasons only.
Your employer might feel in danger of losing your valued services and therefore unilaterally raises your pay. Or you go to your employer and set out your stall, arguing for higher remuneration. Make a strong case and, in a tight labour market, you may get what you want.
This does not apply, however, across the public service, where the monstrosity known as Benchmarking II is now set to unfold.
Public servants are like any other group of workers. There are high achievers and hugely creative types. There are people who may not be brilliant but put in long, hard hours and achieve much. And there are those who swing the lead, doing the minimum required to get through the working day.
Anybody who has sat in a public office trying to pay a bill is painfully aware of this reality. Yet Bertie Ahern, the Irish Business and Employers Confederation (Ibec) and the Irish Congress of Trade Unions (Ictu) persist with the bizarre concept of applying uniform rewards for alleged special effort across the entire state sector.
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The first benchmarking agreement is costing the state about €1.2 billion a year. The next agreement will be with us shortly and is likely to reflect the determination of the so-called social partners to make collectively determined special awards for public servants a permanent feature of our industrial relations.
The contempt in which taxpayers are held by Ahern, Ictu boss David Begg and Ibec chief Turlough O’Sullivan is underlined by the fact that the rationale underpinning the first benchmarking process was never published. There are three reasons why this secret has to be kept.
First, the productivity increases negotiated ranged from the vestigial to the nonexistent. Second, the increases were based on the false assumption that the public service was finding it difficult to recruit workers in a tight labour market. Third, there was a parallel assumption that public service pay was lagging behind the private sector: again this was a falsehood and the opposite was the case.
The raison d’être for benchmarking was the industrial relations equivalent of the third secret of Fatima. The second benchmarking process threatens to become the fourth.
Organisations such as the Irish Small and Medium Enterprises Association (Isme) claim that average pay in the public service is now 40% above the norm in the private sector. Isme has produced some evidence to back up its claim. The supporters of benchmarking offer us nothing.
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Benchmarking is the most extreme example of the irrationality of governing pay bargaining in the public sector. It does not stop there, however. Extraordinary pay arrangements are rife in what used to be known as the semi-state sector.
In recent days two senior figures in the trade union Siptu have threatened to scupper the entire system of national pay deals because the directors of Great Southern Hotels (GSH), a subsidiary of the Dublin Airport Authority (DAA), wish to sell the hotels as a going concern. Ahern says that the hotels will lose €8m this year, adding to the accumulated deficit of €40m recorded in 2005.
Reflecting the bargaining power of the unions at GSH, the cost of labour at the state-owned hotels (expressed as a percentage of sales) is 12% above sectoral norms.
Asked to explain their refusal to accept the proposed disposal of the hotels, the unions admit they use their position within GSH to attempt to set norms for pay and conditions in the sector. What they are saying is that the continuing losses should be ignored because the company is seen as a sort of sectoral exemplar.
The government, including Ahern, now supports the idea that the nine hotels should be sold as a going concern. Don’t hold you breath. With an election down the tracks it is hard to see the taoiseach upsetting this large group of workers. But if the unlikely comes to pass and the hotels are sold, expect the unions to claim at least 15% of the proceeds — and to get it.
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One must assume procedures for the management and reduction of overheads at state firms within a reasonable time frame were not agreed as part of the benchmarking process. In fact, it is safe to assume they were not alluded to at all.
For instance, the DAA, struggling to service bank debts incurred to pay for capital expenditure at competing airports, is trying to negotiate 200 redundancies at Shannon airport. It has had 23 meetings with its unions concerning this matter in the past eight months, all to no avail.
There has been a similar lack of progress at Aer Lingus, the state airline, which is legally prevented from taking free capital from its owner, the state, under EU law. The trade unions at Aer Lingus are vehemently opposed to privatisation, yet the plan that is now being considered will mean that EU law on subventions is negated and the proceeds of the first tranche of shares to be sold will be used to top up the staff pension scheme.
In other words, the state will forfeit part of the value of its stake in Aer Lingus in order to provide free capital that will be applied for the benefit of the workforce. Thereafter, the unions will similarly be entitled to a proportion of the proceeds of any further share sales.
The application of double standards of this ilk is now commonplace across the public sector. At the Electricity Supply Board (ESB), workers are being offered big lump sums to switch their employment to a newly created power generation company.
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This is to compensate them for the possible loss of their share of the proceeds of any future privatisation at the ESB, a privatisation to which they are totally opposed, in nominal terms.
All of this nonsense poses a huge threat to the finance minister Brian Cowen’s credibility as an economic manager. Unless he calls a halt, there is a danger that he will become a “soft touch”. The exchequer is flush with cash: January alone brought a huge surge in indirect taxes that were more than 20% above target. With the election in the offing, there will be a temptation to spend and to recruit more public servants.
Compounding the problem for Cowen is that he is identified with the slightly left-of-centre policy enunciated by Fianna Fail at Inchydoney 18 months ago. Cowen’s options are not pleasant, but he could make a start by insisting that any future benchmarking negotiations are transparent. This means the details must be made available to those picking up the tab.
But the process may already be beyond Cowen’s control. Ahern lobbed yet another hand grenade into the arena last week when he raised the possibility of a 10-year wage deal, taking us up to 2016, when the average Chinese family will be driving a 1.6 saloon car and the price of oil will have reached $250 a barrel.
Ten more years? No thanks.
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PS: The row over the operation of tolls on the M50 motorway will not go away. One key issue has been ignored in this debate. In 1987, when the deal was negotiated, the standard rate of corporation tax was 40%, whereas it is now 12.5%. In other words the revenue that would have accrued to the state from taxing National Toll Roads (NTR) profits would have been far greater had the old regime prevailed. At the same time, the likely growth in traffic through the Westlink was vastly underestimated. Everyone is complaining, but is hindsight not a wonderful thing? This is not to praise the original deal between NTR and the state. Evidence given to the Oireachtas transport committee suggests it was so loosely written that it is of little legal value at present. Olivia Mitchell, Fine Gael’s transport spokeswoman, claims there in a clause in the deal that obliges NTR to provide for the orderly and efficient collection of the tolls. No attempt was apparently made to invoke this clause when the need arose to upgrade and expand the toll plaza some years ago. The state simply picked up the tab.
A lot of mistakes were almost certainly made in relation to the M50 and the Westlink. But this should not invalidate the case for public-private partnerships on big road projects.