There are two good reasons why John Corrigan, head of the National Treasury Management Agency (NTMA), decided not to “accept” the near €250,000 bonus he was due to receive from his state employers last year on top of his €490,000 salary.
One is obvious: the state is bust and cannot afford to make such payments. This is particularly the case when it comes to someone who is already exceptionally well paid, and many would argue overpaid, from the public coffers. The second is less obvious but no less important: how could Corrigan negotiate with the International Monetary Fund (IMF), the European Commission and the European central bank (ECB) when it comes to changes in the terms and conditions of the loan agreement reached last November if he is earning what might well be a multiple of the salary enjoyed by those who are on the other side of the table?
Corrigan is not alone in this dilemma. It is officials, not politicians, who do most of the heavy lifting when it comes to negotiating with the so-called troika that now controls our finances. Ministers tend to arrive when the details have been sorted or the negotiators have reached an impasse. Brian Lenihan and Brian Cowen signed off on a deal last November that was agreed by a team led mainly by Corrigan and Patrick Honohan, governor of the Central Bank of Ireland. One can only imagine what the IMF/European Union team thought about the pay levels enjoyed by the Irish officials arguing against the imposition of severe austerity measures.
Honohan is among the best-paid central bankers on the board of the ECB. One of his deputies, the financial regulator Matthew Elderfield, took up his post at the start of 2010 on the basis of a salary of €340,000. Kevin Cardiff, who oversaw the finance department’s control of the banks before the introduction of the bank guarantee, is paid €229,000 as its secretary-general.
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The EU looks askance at what our state pays top officials in this country, even if rates are less than those enjoyed by their predecessors. Neither is it impressed with the pay and conditions offered to “ordinary” public servants, including gardai, ambulance personnel, nurses, teachers, doctors and tens of thousands of administrators. Most are paid much more than their equivalents throughout Europe, and arguments about the cost of living here or burdens such as mortgage repayments make no difference. Europe wants prices and public-sector wages returned to what they consider competitive levels. With an annual gap of €15 billion between the state’s income and expenditure, it’s hard to argue the case for generous pay at the top level, not to mention bonuses.
Of course, the creation of this state elite is itself a fascinating story. Until recently the NTMA has operated behind a veil of secrecy that would have done justice to MI5 in Britain. And now we also have the National Asset Management Agency (Nama), which could give MI6 a run in the secrecy stakes. This is the body with the near-impossible task of managing pretty well the entire portfolio of development and associated loans made by toxic banks during the politically endorsed madness of the boom years.
Employees in the offices that house the NTMA and Nama are rewarded generously. Sixteen earn more than €200,000 a year. Another 22 are getting between €150,000 and €200,000, while a further 65 earn between €100,000 and €150,000. Many have come from the commercial property sector, where their incomes had almost collapsed.
Defenders of Nama (there are a few) argue these people are entitled to generous bonuses if they succeed in making a profit on the sale of the agency’s property while avoiding destroying the economy in the process. There is also an argument that they are doing a job that is beyond civil servants. That was the very argument when the NTMA was created to manage the national debt.
A little more than 20 years ago the then government decided the department of finance was not fit for purpose (sound familiar?) when it came to managing the country’s enormous public debts. At the time, the interest bill on the state’s borrowings consumed more than 25% of total tax receipts (again, sound familiar?). The finance department didn’t have the expertise to run a treasury operation that would get the best prices on the international debt markets. It couldn’t induce the best people to join the civil service because the pay and conditions apparently weren’t attractive enough.
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The NTMA was set up to recruit the best on the financial markets, mandating them to go toe to toe with those employed on huge salaries and bonuses at privately owned financial institutions. The agency was kept “off the books” so that other public servants would not see what its employees were paid. A system was put in place whereby much of the annual income earned by NTMA employees was based on performance, thus spawning the bonus culture.
But things went too far. Ten years ago Michael Somers, the NTMA’s former boss, got a super deal, apparently to compensate for the fact that he wasn’t in the private sector. According to documents obtained by this newspaper after a lengthy and difficult campaign using the Freedom of Information Act, not only was Somers given a salary of €387,000 all that time ago but he was also entitled to earn up to another 80% in the form of a bonus. This, it was claimed, was to bring his bonus levels “into line with other financial institutions and to compensate for the absence of share options”.
Charlie McCreevy, the then finance minister, increased the salary to €460,000 in 2004, and by 2008 Somers was paid a salary of €565,000 and a bonus of €403,000. He got another top-up of €35,000 for being a “commissioner” of the National Pensions Reserve Fund. Somers justified these payments on the basis that it wasn’t even half of what was on offer to people such as Eugene Sheehy at AIB and Brian Goggin at Bank of Ireland.
When he retired Somers got a lump sum of €842,000 and an annual pension, paid presumably out of current government cash flow, of €265,000, making him the highest-paid public-sector pensioner. He is entitled to €150,000 per annum from his part-time role as deputy chairman of AIB, to which he was appointed by Lenihan.
It is possible to make the argument that Somers’s performance entitled him to all those rewards. The NTMA performed as hoped in raising and repaying debt. It also got a decent return on the money contributed to the National Pensions Reserve Fund. But the pensions fund has been emasculated to pay for the bank recapitalisation programme, and the NTMA was locked out of the debt markets even before the IMF deal last November.
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Corrigan may be getting paid less than Somers but, given the manner in which activity at the NTMA and the pensions fund has dried up, he is still on an extraordinary deal. In this new era, state employees such as Corrigan can forget about bonuses for many years to come and are going to have to accept lower pay too. Compare his pay with what his equivalents in Britain or Australia are earning and it becomes clear that a 50% reduction would not be out of line if anyone wants to trot out the international benchmark line.
It isn’t only for the reasons outlined at the start of this column: when you think of cutbacks in services for the ill and elderly and the attack on low-paid workers, a state-funded pay packet of nearly €500,000 is not suddenly all right because a bonus is being waived. Fairness dictates that the government must get a grip on the remuneration being offered to employees in the various wings of the NTMA.