Enda Kenny’s pay cut… the 5% solution? Or is it 8%? Or hows about 25%? October 12, 2008
Posted by WorldbyStorm in Uncategorized.trackback
Just briefly, because it has been discussed here and here.
The news that Enda Kenny intended to take a 5% pay cut raised some wry smiles, if not quite laughs, around WorldbyStorm Towers this weekend. It doesn’t help to call 3% extra ‘populist nonsense’ (which indeed it is) a couple of days earlier. Makes one wonder at what percentile it tips from ‘gesture’ to ‘populist’?
Yesterday’s take on it on the Irish Times leader page was entertaining.
Enda Kenny’s decision to adopt a unilateral pay cut of 5 per cent has put it up to the Taoiseach and his Ministers, who are paid more than twice his salary, to at least follow suit. The Fine Gael leader’s decision is more than a gimmick; it gave credibility to his party’s pre-budget submission and its call for a public sector pay freeze next year for all those earning over €50,000.
Does it ‘give credibility’? I seriously doubt it, not least because – even putting the inconsistency between the 5%/8% issue aside – he hadn’t bothered to inform those on the panel beside him when he announced it.
Mr Kenny revealed his self-imposed decrease in salary at a news conference on the budget where he was flanked by finance spokesmen Richard Bruton and Kieran O’Donnell. Though not forewarned of the announcement, both said in response to media questioning that they would seek a similar reduction.
Afterwards Mr Kenny was heard to say to his colleagues: “Sorry to land you in that there.”
Well, there’s leading from the front and being way out there, and I think this is the latter. And the somewhat less than fulsome reception for his example tells its own story, as when we learn that:
THERE WAS a mixed reaction from Fine Gael frontbenchers to party leader Enda Kenny’s surprise announcement yesterday…
Out of seven senior figures available for comment last night, only three said they would follow the leader’s example.
But the IT leader makes a fair point, although not going far enough, when it notes:
A key problem in any discussion about public service pay and pensions is that Government Ministers, and most TDs for that matter, don’t appear to have any idea what life is like for the majority of workers. The political system has pampered itself over the past decade with extraordinary salaries for Ministers, TDs, middle-ranking and higher civil servants, as well as Government advisers. The pampering doesn’t stop there. The pensions of our politicians and, for that matter, our entire public service are the most generous in the world. Unlike almost all other pensions they are linked to the salary of the person doing the same job in the future. It means that many retired politicians and public servants are drawing far bigger pensions than they were ever paid as a salary during their working lives.
Then there are the amazing perks politicians have like ministerial cars, an array of Oireachtas committee posts with substantial extra pay and pension benefits for those on the next rung, with unvouched expenses for all. When they lose office ministers qualify for severance packages on top of their salaries or pensions.
Now, there are a number of very questionable assertions there, for example, are our pensions the ‘best in the world’? I doubt it strongly – if only because if they were I’d have thought we’d have heard more about it previously. And the concentration on the Government is lamentable. It’s a system which all the parties which have shared government in the state are complicit in.
Note that it doesn’t (and neither does Kenny) mention expenses. And these are a most generous perk on top of salaries dealing with the following:
The system of expenses and allowances covers travel to and from Dublin, phones, meal allowances, accommodation allowances as well as significant provisions for running a constituency office.
Much of the expenses are also tax free, significantly bolstering the TDs basic salary.
Still, the response from the front bench was instructive…
Justice spokesman Charles Flanagan, education spokesman Brian Hayes and foreign affairs spokesman Billy Timmins all told The Irish Times they would not be seeking pay cuts and arts spokeswoman Olivia Mitchell was undecided.
Deputy Timmins said: “It’s the prerogative of any individual to seek a pay cut. It’s not an initiative I will be taking up myself.”
Deputy Mitchell said: “This is a family matter and I would like to discuss it with my husband before we make a joint decision. He’s on a private sector pension which is disappearing before our eyes.”
However, Mr Flanagan said: “I won’t be doing it. As a mere ordinary TD, I’m one of the few people in Leinster House who isn’t on an ancillary payment . . .”
Tough times ahead. For some.
Beyond that though, wouldn’t it be great if even such populist ‘gestures’ were done with a little bit of panache. Not this chaotic announcement and scurrying away from it on the part of our opposition. Or to put it another way, even if its the wrong thing to do (and it is, it really is) there is a right way to do it.
A key problem in any discussion about public service pay and pensions is that Government Ministers, and most TDs for that matter, don’t appear to have any idea what life is like for the majority of workers
Or indeed, they could have added, almost anybody who is paid to comment on such matters in the newspapers or elsewhere.
Talking of which:
The pensions of ….our entire public service are the most generous in the world. Unlike almost all other pensions they are linked to the salary of the person doing the same job in the future. It means that many retired politicians and public servants are drawing far bigger pensions than they were ever paid as a salary during their working lives
Ah yes, it’s going to be public sector pensions that are the problem, and presumably the pressure will be on (as it has been in the UK, for some time) to renege on agreements and cut aforesaid pensions to bits. On the grounds that they’re not “affoerdable”, etcetctetc. I suspect this may be something that the markets “demand” in order “to restore confidence”.
Now one point about this is that the alternative of investing in a pension related to share peformance may not be all that attractive for a while. But another is that one really would like to know how many public sector pensioners “are drawing far bigger pensions than they were ever paid as a salary during their working lives”. What proportion, please? I mean even if you’re on a pension of 2/3 of final salary – and bear in mind that (if it’s anything like the UK) you have to have worked forty years to get that full 2/3 – how long would it take for you to overtake your final salary figure, let alone to reach the stage where your pension was “far bigger” than that salary?
I stand to be corrected on this, but until provided with figures to demonstrate the contrary my inclination is to think that this is bullshit, and ill-informed bullshit, and ill-motivated bullshit at that.
I completely agree (your point about commentators being particularly right), and I think it would be worth taking the questions and analysis you posit further… Firstly, I can’t see how it is possible for the ordinary worker in the civil service to overtake their final salary figure. I’ve looked into superannuation and suchlike where I work (on contract so I’m not eligible) and there’s simply no way one is earning *more* than final salary. Even 2/3rds is tricky enough to get to in the current market where many people enter the civil service in their 30s or later (and incidentally the means to *buy* back years has – IIRC – been essentially shut down).
I think you’re also dead right in your final paragraph. I’d put it stronger than that. I’d suggest that if not quite a lie, it certainly is no better than hearsay. And I can’t help but feel that – like our pal in Anglo Irish Bank last week – this is the thrashing around of the former cheerleaders of the other God that failed attempting to get some post-crash pre-emptive strikes in, whether out of pique or to muddy the water so their culpability is hidden it is impossible to know.
Firstly, I can’t see how it is possible for the ordinary worker in the civil service to overtake their final salary figure.
Well, with inflation you could presumably do it if you hung around for a bit.
My impression, after reading Collin’s piece was, now that the PDs are gone, Steve is determined to rock to Enda’s beat. It follows the theme of FG perfectly, cutting public service pay and almost everything he said is inaccurate.
ejh, fair point… can’t see though how it is unreasonable though for a pension to be index linked. I’d presume the editor of the IT has one too.
Donagh, that makes sense.
can’t see though how it is unreasonable though for a pension to be index linked
No, self neither. It’s just a question of testing the veracity of the original claim.
I’d presume the editor of the IT has one too.
I think it’s very, very common in contemporary society to see all money earned in the private sector as fundamentally legitimate (and perhaps also to see all money earned in the public sector as fundamentally illegitimate). This viewpoint tends to bypass points such as these.
It’s probably worth noting that public sector pensions aren’t index-linked; they’re linked to the point on the payscale that the individual was on at the time of retirement. If the scale is increased under a partnership agreement, the pension is increased accordingly on a pro-rata basis. However, if partnership increases don’t keep pace with inflation, the pension doesn’t either.
Another point often overlooked about public service pensions (or, at least, about the pensions for staff who have started in recent years) is that they’re made up in part of the retirement benefit one is entitled to anyway with sufficient PRSI contributions. Also, as you point out, unless you’ve done your 40 years or something close to it, the pension isn’t that lucrative. And they’re nowhere near the most lucrative in the world.