Blog: The way to pay recovery

Lansdowne Road Agreement

The economy’s soaring. The recession is over. So the legislation that imposed public service pay cuts and pension levies should simply be repealed? Well, yes and no, says BERNARD HARBOR.

Last week, ICTU’s Public Services Committee wrote to public expenditure minister Paschal Donohoe demanding the repeal of the Financial Emergency Measures in the Public Interest (FEMPI) act. This is the measure that imposed the pension levy in 2009 and was amended to add pay cuts across the public service the following year.

While all unions want to see the back of this divisive legislation, we are now grappling with the realities of meeting different priorities when it comes to restoring what was lost during the economic crisis. Opinions differ both within and between unions.

There’s agreement that those on low and middle incomes should be prioritised, although unions that represent higher paid staff – who lost most in absolute and percentage terms – say their members mustn’t be forgotten either.

But some say restoring working time is as, or more, important than the money. For others, including younger staff in parts of the public sector, changes to allowances or even overtime had as big an impact on pay packets as the pay cuts themselves.

Most of these measures were imposed by legislation – without union agreement – in the early years of the crisis. But FEMPI has since been amended to underpin a series of agreements reached after the pension levy and pay cuts were imposed.

These include the 2013 Haddington Road agreement – which delivered additional savings of €1 billion, through measures like increased working time and additional temporary pay cuts for the 13% of public servants who earned over €65,000 a year. Last year’s Lansdowne Road deal, which finally started the process of pay recovery in the public service, was also put into effect by amending FEMPI.

The Lansdowne Road improvements (see boxes) demonstrate that FEMPI can be a vehicle for staged pay restoration now that the economic collapse is behind us. The Department of Public Expenditure and Reform says the public service pay adjustments will cost €844 million a year over the lifetime of the deal. There’s also a €90 million price tag attached to reducing the levy on public service pensions.

IMPACT and other unions have called for an acceleration in this process, on the basis that economic growth – and the related improvements in the public finances – is stronger than anyone expected when the Lansdowne deal was done.

Unsurprisingly, the new public expenditure and reform minister Paschal Donohoe has taken a hard public stance on this. In both Dáil Éireann and in media interviews, he’s ruled out any acceleration, saying only that he would abide by Lansdowne Road.

IMPACT counters by saying that both the Lansdowne Road and Haddington Road agreements changed the terms and timetables of existing deals – the latter taking more from public servants in 2013 specifically because economic growth was weaker than expected.

The message from IMPACT leaders at the union’s May delegate conference was clear: If workers lost more when growth was slower than expected, they can – and should – gain more when it’s faster than expected. The union’s outgoing president Jerry King put a timetable on it, saying that talks on a successor to Lansdowne Road – which officially expires in September 2018 – must get underway in the first half of next year.

Assuming that improvements in the public finances continue to outpace expectations, it’s likely that this will indeed happen. But what approach will unions take given the many, often competing, priorities that have been voiced?

At our conference in May, IMPACT general secretary Shay Cody sounded a note of caution about the simplistic call for an immediate repeal of FEMPI. He said that – affordability aside – the highest paid public servants would be by far the biggest beneficiaries if the legislation was simply scrapped when Lansdowne Road expires.

That’s because the complete repeal of FEMPI in 2018 would give a worker on €30,000 a total gain of less than €450 a year, while someone earning €125,000 – rare as they are in the public service – would stand to gain almost €20,000. Few union members would thank their negotiators for delivering such a regressive outcome.

Instead, IMPACT believes we should negotiate deals that deliver continuing improved living standards for those on low and middle incomes, with a fair and balanced unwinding of FEMPI for all over time. Because, as the recovery strengthens and we need to return to normal industrial relations where pay is set by agreement, not legislation.

Bernard Harbor is IMPACT’s head of communications.