Croke Park savings are not over-estimated

The Implementation Body, which is charged with verifying savings achieved under the Croke Park agreement, has emphatically rejected claims that the savings have been overestimated. The implementation body stands over its report of €1.5 billion in recurring savings achieved in the first two years of the agreement. It says Croke Park is on course to deliver annual savings of €3.3 billion, net of additional pension costs, by 2015.

Payroll savings

So far, the agreement has delivered recurring annual pay savings of €810 million. This figure is made up of average annualised savings in salaries of staff who have left the public service, plus some savings in overtime and premium payments.

The staffing figures used in the calculation are the same ones that the Department of Public Expenditure and Reform (DEPR) uses to report to the troika. The net reduction in staffing is calculated simply by subtracting the total number of public servants at the end of the review period from the total number at the beginning.

The pay savings are calculated by the DPER, which simply multiplies the net staff reduction by the average public service salary including employers’ PRSI. This methodology is likely to have underestimated, rather than overestimated, the pay savings because official figures show that those who have left tend to be more senior and higher paid public servants.

Speaking on RTÉ’s Morning Ireland programme this morning, implementation body chairperson PJ Fitzpatrick said nothing else is added to the salary figure. In other words, nothing is added for ‘overheads’ and, contrary to some media reports, the implementation body does not add a notional additional 25% ‘saving’ on pension costs.

Non-pay savings

The implementation body has also verified €678 million of non-payroll savings achieved in the first two years of the Croke Park deal. The body compiles these savings from reports, which are signed off by the Accounting Officer of each department or office. The implementation body then engages external consultants to verify the savings reported in a sample of the projects reported.

Departments have not been instructed to calculate non-pay savings as 40% of pay savings and implementation body chair PJ Fitzpatrick has confirmed that there is no evidence that any department or office has done this.

Most non-pay savings have come from things like enhanced shared services, improved procurement practices, increased online services, reduced travel costs, and savings in maintenance, fleet maintenance, catering and cleaning costs. Virtually none of the non-pay savings have so far come from office overheads – the issue raised in media reports over the weekend. 

Despite media reports, the implementation body’s non-payroll figures do not include an additional 40% (or 80% according to this morning’s Irish Times) of payroll costs to account for office overheads. Confusion over this appears to have arisen from a report by Grant Thornton which was published in June 2012 and which, among other things, verified non-payroll savings in the Department of Agriculture, Food and the Marine.

Grant Thornton suggested that the department could have reported savings in overhead costs following office closures as 40% of staffing costs. This appears to have been based on an earlier public service convention of adding 40% for office and overhead costs – on top of salary costs – when new agencies are being established. 

Although no new agencies are being established under Croke Park, Grant Thornton suggested that the agriculture department could use this figure when calculating the savings from office closures. The department declined and the implementation body used the lower departmental estimate of overheads savings, rather than the 40% figure proposed by Grant Thornton.