Potential savings from increments vastly overestimated

Wednesday 1st February 2012

The exchequer would save just €50 million if public service increments were frozen in 2012 – less than a fifth of the €250-300 million cited by some commentators – according to IMPACT general secretary Shay Cody.

His estimate was based on Minister for Public Expenditure and Reform Brendan Howlin’s response to a recent Dáil question, in which he estimated the full-year cost of increments (excluding local authorities) at “no more than €180 million per annum and less than half that sum in 2012.”

The €50 million figure is calculated by taking the Minister’s estimate (€180 million) and adding an estimated €20 million for local authorities, who represent roughly 10% of public service staffing. The figure was then halved (as indicated by Minister in his Dáil answer) because annual increments are not all paid for the full year because staff get increments on the anniversary of their starting work.

This totals €100 million, which Cody then halved to take account of tax, pension levies, USC and other deductions that are made from any increment paid. The resulting €50 million does not take account of a likely additional fall in VAT and excise.

IMPACT has opposed calls for an increments freeze because it would affect younger and lower paid workers most. This is because they tend to have less service and work in grades with long incremental scales.

The most senior staff would be less likely to suffer because they have few or no increments in their pay scales. Departmental secretaries and deputy secretaries have single point scales and, therefore, no increments. Principal officers have just six increments; assistant principals seven.

Further down the grades executive officers have 11-point scales and clerical officers have 13. This means that lower paid public sector workers have much further to travel before reaching the top of their salary scale.  

A freeze on increments, which would see €50 million taken out of the economy, also has the potential to further reduce domestic demand. Workers on lower salaries generally spend more of their income and any capacity for discretionary spending would therefore be lost.