|
|
|
|
The number of public sector staff has risen by 77,000 since 1997 and despite large pay increases, there has been no reform. The Taoiseach Bertie Ahern said in October 2006 that problems in health and other public services cannot be solved unless working practices change. Ahern said change and modernisation in the public service could be achieved only if staff extended their working day. He said it would not be possible to face challenges in the future if public sector workers wanted to work only six hours a day and take a half-day on a Friday. Public service workers are no different to their private sector counterparts. When they work in a 1920's era system with limited or no accountability, what should anyone expect? So the Taoiseach recognises the need for reform despite he and everyone else on the public payroll plus all retirees getting special payments in respect of what was laughingly called benchmarking - a system that had its genesis during the brief period of dot-com hysteria when public sector unions had sold Ahern on the yarn that a few high profile stories of high-tech entrepreneurs making a killing, suggested that private sector workers were in clover compared with their brethren in the public sector. Ahern set up a study group and the card was dealt from the bottom of the deck to arrive at the desired conclusion and was done while ignoring the generous pension benefits available in the public sector (see section on Sham Benchmarking here.) Not only was Fianna Fáil ready to raise the white flag on pay, the junior party in the Coalition, the Progressive Democrats (PDs) had thrown in the towel on public sector reform in 1997. In the 1997 general election campaign, a botched proposal on public sector reform, involving the loss of 25,000 jobs, threw the PDs on the defensive as it struggled with its cocktail of soundbites to respond to charges about cutting benefits for lone parents. In the intervening ten years, job numbers in the public service have risen by 77,000 and the PDs who supported benchmarking, have had nothing to say on significant public sector reform other than the back-of-an-envelope decentralisation policy. PD Party President Tom Parlon T.D. has had responsibility for implementing the politically inspired measure, that has become a national joke. The issue of significant reform has now been outsourced to the OECD and changing taxes is top of the election agenda. If only governing in a competent manner and with courage where necessary, was as simply as adjusting tax rates! Despite proposals on income tax and stamp duty, there are no promises not to increase indirect stealth taxes. First time house buyers and others will still have to pay 13.5% Value Added Tax on the cost of new housing units and overall, while particular taxes have been reduced over the past decade, the overall tax burden has not significantly changed from its level in 1995.
Redux 1977 In the Irish General election campaign of 1977, Fianna Fáil front-bencher Gerry Collins, placed an advertisement in his local provincial newspaper in Limerick, which said that his party wasn't offering "pie-in-the-sky promises such as no rates." By the time the newspaper hit the streets, FF had added the abolition of residential rates to its treasure chest of electoral goodies, which had included the scrapping of car tax. Between 1977 and 1981, the combination of tax cuts with huge spending increases (in the single year 1979, the public service pay bill was increased by 34%), resulted in a trebling of the National Debt. 1979 had also been a year of industrial strife and in January, 1980, the new Taoiseach Charles Haughey solemnly told the people in a televised address that the country was living "way beyond our means." When Haughey's Minister for Finance Gene Fitzgerald was challenged on television during a discussion on Budget 1981, for quadrupling the car "registration fee," which had replaced car tax, from £5 to £20, he was accused of re-introducing motor taxation. Rates on residential property were partially replaced with hikes in commercial rates and development levies together with increasing centralisation. The election gave rise to the term "auction politics" in an Irish context. The issue of reform was not on the agenda then and local authority representatives were left with one significant power - rezoning land and the creation of an artificial scarcity of land for development, in a country that was only 4% urbanised. Approval for anything else, including filling vacant posts, came via a tortuous bureaucratic process from Dublin. Politicians sold their votes for as little as £2,000 and a ramshackle planning system with the buck stopping nowhere, left us with results where for example sprawling Dublin is forecast to soon have a footprint the same size as Los Angeles with less than a quarter of its population. Back to the Future The Celtic Tiger period from 1993-2001, was powered by a big influx of world class US companies, and our living standards rose by one-half. Now that economic growth in 2008, is forecast to fall to the lowest level since 1993, it's clear that little has been done to reform an eight-decades old system of governance. While politicians head the pay rankings (excluding expenses) in the Irish public sector pay bonanza since 1997, with rises amounting to 119%, the comparable increase in the average industrial wage was 60%. While old-age pension inducements have got attention from politicians, the issue of the reasons for pensioner poverty - the low level of occupational pensions in the private sector, is ignored. The Minister for Social and Family Affairs Seamus Brennan, promised that a white paper on mandatory pensions, would be published in March but the plan has been quietly shelved. Politicians and the rest of the public service staff meanwhile enjoy a level of pension coverage that is only available to an elite in the private sector. Last August, a report prepared by the Pension Board stated that at present over 900,000 people, almost half the country's workforce, have not made provision for any private pensions and, as of now, are moving towards a retirement in which their main source of income will be the State pension. In what other Developed Country, would a public tribunal sit for ten years investigating planning corruption, while the system that spawned the corruption, remains unreformed even though more subtle forms of bribery have replaced the brown envelope? To add the bizarre to the surreal, it's a non-issue in the election campaign. Clientism and local politics have been essentially unchanged for decades. The Haughey-like stroke politics measure, involving the planned move of 10,000 public servants out of Dublin, that was announced by then Minister for Finance Charlie McCreevy, in the December 2003 Budget, as a political sweetener in advance of the 2004 Local elections, was essentially a carve-up of jobs for the constituencies of Government ministers. The so-called decentralisation plan is currently in limbo. Two week ago, Tánaiste (Deputy Prime Minister) Michael McDowell said that his Progressive Democrats party will not agree to participate in Government unless plans to build a waste incinerator in his constituency are scrapped. The Minister for the Environment Dick Roche opposes the building of an incinerator in Wicklow, south of Dublin. When residents of North Dublin, objected to plans to build a prison in their area, McDowell told them where to get off. At the behest of the European Union, Ireland has to reduce the amount of waste landfill at a time when water contamination requires residents of an Irish city, Galway, and adjacent areas to boil water for several months. In March, the European Commission warned the Irish Government that it will be taken to the European Court of Justice if it does not improve the quality of drinking water. In Cork, the centre of the mainly-US owned pharmaceutical industry, residents are objecting to the building of an incinerator but they don't object to the chemical waste being shipped to India. But when ministers object to their own Government's policy, who would blame the NIMBIES? (NIMBY - Not in My Back Yard). Irish Economy 1997 and 2007 The big rise in inward investment up to 2000, coupled with billions in EU structural funds and a global economic boom, triggered a construction boom. To add fuel to the fire, the Government extended and broadened property tax incentives. In the period 2001-2006, Irish investors put €41 billion in commercial property, mainly overseas. Less than €1 billion has been invested in venture capital for Irish business producing exportable goods and services in the same period. Today, apart from the temporary prosperity created by the construction boom, we are as dependent on foreign direct investment, principally from the US, as we were in 1997. In 2006, foreign firms were responsible for 92% of Irish exports and Irish-owned firms mainly export to the UK market. As we remain so dependent on foreign direct investment, rampant property market has pushed up costs and our export performance is deteriorating. Irish industrialist Eoin O'Driscoll, who is chairman of the Irish Government science and policy advisory agency Forfás, told a conference in 2005, that most of the products we manufacture, are designed elsewhere and the bulk of our exports, are marketed/sold by organisations outside Ireland. In the Irish Times on Friday, April 6th, economist Paul Tansey wrote that Ireland's Celtic Tiger economy, where growth was led by exports, expired in 2001. The demise of the tiger went unmourned and for a simple reason. After hitting a flat patch in 2001-2002, the economy rebounded. Nobody much cared that domestic demand had elbowed out export demand as the engine of economic expansion. What was important was that growth was back. Never mind the quality, feel the width.
The European Central Bank had re-fuelled the property boom by reducing its key interest rate to 2% in June 2003 and keeping it there until December 2005. The World Trade Organization reported this month, that exports from Ireland grew in US dollar terms by 3% in 2006, compared with 27% for China and 15% for Germany. Ireland had the lowest growth rate of the top 30 world exporters in a year when the global economy grew at a real (constant prices) rate of 5.5%. Over the past decade, only four Irish companies have made an impact on the world stage - CRH, now the largest building materials supplier in the United States, Ryanair, Independent News & Media and Denis O'Brien's Digicel. While plans to ramp up R&D spending are laudable if properly managed and focused, the notion of becoming a world class knowledge economy in six years, is a pipe dream. Apart from Digicel, no other Irish tech company has revenues of over $100 million. Quite a number of them including Iona Technologies are in fact struggling. On Thursday, the Economist Intelligence Intelligence Unit's (EIU) annual E-readiness Ranking, which is produced in colloboration with the IBM Institute for Business Value, gave Ireland a 21st place ranking. Denmark got first place for a second successive year. In March, the World Economic Forum'sGlobal Technology Ranking 2006/2007, gave Denmark and Ireland the same rankings as the EIU. The World Economic Forum said that Denmark's outstanding levels of networked readiness have to do with the country's excellent regulatory environment, coupled with a clear government leadership and vision in leveraging ICT (Information and Communication Technologies) for growth and promoting ICT penetration and usage. While some may argue that everything will be okay when we get our broadband services up to speed, I have written elsewhere, that such a conclusion may well be a delusion. Last week, the opportunity to challenge a soundbite at the Fianna Fáil press conference to launch their economic document Keeping Ireland Working - The Next Steps Forward, was too much to miss. It's a handy soundbite and even better when no journalist digs a little deeper. In total 86,000 jobs were created in 2006, according to the CSO. The strong growth in the Construction (+28,400) and the Health (+18,700) sectors accounted for just over 55% of the annual increase in the numbers employed. Only 6,000 jobs were created in the tradable goods/services sector of the economy, according to policy advisory agency Forfás. It had reported in January 2007 that 83,000 jobs were created in 2006. So 7% of the jobs were in businesses producing exportable goods and services. 2,913 permanent full-time jobs were created in foreign-owned companies, and 3,014 in Irish-owned companies, supported by the State enterprise development agencies, during the fourth year of a global economic boom. I said to Martin and his colleague, Minister for Finance Brian Cowen that while measures outlined in the plan would assist business, they would have a minimal impact if any on economic activity. I asked Martin, of the 50,000 new jobs that are expected to be created in each of the next five years, how many are projected in the exportable goods/services sectors that can be related to the 6,000 in 2006? He queried my 2006 figures but I told him that his own Department's agency Forfás had produced them. He did not provide any breakdown of the annual 50,000 jobs for the years 2007/2012. Employment in construction has risen from 126,100 in early 1998 to 281,000 today. As the housing and infrastructure sector slows down to more normal levels over the next decade, there is no simple answer to what will take up the slack. However, if we do not engineer a competitive economy that is not in the grip of vested interests, then there will be is a very simple outcome. Producing conditions for a competitive economy also requires not only reforms in the public sector and the protected areas of the private sector, the 1920's era system of governance if unreformed will remain as a cancer that will impede everything else. Finally, on economics, AIB says in a report published on Thursday that the slowdown in housing activity should not derail the economy. Instead, it is likely to see it move on to a more moderate growth path by 2008, with GDP forecast to rise by 3.7%. The report says that it is very important that Ireland keeps domestically induced inflation under control. The errors made at the start of this decade, when sharp hikes in indirect taxes and public service charges plus very large wage increases caused high inflation to become embedded in the economy, must be avoided on this occasion. The bank expects headline inflation to fall sharply in 2008, with the CPI rate forecast to fall to below 3%, assuming that the ECB does not continue to tighten monetary policy next year. AIB says that all of the major political parties have made generous commitments on either tax cuts or public spending increases, or on both, in the context of the upcoming general election. Delivery on expensive political commitments on taxation and public spending must be conditional on the economy’s ability to generate the wealth and activity to finance these electoral packages, without resulting in a serious deterioration in the overall public finances. The Irish System Press releases are churned out of Government Departments daily with ministers claiming bragging rights for a multiplicity of issues but accepting responsibility for anything is another story. Taoiseach Bertie Ahern even blamed the Opposition parties for the e-voting fiasco. I wrote last December that Ireland has a part-time Government and Parliament and the results are self-evident. Whether it is water quality, nursing home standards, Garda reform, basic controls on big IT infrastructure projects, health insurance and so on, there is nothing done until there is a crisis. There are so many examples of neglect, incompetence, sheer cluelessness, laziness and inertia that can be summed up with an overarching conclusion: The Buck Stops Nowhere. Last November the Irish Independent summed it up well: Five ministers were on hand to reveal plans for a fabulous new Dublin Metro line. On the same day, commuters witnessed the biggest traffic jam in Irish history. Apart from the Northern Ireland issue, the Taoiseach Bertie Ahern appears to act like a chairman rather than a CEO when it comes to other key issues of government. Ahern seldom gives detailed speeches on issue of public policy and does not give broadcast interviews between elections, where he would be grilled on major issues. However, nobody could say that he doesn't put in the hours. Mary Harney's predecessor as Health Minister, former school teacher Micheál Martin, must hold the record for the number of consultant reports that any minister in the world has requested in the space of 4 years - at 145, he always had a cure for insomnia, at hand. Martin spent more on a library of reports and reviews during his tenure than any minister in the history of the State. The bill for 115 of 145 reports commissioned by the Minister in the Department, where he spent four years, was outlined in a parliamentary answer to Fine Gael TD Seymour Crawford in 2004. It was €30m. Martin also likely holds the world record for pre-announcing the launch of a website that earned consultants Accenture €3 million but the website was never launched! Where was Bertie Ahern as Martin was drowning in reports and billions were being shovelled into a health sector black hole? The management consultancy industry has almost become a branch of Government, which is also an indictment of the political process where soundbites are preferred to policy by political parties. Where is the radicalism that Progressive Democrats' leader Michael McDowell once promised? It's easy to promote a blue sky project in a manifesto such as moving Dublin Port, but where are the proposals for reform of institutional structures and the public sector? In their policy document, Fine Gael and the Labour Party have made a commitment to define the roles and responsibilities of civil servants and ministers. A minister can't be responsible for every act of incompetence or neglect but senior well-paid public officials should also shoulder responsibility. Publishing formal advice given by officials should also be considered as part of developing more accountability in the system. If such a measure would stifle candid advice, then such a person should not hold a high position in the public service. Why should we put up with having incompetents signing off on projects costing hundreds of millions of euros where the buck stops nowhere? Beyond the spin and tax cuts, there are real issues that matter in preparing for the challenges that will follow from a temporary period of prosperity, built on a housing boom. In the absence of reform and when clueless what to do when there will be a financial crunch resulting from a downturn in the economy, there will be little surprise when the old blunt measure, the public sector jobs embargo, will be wheeled out. The merry-go-round will start again with essential posts left unfilled while useless paper-pushing roles remain overstaffed. Finally, if Bertie Ahern and Michael McDowell need the OECD to advise them on how to reform the Irish public sector after ten years in power, does it not encapsulate fundamental failures during a period of unprecedented prosperity? RELATED: Irish Government has spent up to €400 million on management consultants since 1997 Comment: The job description of the Irish TD in the Twenty-first Century - This article has data on a comparable country to Ireland in terms of population and economic development. Irish General election 2007 Main Page - access to several relevant reports © Copyright 2007 by Finfacts.com |
