Addressing the unprecedented crises in which Ireland finds itself calls for swift and radical action. The Government must focus on the two most crucial issues
- cut public expenditure
- improve international competitiveness
Annual public expenditure has more than doubled since 2001 to €57 billion and the number of employed by the State has grown similarly to a total of 373,000 people. Public servants are generally paid more than in competitor countries. For example teachers are paid 28% more than in Germany and 37% more than in the UK. Ambulance drivers in Ireland are paid as much as junior consultants in Finland.
In order to balance the budget and find savings of some €16 billion next year it will be necessary to reduce the number employed by the State towards the levels we managed with a decade ago and in addition bring Irish public sector pay into line with other comparable EU countries. There is a choice between pay and jobs. If redundancies in the public sector are to be kept to modest numbers then radical pay cuts between 10 and 30% must be contemplated. The greater the pay cuts the smaller the number of public sector redundancies. While it is appropriate that the social partners should be consulted it is quite surprising that this has not taken place already and government was unable to say much on the matter when launching the “Framework for Sustainable Economic Renewal.”
A number of the elements in the Government’s framework touch on the issue of competitiveness. For example it is wise, despite the economic crisis, that the major capital investment in physical and research infrastructure is sustained.
However there are many Government initiatives that require no expenditure to improve competitiveness. The following are some examples.
Ireland has 25 separate pieces of labour law and 8 enforcement bodies making Ireland one of the most regulated places in Europe; not a statistic that encourages investment. Each National Wage Agreement has compounded the problem. Now is the time to review all this, bring Irish labour law into line with good practice in countries such as Australia or the UK under a single consolidated act. The 8 employment regulatory bodies should be combined into one.
The Official Languages Act, 2003 has imposed significant costs on Ireland’s 700 public bodies. One of the 700, the Dept of Social Welfare, spent €351,000 in a single year translating documents, coaching staff and erecting language signs. Document translation could be performed electronically and an amendment to the Act could secure significant savings.
Much educational reform could be undertaken that would reduce costs and improve the outcomes. The funding of higher education should be altered a la Australia and New Zealand, where grants are provided but are repaid in subsequent years through the tax system once a graduate’s income reaches a certain level. Ireland’s underperforming school system could be improved, not by spending more, but by focussing on the quality of teaching. The McKinsey report has demonstrated that the quality of teaching, not teacher’s salaries, not class size, not overall expenditure is the key to success. A rigorous annual teacher performance review designed to recognise good teachers and weed out the bad combined with a system that ensures only suitable candidates are permitted to enter the teaching profession could reduce education expenditure while improving outcomes.
The dire predicament in which Ireland finds itself provides the environment in which Government can improve competitiveness by tackle numerous thorny issues, major and minor, that have been glossed over during the past decade.
Many of the initiatives required to improve Ireland’s competitive position and the wellbeing of the whole community do not require additional expenditure but the courage to insist that best practice replaces current custom and practice in the public sector.