PUBLIC EXPENDITURE minister Brendan Howlin’s plans to cut 9,500 public sector jobs in the next two years are too costly and are at the risk of not being realised, according to Ireland’s Troika lenders.
A leaked draft report from the European Commission reveals serious misgivings among the European Commission, European Central Bank and International Monetary Fund about the merits of Ireland’s plans to cut back on public sector job numbers.
Under current government plans, the total number of public sector workers is to be cut to 282,500 by 2015 – down from a peak of 320,000 in 2008 – in efforts to cut €2.5 billion from its overall pay bill.
The government last year said it wanted to bring this target forward to 2014, however, with a voluntary redundancy package that would mean payoffs of up to two years’ salary for any of the government’s current 292,000 employees who opt to leave their jobs.
The document, seen by TheJournal.ie, expresses concerns about the merits of this move, however, with the EU-IMF inspectors bluntly defining the scheme as “costly” and arguing that retraining the staff for other public jobs – as is provided for in the Croke Park Agreement – would be a better move.
Retraining workers ‘more efficient than letting them go’
The report states:
Retraining under the Croke Park agreement would allow a more efficient use of human and financial resources, especially as the scheme’s intended target group of employees has considerable remaining working life.
It also raises fears that the government could struggle to reach its targets, because the current state of Ireland’s labour market means there are few job opportunities in the private sector which public workers could fill.
While the Troika acknowledges that the plans to cut public jobs “would generate savings in the longer term”, because workers would accrue sigificantly smaller pensions if they left early, any immediate gains would be offset by the probability that public workers would have to go on the Dole for at least a short period.
The extent to which the scheme would be compatible with protecting service delivery or would require outsourcing of activities is unclear, casting doubts on the sustainability of the estimated savings.
Critical of delay in new pension rules
Elsewhere, the report is critical of the delay in activating the new pensions scheme for public workers, which will see any new entrant to the system given a pension based on their average career earnings and not just their final salary.
This legislation was activated by Howlin last week, but was passed by the Oireachtas last summer and signed into law by President Higgins on July 28 last.
The delay in implementing these “important provisions” implies a “permanent reduction in the structural savings” that the government can make on its pensions bill, the Troika says.
However, the report does not comment on the fact that the ongoing public service recruitment embargo means there has been limited recruitment in the meantime, with only a small number of new entrants to the teaching and healthcare professions.