THE DEPARTMENT of Public Expenditure has issued a statement which appears to contradict a cabinet minister’s earlier claims about estimated savings under the Croke Park agreement.
In a statement this evening the Department said its estimates for savings under the public service pay deal did not include savings that each department expected to make in overhead costs.
The statement is a response to an article in today’s Sunday Independent, which suggested that €678 million of non-pay savings achieved under the deal in its first two years were ‘now in doubt’ because of the dispute over how non-pay savings are estimated.
That article claimed the Department of Finance had instructed other government Departments to calculate non-pay savings connected to staff reductions as being equivalent to 40 per cent of each employee’s salary.
“We do not include overhead estimates in calculating pay savings and the newspaper reports regarding this are not correct,” the statement said.
However, agriculture minister Simon Coveney – answering questions about the dispute on RTÉ Radio’s ‘This Week’ earlier today - explicitly listed savings from overheads as one way in which the non-pay savings were calculated.
“The standard calculation method, when a Department reduces staff numbers, is that the saving will be the salary of that person, plus 40 per cent,” Coveney stated.
The 40 per cent represents overheads, the costs of employing that person outside of salary, pension contributions, [and] potentially the cost of rehiring if that’s a specialist person.
The Department of Public Expenditure also said no circular had been issued telling Departments how to calculate non-pay savings as 40 per cent, and that each Department used its own methodologies.
“External auditors Grant Thornton signed off on the estimated savings in the March 2012 Implementation Body report, including those of the Department of Agriculture,” the statement said.
Grant Thornton’s report, however, also refers to apparent Department of Finance guidelines on calculating the costs of overheads.
Its report states that because the Department of Agriculture had incurred many of its Croke Park savings by reorganising its nationwide offices, which were rented by the Office of Public Works, it was finding it difficult to calculate its exact non-pay savings.
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In calculating the value of non-pay savings, the DAFM [Department of Agriculture, Food and the Marine] therefore used an estimate of 40% of total salary cost based on Department of Finance guidelines.
The Sunday Independent article did not seek to explain the source of the 40 per cent figure, and did not mention overheads as being a contributory factor to that amount.