Press Release

Equality needed in Government’s adjustment programme

Date Released: 23 April 2013

SIPTU members, together with their fellow trade unionists across the public service, have decisively rejected the proposals for a Revised Croke Park Agreement.

The result reflected a deeper resentment among workers generally and public servants, in particular, towards the way in which they have been forced to carry the lion’s share of the burden of adjustment while the wealthy have contributed very little.  It also reflected fatigue with the troika imposed one sided austerity strategy of the last five years, which transparently doesn’t work. (Even Professor Ashoka Mody, the former IMF mission chief who was prominently involved in imposing it in the first place, recently described it as a mistake).

The proposal is now comprehensively defeated.  Unfortunately, the problem hasn’t gone away. The troika agreement requires us to reduce the gap between tax revenue and spending, (which was the highest in the Eurozone until this year), to 3% of GDP by the end of 2015.  This entails further savings amounting to €5.1bn (if growth holds up). In accordance with the principles of the Programme for Government between Fine Gael and Labour the distribution is about 40% tax and 60% cuts.  This means that about €3bn is to be achieved through cuts.   Public service pay and pensions amount to 35% of spending – hence the proposal to cut them by €1bn.

Apart from the troika programme, getting to the 3% deficit is also key to exiting the so called “bailout” and remaining free of its strictures.  Some say this is all irrelevant to the lives of working people and their families.  Nothing could be further from the truth.  Unless we can get back to borrowing for ourselves the architects of the next bailout, (if we get one), will decide how fast we reduce our 122% Debt/GDP ratio.  They will dictate how we dismantle what remains of our public services and how we increase taxation to do it.  The first casualties would be working people and public service workers, in particular, as well as those who depend most on the services they provide.

The next move is up to the Government.  If it chooses to legislate for pay cuts it will be faced with a co-ordinated industrial response across the entire trade union movement in the public service on a scale which has not been seen since 1913.  No-one can be certain of the outcome but it would be enormously destructive on all sides.

There is some room for manoeuvre as a result of the promissory note deal which will afford breathing space of €1bn in 2014 and €1.025bn in 2015.  Proper use of this accompanied by the launch of a significant off balance sheet stimulus programme as well as a belated tax contribution from the rich would lessen the requirement for a €1bn cut in public service pay and pensions. 

The Government has more flexibility to concede ground in respect of the cuts projected for 2014 and 2015.  The €300m from this year is more difficult because it is already in Budget 2013.

It still has the capacity to retrieve the situation in respect of 2014 and 2015.  It should take steps to redress the inequity in the adjustment process to date.  A good start could be made by declaring its intention to cap publicly funded pensions at a maximum of €100,000 per annum, even to the extent of promoting a constitutional referendum to do it, if necessary.  (A number of referenda are already scheduled for the autumn on other matters).   

In parallel with this, the Fine Gael party should give some ground on the taxation of wealth and of those on high incomes.  Their insistence on protecting this tiny minority at the top is detrimental to maintaining the social cohesion that is necessary for economic recovery.  

Simultaneously, the Government should signal its intention to use the space afforded by the promissory note deal, along with a major off balance sheet stimulus to:

-       Fund Job Creation

-       Alleviate hardship for working families and

-       Protect public services

Such an approach would create the context for negotiation of a settlement in two phases i.e.

-       Interim terms to apply to the end of this year

-       Better terms for 2014 and 2015

An unnecessary and mutually destructive confrontation would be avoided.  A degree of equality would be introduced into the adjustment process and public service workers would retain the protections of the Croke Park Agreement against compulsory redundancy, indiscriminate redeployment and outsourcing of their work.

 


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