Here's How – Here’s How 60

Tom Geraghty is the General Secretary of the Public Service Executive Union.

Tom disputed a couple of the references that I made during the interview. The report of MABS staff dealing with an average of two new cases per week here. The minister for justice has confirmed that there are gardaí suspended on pay for up to seven years.

In case you didn’t notice, I didn’t agree with everything Tom Geraghty was saying. His job is to advocate for his members, so that’s fair enough, but I want to check if what he is saying is valid.

I don’t like to get too deep into statistics because I don’t think that it works well in an audio format, but I want to take up a few of the things that Tom said, so bear with me. If you take the real boom, from about 2000 to about 2007, revenue, that’s the tax take, went up from about €30b to almost €50b; then in 2008/9, it crashed back down almost all the way to €30b a year.

In the same time 2000 to about 2007 government spending, which is mostly wages shot up along with it. Remember Charlie McCreevy saying “When I have it, I spend it”?

Well he really did. But what he had was once-off tax revenue from the housing boom. And what he spent it on was on salaries that would have to be paid every year, boom or no boom. When the crash came, all those people who had been hired and given big pay rises, they still had to be paid, but that huge boom in revenue, on the back of the property market, had stopped.

That created a huge annual deficit, every year, clocking the national debt higher and higher; now, people will say what about bailing out the banks. And they are right. Bailing out the banks cost about €70b; a lot of that will be paid back by selling bank shares, the final cost will be about €40b. But continuing to pay the boom level salaries through the financial crisis meant borrowing more than €10b a year, every year. That borrowing clocks up, and overspending €10b a year very quickly outstrips a once-off cost of €40bn.

Now Tom says that he is looking for the pay cuts to be reversed, but there is some vocabulary there that I think is a bit slippery. It’s true that public sector workers had pay cuts, technically, but they also had pay increases, even though they didn’t call them that. In the public sector there are three ways to get a pay increase. The first one is a pay increase, just like someone in the competitive sector might get one.

But in the public sector, there are also what are called increments. These are automatic pay increases, usually every year, and they are written into the job description. Now most people would regard anything that gave them more pay as a pay increase, but that’s not the way public sector unions see it, and that’s how a great many public sector workers who technically had a pay cut ended up within a year or two with a higher salary than before the pay cut.

And that’s the reason why, despite the pay cut, the public sector pay bill went up every single year throughout the crash, although the speed of its increase did slow down.

And as well as what the unions call pay increases, and the increments, when someone in the public sector is promoted, they get a pay increase for that as well, and that increase is excluded from what the unions calculate as pay increases also.

Tom also said that there needed to be a wider tax base to pay for the increases that he’s looking for. That’s tax increases to you and me.

I’m going to have a look at what value for money is on offer for tax increases in the next podcast.