Runaway public spending created havoc with the nation’s finances, argues Bill Hobbs
With wages accounting for over 40% of day to day spending, Government can no longer afford to run an inefficient, overstaffed and unproductive public sector. Between 2000 and 2008 staffing levels in the wider public service grew by close to 70,000. There are now about 347,000 state employees and another 53,000 employed by semi-state companies.
About a decade ago, Big Government arrived as the economy boomed. Billions in low cost credit flushed through the banking system to fund a domestic construction boom. Private sector service and retail enterprise expanded and incomes rose. Swollen with tax revenues, governments’ coffers emitted the luring siren call of “spend me now!” An unfettered Government obliged and went on a spending spree. Once it exhausted billions on the “must haves”, billions more were expended on “nice to haves” in what became an unstoppable spending spree. The high tide mark of this credit based, illusory largesse was Bertie’s Bowl, which was to be a modern monument to mammon.
Public sector unions were quick to exercise their muscle and politicians opened the exchequer cheque book to fund salary increases for absolutely zero gain. Not only did employee numbers rocket, but Ministers competed with one another to set up one new agency after another, providing highly remunerative career paths for senior civil servants and thousands of board seats for their friends. It was Big Government on a Big Scale needing a Big Budget.
Senior state employees thought nothing of flying first class on international jollies, while private sector businessmen sat in the coach seats. If the first class ticket symbolised hubris and waste, hospital corridors full of trolleys symbolised something altogether different – leadership and management failure to change the way things were done. We had third class public service standards on first class budgets.
The problem was we were living and paying each other largely on bank credit. Worse still the public service was funded from taxes on imported credit. When taxes dried up, an enormous gap appeared between revenues and expenditure. The IMF programme may provide €50bn in funding to pay for the running of the public sector but it comes with harsh demands. Closing the gap between what we can afford to contribute in tax revenue and what Government spends on public services can only mean one thing. It only ever meant one thing - brutal surgery.
Tens of thousands of state employee jobs will have to be eliminated. The Croke Park appeasement will be replaced with a ruthless business endeavour to radically reduce numbers whilst maintaining the quality of essential services and “nice to haves” will simply have to go.
Ten years ago public servants were earning 13% more than their equivalent private sector colleagues. By 2008 the gap had risen to a stratospheric 25% which was 48% more than the average industrial wage. The disparity in wage rates between public and private sectors was one of the widest in the modern world. It still is. Last September public servants were being paid 55% more than private sector employees or just over €9 extra per hour. Yet no one argues the public sector is 55% more productive. Few can point to service improvements in the past ten years. The number of significant service breakthroughs can be counted on the fingers of one hand.
Any reform must tackle the embedded management emphasis on what’s been spent and not what’s being accomplished. Whatever funding is available must be focused on delivering what matters to the public. Key services will have to be executed flawlessly. Hard to measure long term outcomes, such as improvements in health and education will have to be matched by short term outputs that can be measured and rewarded. Key service performance measures will have to be benchmarked to real change and reform objectives and not some flowery nonsensical statements that mean anything you want them to mean.
The public service must learn to emphasise what’s being accomplished and not what’s been spent. Management and staff will have to learn how to deliver on the service value demanded by us, their customers. Routine services should be outsourced to the competitive private sector.
Political language uses words such as “change” and “reform” without any real meaning. In business they are hard words carrying real meaning. One political party is using harder business language. Fine Gael’s plan to cut public service employments levels by 10% or 30,000 jobs is but one of the many changes that will have to be imposed if the country is to have a public service it can afford. The challenge for any new political administration will be to ensure public sector employees deliver a first class service on a third class budget.
A version of this article appeared in the Irish Examiner, Business Edition, Monday 21st February 2010.
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