Setting: A private meeting between a Secretary General and a new junior; Got your emails Gerald, so what’s got you worried about pay?

Well, Secretary General the talk is that public sector pay is to go up 50% over the next few years, I’ve run the numbers and can’t understand how that’s possible.

Gerald, we won’t actually increase pay by that much at all.

So 50% is wrong?

No, 50% is about right, it just won’t appear that way.  We’ll put most of it through in allowances, overtime and “sick leave”.

But surely the politicians won’t wear it?  After all, it will openly challenge their running the country.

Gerald, you don’t seriously think we let politicians actually run anything?

We only let them think they run it.  Anyway we’re going to link politicians pay to upper grades in the Civil Service, even higher for ministers, plus lots of receipt-free expenses.  Meanwhile, public sector union chiefs have been, how do I say this delicately, persuaded of the wisdom of linking their own remuneration to similar scales as well.  That way, there’s a common incentive to solving problems of pay.

You mean self interest, but surely the private sector who’ll foot the bill will see through it after all it will lead a huge pay and pension gap opening up?

See through it?  Gerald, dear boy, the public sector is far too complicated for anyone to see through it and as for pension comparisons, well, they’ve no hope whatsoever – that’s why we use them to pay golden parachutes.  And we can always rely on our union partners to find some heart-softening stories about those on much lower pay having a real hard time.  That’ll deflect attention away from where the cream is being paid.  See, the public love their Gardai, teachers and the nurses, they really dig those nurses.  Very useful as a screen, along with low paid clerical grades in the Civil Service, thank heavens for them too.

But what happens when the increases are measured against value for money?

Oh we never actually use value for money to measure anything; it’s far too complicated for that.  We call it benchmarking instead, sounds much better, a great word that – benchmarking.

But what happens when they apply the benchmarks?

No we only call it benchmarking, in practice there’ll be no benchmarks.

But surely they’ll go abroad for comparisons then?

Yes, we’ve anticipated that so we’ve commissioned a report, a comparison against other economies with older ages, much higher health costs, bigger armies, more expensive pensions, that kind of thing.

But what happens if the report leads to calls for corrective action?

Oh no, I said we’ll commission a report.  But we never act on a report.

Reports, like tribunals, take lots of time and the public forgets.  Then when the report finally arrives we say circumstances have changed and we need to commission another report and so on.

So let me get this right.  We’ll hide, I mean overlay, the pay rises by using cash, sorry, allowances and expenses and more holidays, that is to say, sick leave.  Then we link pensions to grade increases and increments, tie in the politicians with similar deals, and get union chiefs to follow suit – and we can boost their personal earnings even further with appointments to state boards.  Finally, we cover it off by skewing the assumptions in comparative reports to give us the results we want?

All in the national interest Gerald.  That way there’ll be harmony paid for with bribes, I mean agreements, understandings, undertakings, a general knowledge, an unwritten contract, if you’d prefer, among people of influence.  About how things work.  At the top.  That’s our little lesson over Gerald and, remember, some day you can occupy this seat.  After all I’m just keeping it warm for the next fellow to get the big uplift in pension just before retirement age – provided, of course, he asks the right question.

The right question?

What I’d like to do after retirement.

You mean what boards, review groups and agencies you might be able to assist – in the national interest?

Excellent question, Gerald, truly excellent and deftly put.

Order the headstone now "Here lies Private Pensions, murdered by a bunch of clowns in an act of stupidity after a long struggle with markets RIP."  The programme for government proposes to reduce the incentive to avoid retirement poverty by saving in private pensions (AVCs, PRSAs and Personal Pensions).  The move will affect huge numbers of self employed workers, those not in company funded retirement schemes and contract workers.  The proposal is that you'll no longer get tax relief equivalent to the top rate you pay, instead you'll get hammered by income tax and levies at over 50% on your earnings (and your pension) but you'll only get 30% relief on any money you manage to save.

Even a child in a creche could work out that this is a very dodgy deal. But we're not talking about toddlers, we're talking about politicans who'd prefer to screw the disorganised and vulnerable backbone of the economy rather than introduce real reform. These chuckleheads think that by setting relief at 30% it will enourage low paid workers on standard rate tax to save even though they don't have the money! But its really a smokescreen to duck the real issue, the reform of public sector pensions. Already, in a previous act of cowardice they've hit anyone with taking more than €200k out as a tax free cash lump sum with tax. But guess what, that doesn't affect any public sector worker retiring on less than €133,000 taking up to €200,000 tax free and gettting a pension ecaslating with salary grade increases beginning at €66,000 and worth over €2 million in the private sector.

But the private sector worker is screwed with the tax on any part of his pot worth over €800,000, that means the tax comes in at a level 60% lower than fellow workers in the Public Sector. But what makes it all the more galling and reinforces the wall around the pensions ghetto is that all private sector workers already pay for pensions through tax transfers except they don't get a stitch from these pensions because they're paid to public sector workers. The real issue isn't the tax relief forgone by the Revenue to encourage private sector workers to save to avoid retirement poverty but the huge black hole from public sector pensions now topping €100 billion in future liabilities. To hammer one without first reforming the other is an extraordinary exercise in cowardice and self interest.

Leinster house with its own nose in the public sector pension pot and cowering before omnipotent public sector unions, can be relied upon to continue to shaft the private sector rather instigate real reform. This would require topping public sector pensions at about forty grand and introducing a universal pension into which all workers contribute capped at a modest level and supported by pension guarantees. Fat chance from the fatcats.

Public sector workers are right to feel pissed off that their pay and pensions are in the cross hairs, at a time when there has been nauseating gravy trains at the Ceann Comhairle’s office and at FAS while three quarters of State sector CEOs have failed to make voluntary pay cuts. But if there’s one thing that’s also pretty clear from programmes like RTE’s Frontline last week is that a substantial rump within the union movement are hiding pay and pensions segregation behind a curtain of indignation and anger. They call for leadership but show none themselves by engaging in the politics of denial and by shooting messengers.

They appear to live on the other side of the wardrobe, in a Narnian world where pay levels can’t go down, pensions can’t be capped and there is a golden printing press oozing cash. That the real economy is on a collision course with bankruptcy and social welfare recipients face savage cutbacks, matters little when you a segregationist. That’s for them out there, it’s their problem let them fix it, just say no. If that sounds familiar you heard it before from others that desperately fought to maintain segregated systems and the power that comes from them.

• Rather than accepting the recent results from the ESRI using standard international science in measuring rates of pay that expose a 20% gap in favour of the public sector, the segregationists insist the comparison is flawed because it relies on age, experience and education rather than job content. This is daft economics and is the language of denial.
• The quadrupled public sector pensions liability of €101 billion calculated by the Comptroller and Auditor General using actuarial science is dismissed by relying on this year’s cash payout from the pay- as- you- go system despite the fact this method of calculating pension liabilities is illegal in the private sector because it creates the dangerous mirage that future pensions can be afforded. Add pensions to the pay gap and it doubles to well over 40%. Economics call this an imbalance. I call it apartheid.
• Eurostat data shows the alarming degree we overpay public services but it’s ignored by claims that like for like comparisons to Ireland aren’t fair because it’s more expensive to live here! That prices have fallen by nearly 6% and that most domestic price inflation up to the bust corresponded with accelerating public pay hikes are ignored.
• Based on 2006 data, Teachers in Ireland averaged €52 grand, ( now €60k). That’s 44% higher than the Euroland average of €36k and well above big economies like Germany at €42k, Britain at €41k and France at €34k. Health and Social workers in Ireland averaged €46k that’s 45% above the Euroland average of €38k and well above high cost economies like Sweden at €35k. The averages for Germany and Britain were similar at €34k and €38k respectively. The gap on public administration salaries is lower, but at €46k Ireland’s is still 21% above the Euroland average. The gap for politicians pay and pensions remains unadjusted despite promises to benchmark down to similar economies.

Unless you live in Narnia, no matter where you turn these truths keep popping up. We’ve simply been overpaying ourselves and we can’t afford to do so any longer. This year’s deficit has worsened and is now heading towards €30 billion in the red. That means we’re now paying half our bills on the national credit card. Going on strike won’t make that fact go away, it will just make it worse by increasing our extra borrowing cost which is already running €400 million per year above what it should be. Pay has to be cut and pensions capped, that’s the ugly truth. Lower paid workers on less than the average industrial wage need to be protected but progressively higher pay cuts have to be implemented, ideally within a new framework that includes a national recovery strategy.