The Public Sector national strike is off. Thank heavens we’re moving past the anger phase and into searching for real solutions to the common threat of losing our independence in running our countries finances. Next we need to move past simple slogans and into precise detail. Slogans like it must be fair and the rich should pay for their excesses make for great speeches but ignore the harsh reality that the budget will, by necessity, hit just about everyone.

I’ve been banging away at the daftness of the most protected marching to offload their burden elsewhere.  If super taxes on high incomes could get us out of this mess I’d say it. If nailing and jailing fatcat bankers would do it, I’d say it. If taxing the worldwide assets of Irish tax fugitives were possible and effective, I’d say it. If there were any way out other than spreading the load across all workers hell I’d be leading the march. But there isn’t.

Right wing theology this is not. It is simply the truth.  The ugly facts of the matter are that if all workers and that includes, the self-employed and owners of SMEs don’t carry the load together, it is the weakest and most vulnerable in society that will get it in the neck. That means our elderly parents on very low pensions, our growing jobless neighbours worried sick about their children’s education and how to meet the next loan demand, our sick and disabled, our home helpers and the hundreds of thousands of others that rely on us taxpayers to help carry them.

That’s the contract we all enter into when we pay our taxes. No group of workers has the right or the justification to claim special privileges in ring-fencing their incomes, that’s why I’ve been relentless in exposing the nonsense of public sector victimisation. If Public Sector Union chiefs got their way and lessened the load on their constituents it isn’t the rich who suffer. Their load would be paid for by savage cutbacks in social welfare payments, in hospitals and throughout our schools.

The most important thing the Government needs to get right about this budget is leadership, that means leadership built on telling the truth with crystal clear communication and unafraid to stand up to powerful vested interests used to dictating to Government.

• On the spending side that means telling us that all salaries from President Mc Aleese down through Ministers, TD’s, Judges, Senior Civil Servants, heads of State agencies, lecturers, gardai, teachers and nurses are too high for our shrunken and uncompetitive economy and must be cut. Deep cutbacks are already happening in the private sector as businesses scramble to survive.
• Let’s widen the tax base to include investment property taxes, carbon taxes, let’s skew income tax to ensure higher earners carry relatively more, let’s cut out all non-essential tax breaks and go after tax exiles. But even doing all these things we still cannot avoid taking more tax from low and middle income earners that have jobs. We also need to avoid the fatal trap of taxing success at more than 50% of income by introducing an ill-conceived new tax rate - do that and we’ll kill motivation stone dead.
• Let’s be smart, foresighted and brave enough to continue to invest in the things that will matter most during the next up cycle especially projects that will support sustainable jobs in clean technology, in the sciences and engineering and in energy efficiency and generation. That means not being afraid to borrow to invest even though faced with hugely challenging cash calls elsewhere.

And if the Government fail to deliver clear headed leadership this time, let’s throw them out.

Public Sector action scheduled for the end of March serves just one useful function – it vents anger. But it is based on a sham victimisation position. Here’s what the Government and Opposition parties are afraid to say;

• Adjusting for education, experience, occupation and gender public workers are paid 20% more than everyone else.
• Contrary to public sector union propaganda where the single mum example is often wheeled out, the low paid enjoy the highest premium at 30%. The high paid have the least at 10%. A single mum is far better off in the public sector than serving in the local fast food joint where she’ll have 30% less pay including no pension.
• In money terms public sector pay, now touching an average of fifty grand a year, is running nearly ten grand a year ahead of the private sector.
• This premium ignores the current pay cuts hitting the private workforce and the extraordinary pension premium enjoyed by the public sector.
• A teacher starting work today would need to pay between 27.5% and 33.6% of salary each year for forty years into his or her pension if it wasn’t subsidised by the private sector. A garda would need to pay between 36.6% and 44.8% because retirement on full benefits is as early as age 50.
• The cost of the pensions levy after adjusting for tax relief is just 4% to 5.3% on incomes between €25,300 and €66,100, far less than the substantial pay cuts assailing the private sector.
• In strongly competing economies like the UK, Germany, Holland, Denmark and Finland public pay is at a discount to private sector pay because of the extra security.
• Irish average pay in the education sector in 2005 at €51,666 stood 25% above the UK and 66% above Swedish 2007 levels.
• French average pay in its much lauded health sector in 2006 was €26,780 compared to Irish pay of €39,240 in 2005. That’s a 46% difference.
• In 2001 there was 247,000 employed in the public sector. By 2007 this had risen by over 22% to 302,500, mostly in Health up 26,000 to 107,500 and Education up 18,000 to nearly 86,000.
• The total pension bill is now capitalised at €60 billion. The annual pay bill at €20 billion up 50% in a short few years is, simply put, unaffordable according to economists employed within the public sector and who publish a Quarterly Economic report.
• Time on the clock rather than merit increases pay and adds close to a half billion each year in extra pay. In 2007 Garda basic started at €25,800 and moves by increment to €46,000 after 17 years. Teacher’s €31,000 pushed to €60,300. Admin officers €33,500 went to €55,100, Clerks €23,220 to €35,700, Public Health nurses €46,400 to €55,200, Staff Nurses €30,400 to €43,000. These are higher today.
• The Irish President, Taoiseach, Ministers and top officials are amongst the highest paid public servants in the world outperforming Britain, France, Germany and the USA a truly remarkable feat given our tiny size.

Ireland’s had a property bubble but it’s also run a parallel public sector bubble where the tax revenues from one expanded the other. The harsh truth is that we cannot afford the public sector gravy train at its present level but no politician has had the courage to say it including Fine Gael and Labour. Instead of focusing on a clumsy pensions levy we need to work together to find a common solution to the stabilising the public finances otherwise outside agencies will do it for us as an ultimatum. Public sector pay will have to adjust to fit the shrunken economy and that means several years of adjustment in relative terms if we are to regain competitiveness and finance future expansion in public services. So let the anger vent but when the bile subsides recognise that jailing bankers and hitting the rich with extra tax will not avoid what has to be faced; Public sector pay has to come down if large scale job losses are to be avoided. What Public Sector Union chiefs should be mulling over is not a daftly constructed pension levy  but whether to sell job losses or pay cuts to its members.

My appointment to the National Consumer Agency predated RTE’s Rip Off Republic, since which I have remained a sharp critic of core Government policies most especially its failure to either predict and, to date, adequately deal with the economic crisis caused by the property bust and associated banking losses. In 2005 I was appointed to the interim board of the NCA which became the formal board of the NCA in 2007. In accordance with Section 10 of the Consumer Protection Act 2007 on the anniversary of its appointment two members of the board must retire.

I have volunteered to retire at the discretion of Minister Mary Coughlan in May and have informed the Chairman that I will continue, if reappointed, to act on a voluntary basis. I have never claimed expenses.  I’m of the view that board fees across State agencies in this climate are too high  for the work required and may not represent good value for money especially at a time when the burden of spending cuts and taxes will fall disproportionately on the shoulders of low paid workers where average industrial wages are c.€20 per hour.

Eddie

Take a glass of water and a panadol. You’re a banker now just like the rest of us taxpayers, so AIB’s 2008 results is compulsory reading as is getting a grip on the arcane language of banking accounts. Forget the headlines about a fall in pre-tax profits of 60% to a cool billion which is to be used to replenish its capital base -the trend in dodgy loans is the key. Remember, the bigger the hole, the greater your taxes will be over the years ahead and the bigger the Government cutbacks once the National Pensions Reserve Fund is drained of cash to shore up banks.  So what’s the AIB story?

AIB  point to an improvement in its costs as a percentage of income from its efficiency drives and that its crucial Tier 1 capital is up largely thanks to our €3,500 million loot from 5.8% to 8.4%. At first glance it seems Minister Brian Linehan has done the trick on the cheap and the patient will be back on his feet in jig time but unfortunately the lethal dose is in the estimate of dodgy loans.

What proportion will become losses,  over the next few years will depend on how deep and long the recession will be, especially in the property market which account for 60% of so-called impaired or non-performing loans and which is up nearly threefold since 2007. These have gone from a little over a billion to nearly three billion in just one year jumping from 0.8% of the huge €130,000 million loan book to 2.3%. Remember the impaired loans are the stuff you’ll  never see again, the bad debt write offs and the 2008 figure represents 85% of the cash we’re to lob into AIB. In essence our cash is already gone to pay for losses. You can take that panadol now.

But the impaired loan figure is just for last year. What’s the trend, how much more will we have to put into AIB to avoid it shrinking so much that it sinks the economy? Here you need a crystal ball and a strong stomach. AIB’s own estimate of “criticised loans” the stuff that needs extra management time, has jumped to a whopping €15,465million, that’s an increase of 2.3 times the 2007 figure.

But AIB has a special intensive care ward for really ropey loans called grades 11 to 13. This is the stuff one step from the mortuary and right now that’s reading just under six billion in potential imminent losses. Markets, perhaps expecting worse and no doubt relieved that the hard facts are finally coming out marked up AIB’s shares a few cent to the price of some chocolate but nothing fancy - just one of those tiny Dairy Milk bars.

For us taxpayers the message is pretty clear;

• The scale of at dodgy loans across the banks is likely to be about one eighth of their loan book.
• How much will translate into losses will depend on the depth of the recession
• Despite the capital injection AIB will shrink.
• The credit squeeze will continue lock out all higher risk borrowers including businesses
• Full nationalisation looks unavoidable if the banks can’t raise more capital themselves