Lenihan must tread carefully when reforming public service

A surgeon’s knife rather than a butcher’s axe is the tool needed to make savings in the public sector, writes Eoin Martin.Brian Lenihan’s recent proposal to introduce up to 5,000 redundancies in the public service may at first glance seem brave and laudable, at least to an economist. Ireland has become the first EU member to slip into recession and the public wage bill is an obvious target for savings. Cutting a large number of relatively low-paid jobs would save more money than cutting fewer high-paid jobs.The public service is a complex beast however and its reform should not be taken lightly. One hopes the government is at least somewhat chastened by its experience of decentralisation. Drawn up by a cabal of ministers, as Richard Bruton put it, “on the back of a betting slip”, that plan had to be shelved earlier this year having already cost the taxpayer millions.This time, Mr Lenihan has indicated that he will await the recommendations of the taskforce on public sector reform later this month before proceeding with detailed plans. This could pose interesting challenges for the government as it may discover many of the problems in the public service are ones of its own making.The biggest and most obvious target for redundancies is the Health Service Executive (HSE). It has an annual budget of over €14 billion and employs 130,000 people making it the largest public body in the state. Mr Lenihan has proposed that a scheme of 1,000 voluntary redundancies would be offered to administrative staff in the HSE next year.The purpose of setting up the HSE was to reduce bureaucracy by streamlining the ten existing health boards and other health authorities into a single body. One of the main reasons this didn’t work is that these health boards were filled with political appointees who for political reasons were left in place. The result was a monster that rapidly became infamous in the national psyche.While cutting administrative staff may seem appealing to the public who want more money spent on doctors and nurses, it is likely these cuts will be low level functionaries rather than the unnecessary middle managers that the government itself appointed. The cuts may therefore be cost effective but may do little to actually cure the HSE’s problems.The Comptroller and Auditor General’s 2008 Report revealed that the HSE like many other government agencies has run up an overtime bill of hundreds of millions of euro. Making massive staff cuts could actually exacerbate this situation if it leads to further understaffing.
The public service is a complex beast however and its reform should not be taken lightly
In more general terms, the redundancy proposal poses other difficulties for the government. The main public sector union Impact has already expressed alarm at Minister Lenihan’s proposals. Given the difficulty with which the latest national pay deal was secured, the government should be wary about jeopardising an agreement for such a minimal gain.While the pay roll cuts themselves will save money, the government will face huge increases in the social welfare bill. This will be compounded by the revenue foregone as a result of 5,000 people no longer paying income tax. VAT income will also fall further as unemployment rises. Needless to say, the workers themselves are likely to find it extremely difficult to find new employment in the current climate.Civil servants and public servants are often subjected to criticism for being excessively rewarded for low productivity. Again some of this is the government’s fault. The original benchmarking scheme introduced arbitrary private sector-style pay increases without commensurate productivity goals. This changed the pay expectations of the whole service without delivering any increased value for money.Benchmarking was Fianna Fáil’s way of appealing to all of the people, all of the time. Naturally Irish businesses thrived in the heyday of the Celtic Tiger. There was always a risk though that public sector workers might vote Labour or Fine Gael if they didn’t feel the spoils were trickling down to them. Effectively therefore that is what happened. Money was given out but the focus was never on efficiency.This hypocrisy will seem particularly cruel to those who will lose their jobs. The government, as all governments do, has a tendency to use the civil service as a cushion in the good times and a punch bag in the bad times. For years, Ireland has witnessed the proliferation of quangos or state agencies. There are now over 900 such bodies. Minister Lenihan had previously criticised this trend arguing that it reduced the accountability of the government, a sentiment many would agree with. A further problem is that as with the HSE, the greatest of the quangos, these bodies are headed by political appointees and there has been a strong culture, openly endorsed by former Taoiseach Bertie Ahern, of jobs for the boys.What then is the problem with reforming such a wasteful system? Nothing at all if the government were actually serious about reforming it. The problem is that there is no evidence that they are serious. Few changes have been proposed that would make significant cost savings.A decision was made during the summer to merge a number of state agencies but the government used it as a cynical opportunity to hamstring bodies it regards as a thorn in its side like the Irish Human Rights Commission. The point of democratic government is that it should accept certain such thorns in its side. The danger now is that the government will adopt the flipside of its previous approach. Where it used the civil service and public service to shield it from direct criticism over the last few years, it will now force the same service to bear the brunt of crude cuts.The position is weakened because Fine Gael may well support whatever reform is on offer. They have been calling for such changes but know they would find them hard to achieve themselves if they were in government with Labour. There is still time for a more subtle approach to be taken and for genuine reforms to be introduced.However this would require more political courage and imagination than has previously been shown by this government.