Why the Proposed Pay Cuts should Be Rejected

UNITE’s Walter Cullen and Tracey Osment explain why the union is recommending a No vote on the proposed pay cuts: http://bit.ly/XOsqvp  Go down the page to see the video.

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UNITE to Campaign for No Vote on Croke Park Extension

Statement from UNITE the Union:

Members vote overwhelmingly against proposals

Ballot of 6,500 Public Service members to take place in coming weeks

The UNITE trade union is to campaign against the acceptance of proposals put forward to extend the Croke Park agreement.

A meeting of workplace representatives voted overwhelmingly today to reject the proposals which speakers from health, education, local authorities and the civil service said were ‘disastrous for members and would create a vicious spiral in the overall economy’.

“From this meeting we will now plan for a ballot of all our 6,500 members in the public service,” said UNITE National Co-ordinator Walter Cullen.

“The cuts being proposed cannot be sustained by the workers we represent nor can they be anything other than disastrous for jobs across the broad economy.”

“Time after time the Government has promised this will be the last time, and that job creation measures will be successful in offsetting the impact on the whole country.”

“Time after time those ‘promises’ have proven to be empty gestures.”

“UNITE will now look to work alongside other trade unions opposed to these proposals and campaign vigorously for their rejection.”

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UNITE Condemns Underhanded Government Tactics

UNITE the Union has condemned the threat by Government to punish workers that reject the proposals in the new Public Service Croke Park Agreement while at the same time supposedly offering sweeteners to other public sector workers to vote in favour.

This is an example of a Government intent on imposing pay cuts on public sector workers no matter how inequitable these cuts are or whatever way they vote. There are no sweeteners in these proposals, just lesser cuts for some workers.

The reason UNITE walked out of the talks was because the Government will not discuss any other issue except pay cuts. We believe there is an alternative to these cuts.

No adequate information was provided by the Government to allow public sector workers to make an informed decision on these proposals.

UNITE challenges the Government to demonstrate clearly how the cuts to public sector workers’ pay will secure €1billion in net savings and what the net effect of these savings will have on the deficit.

The Executive Committee of UNITE and our public sector representatives across health, education, government agencies and local authorities sectors will meet next Tuesday, 5th March at 11am in the Gresham Hotel.

“UNITE will resist any attempts by the Government to divide and confuse public sector workers in an attempt to impose pay cuts.

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Workers Paying the Price for the Failure of Reform

We saw that public sector workers are paying the price for the Government’s failure on job creation.  A massive hole in the budget emerged when the Government had to admit it was missing its employment targets.  To fill that hole, the Government went after workers’ wages and incomes.

But public sector workers are paying another price – for the failure of the Government’s reform agenda.   The fact is that the Government – both this one and the last one – has never engaged in reform.  The issue of high-quality, cost-efficient public services have never been on the agenda.  In the recent Croke Park renegotiations, the management not only refused to negotiate reform proposals from the trade unions, they even refused to listen.  Reform was just not part of the plan.

Senator and Professor John Crown outlined the problems in the Irish healthcare system – which he describes as ‘the least efficient healthcare system in the world’:

‘As it is currently structured, the Irish healthcare system ensures that people spend an inordinate amount of time not being treated. The current structure incentivises inactivity, not efficiency. Patients are seen as a cost, and one that only has to be realised when a patient enters the hospital.  We spend an inordinate amount of money on patients who are waiting for expert treatment, while those who run the bureaucracy think that they are saving money by not treating the patients properly.’

In his article Professor Crown compares the Irish system with the US and German systems, the latter being a system based on ‘solidarity’, on ‘need, not wealth’.  He goes on:

‘We do not have the worst quality of healthcare in the developed world, we have instead the worst managed healthcare system in the developed world . . .’

And while he criticises the managers of the system, he also states that there is little that can be done since the system itself is ‘dysfunctional’.

All this cries out for reform.  Instead, the Government cuts the payroll – through cutting wages and employment.  Last October a senior HSE executive described this strategy:

 ‘Around €2.5 billion has been taken off the health budget since the beginning of 2010, with a further cut, speculated to be around €500 million, due to be made next year.  The hospital system was currently at the limits of the current approach to reduce its costs. It is sustainable but not repeatable.’

Not repeatable – but that’s exactly what the Government is doing.  Just today the HSE announced further cutbacks, with ward closures in addition to removing the medical card from 40,000 people.

But cutting payroll is easy.  You just cut.  Reform – real reform in the delivery of quality services in a cost-efficient manner – is hard.  It requires working towards a well thought-out goal; but this can present problems.  It steps on the toes of vested interests and in the case of the health sector, these interests are private profit.  It challenges a deeply entrenched and conservative management culture which is more comfortable with inertia than change.  It requires cooperation and consensus (contrast this to the Government’s approach in the negotiations – agree the cuts or we will impose it on you anyway).  And it requires time.  There is not short-cut to the hard work of reform.  If we had started the process of reform when the crisis broke out, we’d be some ways down the road.  As it is now, we don’t even know where the road is.

That we are not likely to get reform in the future can be seen from the internal divisions in Government.  Prior to her resignation, Roisin Shortall, TD, spoke in the Dail:

‘We cannot cut our way out of problems. We must reform and that reform must happen quickly. Unless there is substantial reform there will be cuts and the poor will be hardest hit . . .  Are we going to reform and strengthen our public health service or are we going to privatise large parts of it? How do we ensure access and equity in the health service? What model of universal health insurance best suits the situation here in Ireland? Should it be a commercial insurance model or a social insurance model?’

Only a short-time later – either because she could not get an answer to her questions or because the answers amounted to privatisation and commercialisation – Deputy Shortall resigned her ministerial post.

When Ministers cannot agree on what kind of reform, when management refuses to consider proposals for reform, no wonder reform is left off the agenda.

There are two losers in all this:  the public and the men and women who work in the health sector.  The former, because they do not get a high quality service at an efficient cost; and the latter because the Government takes the easy way out and cuts wages.

In the end, we are all the losers.

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Reflecting on the One-Policy State

While we await the publication of the final agreement – which will no doubt contain a number of details that will further chip away at people’s wages – it is worth reflecting on potential alternative outcomes of the vote.  The Tanaiste, for instance, stated:

“I think all of us should now respect the fact that trade unions have to consider the outcome of these negotiations and the members of trade unions will have to reflect and make their decisions in the course of ballots . . . it is best if political parties stand back from that process and give to the people who work in our public services the respect and space in order to make a decision.”

This seems reasonable.  However, there is a problem.  For the Government has also made it clear that it doesn’t matter what the public sector workers do in the ballot – the Government will legislate the changes anyway.  So this is the real message:

‘Reflect on the proposals if you will, it doesn’t matter what your decision is.  This deal will be imposed on you whether you agree or not.’

In one sense, this reflects the larger debate in the economy:  it doesn’t matter what you want or who you vote for, it doesn’t matter how many times you change government, you will get austerity.  It’s called a one-policy state.

Over the next few weeks there will be considerable pressure on public sector workers to vote for the deal.  And behind all this pressure there is the stick:  it doesn’t matter anyway, the deal will be imposed.

So is the vote on the deal a meaningless exercise?  UNITE doesn’t believe so, whatever the Government may say.  There are options.  Let’s go through the sequence of potential events.

1)            If the deal is voted down, the worst that would happen is that the Government would legislate for the changes anyway:  the cuts in Sunday premium, freezing of the increments, cuts in pensions, cuts in high pay packages, etc.    Some might argue that the Government would go further and cut even more.  However, the Government would be extremely reluctant to go down this road – to victimise workers on the basis of a democratic vote.  There would be no political support for this and it is doubtful Labour would allow Fine Gael to victimise workers who happen to disagree with them.

2)            However, if the deal is voted down, the issue becomes political and here is where public sector workers can exercise more power – more than in negotiations where they were put at a disadvantage by the Government’s pre-condition.  Once the issue becomes political, the Government can be put on the defensive:

  • Why is the Government missing its targets (which Is their reason why they had to make these cuts)?  We have put forward one explanation here, but in the Dail the Government can’t hide behind a blizzard of numbers and tables.  They will have to come clean – and that means admitting their policies have failed.
  • Why did they refuse to even listen to, never mind negotiate, alternative proposals to make savings?  This confounded all the unions in the process because it is almost unheard of in management-employee negotiations.
  • What are the real savings in the proposals?  Not the gross or headline savings but the actual, after-tax savings – the real benefit to the Exchequer.
  • What is the damage to the economy arising from these proposals?  Again, the Government would have to bring forward their own estimates as to how much consumer spending would be lost, how many private sector jobs would be lost.

By voting down the agreement, public sector workers can start to turn the tables and put pressure on the Government.  In such circumstances, it is not even clear that the Government could carry their own backbenchers.  For instance, why would Labour TDs vote to cut public sector wages for policy mistakes that Fine Gael Ministers made (after all, it’s Fine Gael Ministers who drive policy in the Departments of Finance and Jobs, Employment and Innovation)?

3)            Public sector workers would have the opportunity to go outside the Dail to put their case directly to people – those working in the private sector, the unemployed, community and voluntary groups.  For the equation is simple:  your spending is my income, my spending is your income.  Public sector workers could start to do what we should have been doing all along – linking the fortunes of all workers together, building a broader, popular coalition.  This could be the start of a new alliance – one that could put even more pressure on the Government to break from austerity policies throughout the economy.

And behind all this, the public sector workers have a stick, too – namely, industrial action.  That combined with political alliance building could make for a powerful combination.

In short, rejecting the deal means the potential of bringing the issue of wages and living standards out of the negotiating room and into the political sphere where the outcome is less certain and public sector workers are more powerful.  And the worst that would happen is that the same deal would be imposed.

In other words, public sector workers have nothing to lose but much to gain.

This, too, should form part of the reflection of workers as we prepare to debate the details of the deal.

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Statement on Withdrawal from the Croke Park Talks

The UNITE trade union has withdrawn from talks with Government over public sector cuts which it believes have been politically driven from the outset.

“We have never been presented with an economic case for the proposed cuts,” said UNITE Regional Secretary Jimmy Kelly.

“Our belief is that the scale of the cuts proposed would be hardest felt by those on low salaries that cannot afford to give more; and that they will add thousands to the number of unemployed and those forced to emigrate.

“By the Government’s own estimate there will be 32,000 fewer in work than it had forecast. It now feels it right to go after public sector workers to foot the bill for a chronic failure to tackle the jobs crisis. Having failed to get an answer on the economic basis for the proposals, UNITE feels that it owes it to its members in the public service, and to the country to withdraw from what has been nothing more than a political facade.

“We are pleased to stand alongside the other trade unions who are walking away from this political choreograph,  We will prepare with our members to resist legislation to bring about cuts that will damage Ireland in so many ways.”

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UNITE Withdraws from the Croke Park Talks

UNITE has withdrawn from the Croke Park renegotiations.   We will be making a full statement tomorrow.

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Workers Pay the Price for Government Policy Failure

Public sector workers are being asked to pay the price for the Government’s own admitted failures.  This is nothing new, however.  Since the beginning of the crisis workers in the private and public sectors have paid the price of poor Government policy combined with the negligence of senior management in the financial sector.

This latest merry-go-round of ‘make the workers pay’ can  be seen from the Government’s launch of, yet again, another Action Plan for Jobs.  We’ve had the Jobs Initiative, two ‘job-creation’ budgets, the first Action Plan for Jobs , the 10-point Jobs Plan launched last December; and now we have the latest Action Plan.  Still, the Government’s jobs strategy is not working.

  • In Budget 2012 (introduced in December 2011), the Government estimated that employment would grow by 63,000 by 2015
  • In the last Budget – Budget 2013 – the Government is now estimating that employment would only grow by 31,000.

The Government now expects there will be 32,000 fewer people at work in two years’ time.   This has enormous financial implications for the Government.  It is difficult to estimate the cost of unemployment but a round figure often used is that each unemployed person ‘costs’ €20,000 in terms of unemployment costs and lost tax revenue.

The cost is undoubtedly higher because if there 32,000 fewer people at work, there is less consumer spending, less VAT revenue and profits tax, less wages, less economic activity.  But let’s stick with this crude €20,000 yardstick.

Because the deficit had to revise downward the number of people at work by 2015, they had to factor in a rise of €640 million in the deficit.  And that’s at a minimum.  The figure is probably higher when you factor in the impact on the economy.

So within the last year, the Government discovered that there was a €640 million hole in the budget because their employment policies are not working.  What do they do?  Do they reassess their policies?  Do they try to find out what’s going wrong with their approach and fix it?  No.

Instead, they go after workers’ income and living standards with more pay cuts.  How much will the Government’s proposals save?  We saw in the previous post that the proposals on Sunday premium and cuts in basic pay will save less than 50 percent of the headline cut.  If this holds, the Government’s proposed cuts will deliver less than €500 million in savings.

That’s why the Government claim they need more cuts in the public sector in order to reach their fiscal targets.  €640 million lost due to their failure on jobs policy.  So grab €500 million from public sector workers.

And here’s the real insult to injury – the cuts in the public sector will mean even fewer jobs in the economy; particularly in the private sector.

This just proves the old saying:  when management makes a mistake, the staff suffer a pay cut.  Same ol’, same ol’ no matter what sector you work in.

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The Fiction and the Reality behind the Government’s Numbers

Now that the Government has revealed a few more details behind its proposals, we can more clearly see the gap between the level of cuts and what will actually be saved – between the fiction and the reality.

To date, they have proposed two major cuts in the public sector; totalling €370 million – over a third of their target of €1 billion cuts.  The first were the cuts in the Sunday premium.  We discussed this before, but let’s drill further down in the numbers.

For a standard rate taxpayer the marginal tax rate is 38.6 percent (income tax/PRSI/USC as well as the standard pension/survivors contribution of 6.5 percent, minus tax relief).  For those on the top of rate of tax, this figure rises to 57.5 percent.   So the after-tax savings for the Government from a cut of €1,000 would be:

  • Standard rate taxpayer:  €614
  • Top rate of taxpayer:  €425

As we don’t know how many public sector workers in receipt of the Sunday premium are in the standard and top rate of tax, we will assume that two-thirds are on the top rate.  This may seem to indicate a lot of ‘high-income’ earners in the public sector until one remembers that the threshold at which you enter the top rate of tax is €32,900.  So what do we find?

  • On a reduction of €1,000, the net savings to the Government is approximately €488. 

In other words, the after-tax savings to the Government is 49 percent of the headline cut.

Let’s turn to the second major cut –the proposal to cut basic pay for those earning over €60,000.   Almost all these employees will be on the top rate of tax.  Since the pension levy applies, the marginal tax rate – including tax/PRSI/USC as well as the standard pension/survivors contribution minus the tax relief – will be 61.1 percent.

Now let’s apply this to the €200 million savings being targeted by the Government.  What would the net savings after tax be?

  • Approximately €78 million

In other words, the after-tax savings to the Government is approximately 39 percent.

So let’s summarise.

Real Savings

So a €370 million cut turns out to be a savings of €161 million. This may change slightly when the full details of how the cuts will impact on different category of taxpayers with different tax rates and contribution schedules, but only slightly. To put this in perspective, this is equivalent to reducing the deficit by less than 0.1 percent; in other words, a minuscule amount.  But there are two further things to note:

  • The above only estimates the after-tax savings.  When you factor in the reduction of consumer spending from lower disposable incomes and the impact that has on businesses and their employees’ wages and jobs – the savings is even less.
  • The ESRI shows that the savings to the Government from public sector wage cuts falls even further after the first year – as the fall in consumer spending becomes embedded in the economy.

So these after-tax savings are, if anything, on the optimistic side.

If the Government were honest in the negotiations and to the public, they would acknowledge the real savings behind their proposed cuts.  They would acknowledge that consumer spending will fall, and, as a result, private sector jobs will be put at risk.

They would give us the reality and not the fiction.  But if they were to do that everyone would see, from a deficit-reduction perspective, how inconsequential these proposals are.  People would then start to ask:   given the damage to the economy and people’s living standards, what’s the point?

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Government Negotiating Tactics May be Leading to a Breakdown

The following is a statement from Walter Cullen, UNITE’s Regional Co-ordinating Officer.

UNITE is extremely concerned at the conduct of the negotiations to date:

1.            The Government has announced that if they do not get a deal, they will act unilaterally by legislating cuts in wages and working conditions.  This ‘deal’ means €1 billion cuts in the public sector.  This coercive pre-condition has completely undermined the ability of trade union negotiators to represent their members.  Management has made it clear that if it does not get what it wants at the table, they will walk away and take what they want anyway.  In such circumstances, there is no prospect of ‘good-faith’ negotiations.  If the Government were truly intent on reaching an agreement which satisfies both parties, it would remove this pre-condition from the table.  But this is not likely.

2.            The Government has made it absolutely clear that they are not interest in discussing or even hearing alternative proposals on how to achieve savings in the public sector.  They are only interested in payroll cuts.  The 300,000 public sector workers are fully aware of the deficits in public services and have demonstrated this by the non-pay savings and efficiencies that have been delivered over the lifetime of the current agreement.  It appears that achieving further efficiencies and structural reform is not something management are interested in, which demonstrates an amazing indifference to public sector reform.  No one should be in any doubt – the ongoing negotiations have nothing to do with creating high-quality, cost-efficient public service delivery systems.  This is about cutting people’s incomes.  Reform doesn’t even feature at the talks.

3.            The deadline for concluding the negotiations is the end of the month – only seven days away.  The Government has not presented all their proposals – and none of them in the detail needed to begin proper and informed negotiations.  Further, the Government has been slow to provide the information that trade union negotiators have requested – namely, information regarding the financial impact on public sector workers.  Under these conditions, the seven-day deadline is impossible to reach.  The Government knows this and this may explain their delaying tactics to date.  They may not be interested in reaching a consensus with workers’ representatives and may be happy enough to see the talks collapse so that they can do what they intended to anyway – cut wages by legislation.

UNITE has made two things clear:  (a) we will remain at the talks so that we can be in a position to protect our members; and (b) we have no mandate from our members to negotiate a cut in their living standards or working conditions.  We are ready to engage with the Government on how to create real, sustainable savings in public service delivery – savings that will increase the quality of those services.  However, the Government has made it clear they are not interested in such a discussion.

And that is where the real problem lies.

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