Mr. Shay Cody:

I am joined by Mr. Tom Geraghty of the Public Service Executive Union, Ms Sheila Nunan of the Irish National Teachers Organisation and Ms Patricia King of the Services, Industrial, Professional and Technical Union, SIPTU. We thank the Committee of Public Accounts for the invitation to address it. The public services committee of ICTU is always happy to assist the committee in any way it can.

While all potential savings in public expenditure are important, the savings the Department of Public Expenditure and Reform seeks to achieve on foot of its review of allowances comprise a relatively small proportion of the overall savings and reforms being delivered by public servants and their unions under the public service agreement. The implementation body for the agreement reports that the agreement has achieved annual recurring savings of almost €1.5 billion in its first two years and is on track to achieve recurring annual savings of €3.8 billion gross, or €3.3 billion net when the additional pension costs associated with people retiring from the public service are taken into account, by 2015. We would be happy to comment on recent erroneous media reports that questioned the veracity of the verified savings being delivered under the agreement, even if that is not the direct subject of this hearing.

I would like to give some background information on the allowances. Almost all public servants are on pay scales that reflect the agreed rate for the job, minus the 2010 pay cuts and the so-called pension levy, which together have reduced pay by an average of 14%. Any allowance or premium payment paid on top of these rates was introduced - sometimes many years ago - to reflect additional skills, qualifications or responsibilities over and above the normal requirements of the job. In other cases, large groups of staff in a relatively small number of grades have seen allowances introduced during the years to reflect the wide range of duties and specialisms within these grades. Most importantly from a management point of view, the payment of allowances ensures awards for additional duties and responsibilities can be confined to those staff members who carry them out without the need for promotions or the creation of new grades. Various allowances paid to certain groups of staff are pensionable or have come to account for a significant portion of the income of the staff in question. In many such cases the allowances have come to be considered by staff and management as core pay. In some cases allowances are used by management to avoid costs. Acting up allowances, for example, are sometimes paid to staff who take on the duties and responsibilities associated with a vacant higher grade post. During the years this has frequently been used as an alternative to a promotion that would result in a higher salary and pension commitment. The cost of allowances is falling as public service staff numbers continue to decline.

The Department of Public Expenditure and Reform announced the outcome of its review of public service allowances on 18 September and made a further statement in October. The review had initially been established by the Department as a management review in December 2011. It was not conducted under the processes of the public service agreement. Neither the public services committee of ICTU nor any individual trade union made submissions to the review process. We were not invited to do so. There was no negotiation with unions on the content, objectives, timetable or terms of reference for the review. The Department instructed all Government offices and Departments to report to it on the allowances paid and make a business case for those allowances they believed should continue to be paid to new beneficiaries - staff who were newly hired, promoted or assigned to duties that attracted an allowance before now. The publicly stated objective of the review was to facilitate a 10% reduction in spending on allowances and premium payments by 2014. Our understanding was that it was intended that the review would lead to the abolition of certain allowances, particularly to new beneficiaries, to help to meet this target. No allowances were paid to new beneficiaries from the end of January 2012 pending the outcome of the review.

The review was not supposed to end all allowances and premium payments. According to the letter the Secretary General of the Department of Public Expenditure and Reform sent to Departments and agencies to announce the review, the Minister believed allowances which reflected work of additional value or the arduous nature or unsocial hours of certain duties and posts remained valid, appropriate and cost-effective. The letter also stated certain allowances might have been overtaken by developments in qualifications, duties, skills and normal flexibilities now expected or required in public service employment. At the beginning of the review the public services committee of ICTU was informed that it would identify three types of allowance or premium payment - those that would be discontinued because the business case for them was not made or deemed too weak, those that would continue because the Department of Public Expenditure and Reform accepted the business case for them and those for which more information would be required from departmental management before a final decision could be made. We were also told any change would respect the public service agreement and that there would be full consultation with staff representatives at central and sectoral level.

Officials from the Department of Public Expenditure and Reform sent a letter to the public services committee of ICTU to emphasise that any initiative which would arise from the review would be advanced in compliance with the terms of the Croke Park agreement, having regard to the primary commitments given by the Government under the agreement. We took this to mean that while unions would have no part to play in the review, they would be able to contest through the arbitration procedures of the public service agreement any decision to discontinue an allowance. These processes are time-limited and binding on all parties. In such a situation our expectation was that independent arbitrators would have to consider whether the abolition or amendment of an allowance was permitted under the agreement. Although this has not yet been tested, we expected that the outcome of an adjudication would largely depend on whether the abolition of an allowance would lead to cost savings, whether the purpose for which the allowance had been introduced was continuing, whether the allowance formed a significant element of the overall remuneration of the beneficiary and whether the allowance could be defined as core pay, in which case it would be protected by the Croke Park agreement.

Our initial understanding was that the intention of the review was to facilitate the permanent cessation of certain allowances to new beneficiaries only.

However, the Minister for Public Expenditure and Reform made a number of statements during the course of 2012 in which he suggested some allowances currently paid to existing staff may also be affected. The announcement of 18 September 2012 included the cessation of one allowance for existing staff and the further review of the continued payment to existing staff of a large number of others. The statement of the Department of Public Expenditure and Reform on the outcome of its review listed allowances under three headings, which differed from its original letter to the Departments and to Government offices. First, allowances to be abolished which would apply to new beneficiaries - that is, new entrants - promoted staff and staff newly assigned to the relevant duty. Second, the allowances to be approved for new beneficiaries but which will be subject to review and or moderation. Third, allowances to be approved for new beneficiaries as well as for existing staff. The Department of Public Expenditure and Reform's statement of October 2012 further underlined the Government's intention to cease paying certain allowances to staff who currently receive them.

I draw a distinction between allowances, overtime and premium payments. It is worth adding that the grouping together of allowances, overtime and premium payments has confused public understanding of what was under review and what the review set out to achieve. In fact, it has been a review of allowances, not a review of overtime, or premium payments, which are additional payments received by some public service grades sometimes at higher rates than basic pay for working additional time over and above contracted hours. While there are many examples where the public service agreement has successfully been used to reduce the incidence and cost of overtime and premium payments, usually through the revision of rosters, the extension of working time, this was not actually part of the Department's review of allowances.

In October 2012, Departments and Government offices were instructed by the Department of Public Expenditure and Reform to open talks with unions about the abolition of some allowances currently paid to existing public servants. The 88 named allowances were drawn from a list of over 100 which were abolished for new beneficiaries when the Government announced the outcome of its review on 18 September. The Department of Public Expenditure and Reform set the 28 October 2013 as the deadline for talks to conclude. The October 2012 instruction to open talks with unions represented the first proposed involvement of trade unions in the process. In some cases talks between the individual employers and unions concerned have now commenced through the appropriate industrial relations machinery.

Committee members will also be aware that the Payment of Wages Act 1991 protects all employees, regardless of which sector in which they work, and prevents employers from unilaterally making deductions from wages that are deemed to be "properly payable". This includes allowances, unless the basis for payment has disappeared or an industrial relations process has concluded that the allowance is no longer justified. The congress public services committee is not directly involved in these talks as they are a matter for the individual employers and the unions concerned. For this reason we are not in a position to engage with the Committee of Public Accounts on the arguments for and against specific allowances. The Department of Public Expenditure and Reform has also indicated its desire for a fast-track process not least because of fear that adjudications on allowances would represent a significant additional workload for the already stretched adjudication institutions, in particular the Labour Relations Commission and the Labour Court. Unions have said that they will consider a fast-track process when the details are tabled.