Arthur Morgan (Louth, Sinn Fein)
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Question 99: To ask the Tánaiste and Minister for Finance if he had concerns regarding the extent of the pay increases proposed in Report No. 42 of the Review Body on Higher Remuneration in the Public Sector; and if consideration was given to rejecting the proposed increases in view of the fact that ordinary workers are being asked to exercise wage restraint. [29618/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Report No 42 of the Review Body on Higher Remuneration in the Public Sector, dealing with the seventh general review of the remuneration of top public service, posts was completed by the Review Body on 14 September 2007 and submitted to the Government. In line with the established Government policy of accepting the recommendations of this independent review body, the Government decided to accept and implement the recommendations in Report No 42 on levels of remuneration of top public servants.

The increases are to be implemented on the following phased basis:

(a)5% from 14 September 2007, the date of the Report, or where the total increase is less than 5%, the full increase from that date;

(b)half the balance from 1 September 2008; and

(c)the remaining balance from 1 March 2009.

The Standing Terms of Reference of the Review Body on Higher Remuneration in the Public Sector had provided that it should carry out general reviews of the posts covered by it every four years. The sixth general review was completed in September 2000 and the next review would in the normal course have been due to commence in 2004. This review was deferred and the Government decided on 12 April 2005 that the Review Body should be asked to carry out its seventh general review of the remuneration of those covered by its terms of reference and to report thereon in the second half of 2007. This timing was intended to bring the date of finalisation of the review broadly into line with the next report of the Public Service Benchmarking Body.

In its interim report in 2005, the Review Body stated that the relevance of superannuation arrangements in the public service as a component of overall remuneration had assumed a greater importance than was the case at the time of the last general review. It indicated that it would investigate this issue further in this general review and consider the extent to which the value of public service superannuation arrangements should be offset against the remuneration packages available in the private sector.

As part of the general review the Review Body commissioned a detailed examination of the value of public service pensions for the grades covered by its remit by reference to pensions arrangements in the private sector. The key finding of the study was that the pensions of the groups covered by its terms of reference are significantly more valuable than the pensions of comparable groups in the private sector. The superior value was assessed by the Review Body as being 15% of salary. Accordingly, in making comparison with levels of remuneration in the private sector the Review Body applied a discount of 15% to reflect the value of public service pensions.

The Review Body found that the remuneration of many senior public service posts is below private sector levels even when allowance is made for the superior value of pensions in the public service. However, the position varies among the different groups. The salaries of the largest jobs, such as Secretaries General, the Dublin City Manager and the Garda Commissioner, are very much behind private sector levels. The gap is significantly less in the case of some other jobs and in a number of cases salaries are not out of line with the lower quartile of private sector rates. This follows the general pattern identified by the Review Body over a number of reviews where the gap between public service and private sector salaries is more pronounced at the higher managerial levels.

The Review Body did not consider that private sector practice should be followed in all cases. In particular, it did not attach significant weight to published information on the remuneration packages of the chief executives of the top Irish PLCs. Companies in this category comprise a small segment of the private sector and are not representative of the private sector as a whole.

The overall effect of the review is that the salaries recommended are below the average level of salaries in the private sector since they are based on the lower quartile of private sector salaries and have been discounted to allow for the superior value of public service pensions relative to the private sector.

The pay of most public servants has been determined by negotiation between management and trade unions and, where necessary, recourse to third party adjudication by the Labour Court or arbitration board. More recently the benchmarking process has been established by agreement between public service employers and trade unions.

The top posts in the public service are in a different position. Their pay cannot be determined through the industrial relations machinery. Standard round increases under the successive national pay agreements are applied to these posts but the local bargaining or similar provisions of these agreements cannot in practical terms apply to these top posts. Instead the pay of these posts is determined by the Government: it is adjusted on the basis of recommendations by this independent Review Body which is requested to carry out reviews from time to time.

There are various pay review or pay claim processes that apply to every group — the Review Body, the Benchmarking Body, the Labour Court, etc. The Review Body has been there for nearly forty years and every Government since has accepted that it is the best way to determine top public servants' pay and accepted the recommendations. The only significant variations by Governments have been the timing of implementation.