BENCHMARKING: A SCANDAL ABOUT TO BE REPEATED In association with ISME

Mark Fielding, CEO ISME, The Independent Business Organisation.

The challenges facing the Government and the Irish economy in the medium to longer-term are very significant and will require focused and sensible Government policies. Mark Fielding reports

One of the biggest challenges for the new Government must be the long overdue reform of the public sector, which has been sidelined and passed over by all governments of whatever hew in the past. A strong public sector is obviously an important component of any modern economy, but it has to be efficient, cost effective and focused on delivering value for money.

There is a crying need for reform and improvement in the delivery of public services in Ireland. Probably the biggest error made by the previous government was the abject failure to take the opportunity presented by the last Benchmarking process to drive change and reform in the public sector. The Benchmarking process, in theory, had solid justification starting out, but subsequent developments clearly indicate that a major opportunity was missed for reform of the way in which public services are delivered.

Conceived in 2000, Public sector workers and their unions, already tied into national wage agreements, sought another method to increase their pay and promoted the erroneous contention that they were falling behind in relative terms.

A DEFECTIVE CONCEPT

The fairy tale told and sold to Government was that private sector wage growth pushed significantly ahead of growth in the public sector. They succeeded in pushing the notion of benchmarking their pay to the top of the political agenda and it became a key element of the social partnership agreement. All of the social partners bought into the flawed concept, with employer interests represented within Partnership foolishly going along with the process.

There was a carrot (cost) of €1.2 billion dangled in front of the public sector unions, which they grasped with both hands and gave nothing in return. In allowing this to happen the Government have created a monster in a parallel system of wage increases as the opportunity for reform was wilfully and wantonly wasted.

WAGE MISCONCEPTION

The fact that public sector wages were, and still are well ahead of the private sector, no matter by which measure, gives a lie to the assertion that public sector employees were paid less. In December 2002 there was a 38% differential between Public Sector Pay and the Average Industrial Wage. Subsequent to the Benchmarking exercise this differential had actually risen to 44%.

RECRUITMENT CONTRADICTIONS

The fact that recruitment in the public sector has raced along in the last number of years gives a lie to the second assertion that there were difficulties in recruitment. The public sector has added significantly to employment creation over the period, with education and health and public administration and defence accounting for 30% of total employment created over the period. This strong growth in public sector employment, which is still continuing, contradicts the claims made about the difficulty in recruiting and retaining workers in the public sector.

No wonder that Senator Joe O’Toole saw benchmarking as an ATM machine and SIPTU vice president Brendan Hayes stated that ‘benchmarking is one of the most dynamic engines for producing pay increases’. The reality is that Benchmarking has turned out to be the biggest ongoing non-balaclava robbery ever perpetrated in the State – and it’s about to be repeated!

BENCHMARKING II

We are now to be served up another helping of Benchmarking and the danger is that with IBEC at the table and a Government intent on keeping the Public Sector ‘on side’, the benchmarking scandal is about to be repeated, with absolutely no chance of reductions in public sector pay, giving a lie to the process and transparency of the exercise.

In conclusion, the benchmarking deal has many shortcomings and has not succeeded in its original aims and most importantly is unlikely to lead to a significant improvement in the quality of public services. It represents a missed opportunity for meaningful reform of public sector service delivery and has made a significant addition to the permanent cost base of the economy. It is essential that any successor does not have these shortcomings.

Benchmarking II must be transparent, must insist on proper performance measurement before payment is made. Two parallel worlds cannot be allowed to develop, one consisting of a growing and increasingly affluent and costly and cosseted public sector, overpaid and under-delivering, and the other consisting of a private sector being squeezed by productivity challenges, competitiveness issues and the globalisation process.

Published in the July/August 2007 Issue of Irish Entrepreneur