A decade ago we lost our economic sovereignty, our economy plunged into the deepest of crises. The clear lesson learned is that the choices we make as a country have consequences.
Thankfully, we have emerged from that crisis and today the Irish economy is performing strongly. This week we recorded a modest surplus for last year; the first underlying surplus since 2006.
Increases in public spending in the years before the crisis hit resulted in a level of Government expenditure that was unsupported by the tax base. That was ultimately unsustainable and as a result lead to the drastic cuts that affected so many. One area where this was particularly the case was in respect of public service pay.
The Irish public rightly expect us to do better this time; to make better and more responsible choices.
This year we will spend €18.7bn on public service pay. That is more than one in every three euros of Government spending.
We are also now just a year into a three year collective pay agreement; the Public Service Stability Agreement (PSSA) 2018-2020, which commits over €1.1bn to increases in public service pay out to 2021.
This year alone public servants will benefit from a wage increase of 1.75% for all public servants from 1st September, with a further 1% increase to the lowest salaries (under €30,000) kicking in from 1st January. The Pension Levy was also replaced with a new permanent Additional Superannuation Contribution on 1st January, which will benefit public servants by €325 this year – with bigger gains for post 2012 recruits.
What this means is that graduates entering the public service today do so on a competitive salary and good terms and conditions. A first year nurse starting in 2019 will have an effective starting salary of €31,000 or around €36,000 when premium payments and allowances are included. Across the labour market as a whole, the average starting salary for graduates is €28,554, with 40% earning less than €25,000.
From the PSSA pay deal alone, those earning between €30,000 and €35,000 stand to gain over €2,000 in pay benefits. From the proposed new entrant measures recently announced, new entrant public servants (including over 10,000 nurses) stand to benefit from an average of €3,300 from 1st March, on top of the agreed pay increases. This is at a cost of €200 million to the Exchequer.
Taken together, this represents a very significant investment in public pay in a year when the country faces considerable uncertainty and external risk, not least from Brexit.
This Government is committed to honouring the current pay agreement, which is at the limit of what we can afford without jeopardising the public finances at this sensitive time.
Despite this, a number of unions are seeking further gains. For example, nursing unions are considering strike action in pursuit of a reported 12% pay increase over and above the series of increases and benefits outlined, at an additional annual cost of some €300m.
I have huge respect for the work that all of our public servants do; not least those working in our health services. But pay claims like this threaten to take us to back to the bad old days of unsustainable and unaffordable pay rises with disastrous consequences for the public finances and, ultimately, taxpayers.
For that reason, the Government will honour the terms of the pay deal agreed with all unions and we will protect the agreement. Government will continue to engage with nursing unions to seek to avert the potential for strike action. We expect all unions who are benefitting from the agreement to adhere to its terms. Cost increasing pay claims are not permitted under the agreement. Nor is strike action in pursuit of such claims.
Where the issue of recruitment and retention in the health service is concerned, it is important to respond to a number of the assertions being made.
The fact is that CAO applications show a very healthy interest in nursing as a career. Staff turnover rates, as reported by the Pay Commission, are not out of place with trends in the economy.
Overall, we continue to increase the numbers of nurses in our health services to the extent that funding will allow. The overall number of nurses has increased by around 11% from 2014 to 2018.
Furthermore, an increase of €1.05 billion in Health funding has been made for 2019, bringing the total allocation to €17 billion. Additional investment in Health over the last two years comes to a total of €2.25 billion or an increase of 15%; the highest level of Health investment in the history of the State.
All parties must make every effort to avoid industrial action that will impact on vulnerable citizens. The terms of our wage agreement provide the mechanisms and structures for engagement on, and resolution of disputes, and these should be used to the fullest extent possible. The employer will play its part in this process.
Rising expectations might be a by-product of a growing economy. But we simply must act sensibly.
My responsibility in managing public expenditure and in my engagement with public service unions, is to secure our recovery and to lay the foundations for lasting sustainable growth in the interests of all of our people. This is a responsibility that must be shared by all public servants.