An Bord Snip Nua Recommended Cuts In Public Expenditure (Mc Carthy Report) by Annette J Dunlea
As a result of declining global conditions, a collapse in the building industry and a contraction in bank lending, an Irish financial crisis emerged in 2008. In response, Brian Lenihan established a Special Group on Public Service Numbers and Expenditure Programmes to examine the current expenditure programmes in each Government Department and to make recommendations for reducing public service numbers so as to ensure a return to sustainable public finances. The Minister appointed Mr Colm McCarthy, School of Economics, University College Dublin, as member and Chair of the Special Group on Public Service Numbers and Expenditure Programmes. Colm McCarthy said the Government was borrowing €400m a week and paying a substantial rate of interest on that borrowing and this could not continue. An Bord Snip Nua issued its findings, commonly known as the McCarthy report, on 16 July 2009.The report was in two volumes. It recommended approaches to a potential €5.3bn in savings, including recommendations for 17,300 public service job cuts and a 5% drop in social welfare. The panel of advisors consisted of : Maurice O’Connell, former Governor of the Central Bank and Financial Services Authority of Ireland , William Slattery, Managing Director, State Street Corporation and Mary Walsh, former Partner PriceWaterhouseCoopers and Pat McLaughlin, Business Consultant and former Deputy Chief Executive of the HSE.
The group was charged with identifying cuts in spending and staff numbers, quangos (quasi-autonomous government organisations) that could be merged or abolished and recommending ways of obtaining better value for taxpayers’ money. The group had scope to examine the terms and conditions, tenure and pension entitlements of new recruits to the public service. The group was charged with reducing or discontinuing expenditure programmes with a view to eliminating the current budget deficit by 2011. Its brief also includes full freedom to make recommendations on any aspect of public sector reform, which Mr Lenihan said would be crucial to the restoration of competitiveness in the economy.Colm Mc Carthy said said the board had to look to the big items of spending, which are health, education and social welfare.The body identifies these three as areas where significant savings could be made. A range of outdated and restrictive working practices and allowances add greatly to the cost of providing public services,’ the report said.
Key Recommendations of the Mc Carthy report are:
1. Cut 17,300 Public service Jobs
2. Reduce Welfare Payments by 5%…(1& 2 savings €850 million)
3. All citizens to receive only 1 welfare payments, no double benefits ( saving €100 million)
4. Abolish the Dept. of Community, Rural & Gaeltacht and redistribute its jobs
5. Dept. Of Arts, Sports and Tourism dramatically reduce spending and consider abolishing it
6. Transfer Payments and Expenditure of Programmes in Agriculture To Be Cut Back
7. Reduce the number of special needs assistants and English language teachers.
8. Introduce charges and copayment mechanisms for services: school transport, medicines and home help
9. Further reduce allowances for tds and senators
10. Reduce the number of local authorities from 34 to 22
11. Half the number of gardai from 700 to 350
12. Reduction and changes to child benefit (savings €513 million)
13. End payments of community employment service schemes (savings €100 million)
14. Cut benefits for dental, optical and hearing services (savings €92 million)
15. Grading of job seekers allowance by age ( savings €70 million)
16. Cut the Family Support Agency (savings €30 million)
17. Change the eligibility for family income supplement (savings €20 million)
18. Taxing household benefits package (€11.6million)
19. Cut size of Dept. of Health and Children by 10% over 3 years (€91million)
20. Revise income guidelines for medical cards to the basic rate of social welfare (€100million)
21. Private patients in public hospitals to pay higher fees
22. Increase in Drugs Payment Scheme ( €37 million)
23. €5 Levy per prescription (€70 million)
24. Hold an open competition to provide services under the general medical services scheme (€370 million)
25. Revise the structure of state agencies
26. Support for all Irish companies to be processed through Enterprise Ireland.
27. Regulators offices and ombudsmans offices to be merged
28. VECs cut from 33 to 22
29. Rise in pension age and apply to public servants
30. Recommend the government implement the recommendations of the Green Paper on Pensions 2007 (raise pension age and workers’ contribution to pension)
31. Rationalisation of industrial relations institutions 32. Payments of 1% of economic output a year into the pension reserve fund to be suspended.
Proposed savings and staffing reductions are listed here:
Dept Millions Staffing Reductions
Agriculture, Fisheries & Food €305 million, -1,140 jobs
Arts, Sports & Tourism €105 million, -170 jobs
Communications, Energy & Natural Resources €66 million, -106jobs
Community, Rural & Gaeltacht Affairs €151 million, -196 jobs
Defence €53 million, -520 jobs
Education & Science €746 million, -6,930 jobs
Enterprise, Trade & Employment €238 million, -594 jobs
Environment, Heritage & Local Government €130 milion, -30 jobs
Finance Group of Votes €83 million, – 660 jobs
Foreign Affairs €42 million, – 65 jobs
Health & Children €1,230 million, -6,168 jobs
Houses of the Oireachtas Commission €8 million, – 42 jobs
Justice Group of Votes €136 million, -540 jobs
National Treasury Management Agency €5 million, – 40 jobs
Taoiseach’s €18 million, -77 jobs Transport €127 million, – 80 jobs
The Mc Carthy report has recommended some radical measures to cut government spending.He said it is feasible to get out of the current situation by controlling the expenditure better.Mr McCarthy added that the areas of health, education and social welfare account for more than three quarters of Government spending and this has to be reduced.The report has shown the scale and magnitude of the financial problems facing the Government.It is important that Ireland’s reputation internationally is restored.An Bord Snip Nua was given a specific but limited task and it delivered a range of options that identified savings in public expenditure of over €5 billion.The Report recommended a new benchmarking examination and says this should include the possibility of pay cuts and an international comparison of pay rates. Recently, Mr.Lenihan conceded that the proposed €3 billion package for next year would not be sufficent.Next month, he will announce a four-year budget plan in an effort to give clarity to the international markets and give detailed specifics about major planned tax and spending measures. The budget deficit for this year will be around 11.6 per cent of GDP – before taking account of bank bailout costs: a shortfall of €18.5 billion. If the cost of the bank bailout is included, the figure rises to 32 per cent of GDP.
The populace are nervous and are asking where will the money come from? A 5% cut across all credits, for example, would result in income tax at 20 per cent being paid on earnings over €34,770, and yield about €300 million in additional income tax.In addition, the government has already signalled that it intends to change the structure of the myriad of income taxes: income tax, income levy, health contribution and PRSI being unified.It seems inevitable that some state companies and assets will be sold off eg : Dublin Dock, ESB and Bord Gais. Another option available to the government is to take funds from the €11 billion in the National Pension Reserve Fund (NPRF). Nevertheless, a set of proposals has been made and now decisions will have to be made. Turning McCarthy’s proposals, and so many other vital measures, into a recovery plan will require courage and strength.Mr Cowen urged people to face the economic crisis with “renewed fortitude and courage”, saying Ireland needed a “major national effort” to get through the recession.
The End
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