Good article on why we should not be borrowing to pay increases to public servants

[Jon Snow]

You don't see an alternative to a government telling us "The agreement has additional costs of €566 million over a 3 year period" when the costs are 1688m?

My alternative would be the government telling us the costs are 1688m, and not needing a hunt by the likes of us to uncover that figure.

Maybe I wasn't clear, what I meant was that you appear to be ignoring the context of this agreement.

Regardless of the cost of the new agreement (so regardless of whether you're right or wrong on the numbers aspect of your posts), it needs to be considered from the perspective that without an agreement it's likely the FEMPI legislation would be open to legal challenge, and any unilateral action by the Govt to extend pay reductions etc... in the absence of an agreement would result in industrial action across the entire PS.

 

[ashambles]

Instead they will receive in :
2016 € 31,003
2017 € 30, 567
2018 € 30,600

A simple perusal of the mooted Agreement itself will verify the above

So pay goes up AND down over the three years, the basic mechanism is described below from the document. Each change there seems to be a permanent increase. Where for instance is the decrease you think will cause 31,003 to fall to 30,567?

2016
On 1 January the exemption threshold for payment of Pension Related
Deduction (PRD) will increase from €15,000 per annum to €24,750 per annum.
On I January annualised salaries up to €24,000 are increased by 2.5%.
On 1 January annualised salaries from €24,001 up to €31,000 are increased by 1%.
On 1 September the exemption threshold for payment of Pension Related Deduction (PRD) will increase further from €24,750 per annum to €28,750 per annum.
2017
On 1 September annualised salaries up to €65,000 are increased by €1,000.

 

[venice]

Can you answer the questions I asked you in my previous post or is that the best you can do?

Already have. The fact that you won't accept the answer is your problem.

Or is the fact that you can't accept that you are wrong?

 

[Sophrosyne]

Thing is though (and the above points would broadly reflect my own view), if you were to look at it the other way, who says money is being borrowed to pay increases? What if all capital investment was stopped (completely) and pay increases were given and overall expenditure was reduced? Would we be any better? Obviously not. So you bring back in the capital expenditure and suddenly, you're borrowing to fund this expenditure and not the pay rises!

What I'm saying is why would a pay increase be viewed as using borrowed money (the 3% or so that the State needs to borrow) when other spending, such as the replacement of staff in key areas or capital expenditure, would be viewed as an investment by the State?

Good point, lost in the fog!

 

[Deiseblue]

The Government strategy to reduce the pension levy is quite attractive from their point of view - whilst the worker would benefit there would be no actual increase in the pay bill.

Thus avoiding the incremental salary restoration that Ashambles suggested - €4,674 over 3 years for a worker currently on €30,000 - a staggering 15.58% restoration in pay , restoring pay to pre Croke Park Agreement levels .

 

[Duke of Marmalade]

Good point, lost in the fog!

If at the end of the month I am overdrawn I think it is legitimate to say I borrowed for the holiday rather than my daily necessities.
Similarly it is legitimate to ascribe the budget deficit to the most discretionary spend and that is the case here.

 

[Firefly]

What I find truly terrifying is that the annual gross cash flow required to meet PS pensions were projected by the C&AG to increase by 500% from €2.9 billion for 2009 to €14.7 billion in 2058 in constant 2008 price terms. When you consider the additional healthcare costs associated with an ageing population, I really don't see how anybody could regard this as even remotely sustainable.

I agree totally and will be making sure I get my money out of the country well in advance of this point in time...

 

[ashambles]

Instead they will receive in :
2016 € 31,003
2017 € 30, 567
2018 € 30,600

You claim that some public servants as a result of this proposal (drawn up by public servants and unions) will see a drop in income in 2017 versus 2016. Can you explain with reference to the document how that will occur? Some public service workers may be worried by your interpretation. I suspect you're completely wrong but it'd be better to have it explained than leave it hanging in the thread.

 

[venice]

I'm not confusing anything.

OK, Ill try this from a different hopefully less confusing angle for you. Answer the following.

How do I qualify for the Contributory State Pension?

At what age do I receive it at?

 

[Purple]

OK, Ill try this from a different hopefully less confusing angle for you. Answer the following.

How do I qualify for the Contributory State Pension?

At what age do I receive it at?

Can you answer the question?

I asked you what a pension paid and funded by the state is called if it is not a state pension. You have not answered that.

You are now talking about the contributory state pension which is a specific thing. You even posted a link to it.
That's not what I was talking about. I'm talking about the state pension which, obviously, encompasses all pensions the state pays.
You are saying that the state pensions that are paid to public servants are not state pensions. I'm asking you what you call them. You still have not answered that question.

 

[thedaddyman]

The Government strategy to reduce the pension levy is quite attractive from their point of view - whilst the worker would benefit there would be no actual increase in the pay bill.

Thus avoiding the incremental salary restoration that Ashambles suggested - €4,674 over 3 years for a worker currently on €30,000 - a staggering 15.58% restoration in pay , restoring pay to pre Croke Park Agreement levels .

Correct at a high level but it also overlooks the fact that is reduces income coming into the state via tax (which the pension levy was). The Govt then has 3 choices

• reduce spending and use the savings made to make up the shortfall as a result of reducing the levy
• Increase taxes elsewhere to replace the levy
• Ignore the cost of funding the public sector pension bill and leave someone else in the future try and sort out the mess

I fear it will be the latter

 

[Protocol]

People seem to be getting bogged down.

"State Pensions" consist of the following:

(1) State Pension Contributory - based on PRSI conts
(2) State Pension non-contributory - means-tested

Not everybody over 66 will get a State Pension, for various reasons.


Public Service pensions are paid to retired workers from the public service.

 

[Brendan Burgess]

Guys

I have deleted the personal attacks. Please stop accusing each other of being "childish" or asking stupid questions such as "were you bullied at school?"

Stay on topic and stay respectful of each other.

Brendan

 

[Purple]

People seem to be getting bogged down.

"State Pensions" consist of the following:

(1) State Pension Contributory - based on PRSI conts
(2) State Pension non-contributory - means-tested

Not everybody over 66 will get a State Pension, for various reasons.


Public Service pensions are paid to retired workers from the public service.

Thanks Protocol, that answers my question; the State funded pension paid to retired public servants is called a Public Service Pension.
As it's paid by the state and is un-funded it is, in effect, a State pension. It's just called something else... or am I missing something that makes it materially different in any practical way?

What we can be sure of is that they all add up to constitute the majority of the state's future pension liability and, other that very high earning private sector tax payers who pay very large amounts of PRSI, just about nobody is covering anything close to the full cost of the pension they will receive from the state.

 

[venice]

Not everybody over 66 will get a State Pension, for various reasons.

Thanks Protocol for clarification.

 

[Purple]

Thanks Protocol for clarification.

As you still haven't answered the question I take it that you now accept that they are all state pensions and, particularly in the context of this thread, effectively the same thing.

 

[venice]

Oh Purple let go, it’s over you were wrong accept it and move on. It’s getting boring now.

I understand you are trying to save face but please stop ruining the thread for others!

 

[Duke of Marmalade]

The issue of funding state pensions is an illusory accountancy one and that is why very few countries actually operate one.

The real issue is that in our society we need a transfer of wealth from those who earn it to those who can no longer earn it including retirees, whether private sector or public service. Whether that transfer comes from general taxation or from the state having a large proportion of the capital base of the country (i.e. has "funded" the pensions) is largely irrelevant. In a sense they both are largely the same its just that "funding" would imply the formal accounting of the process. Thus it can be argued that through its capital investment policy the state is building up a national base of infrastructure and capital and for which it implicitly charges a rent through general taxation.

So it is that today, both workers and pensioners are much better off generally than they were 50 years ago. Of course technology driven productivity played a big part.

In 40 years time our social economy will be able to support the current relativities between earners and pensioners or it will not. No amount of the state accumulating a vast fund of the nation's wealth will justify pensioners living in luxury whilst the workers starve. The earmarking of these national assets for a certain section of the population is an illusion and that goes even if the assets are foreign investments.

Of course, it is essential that the state maintains an appropriate level of capital investment so that we may hope that there will continue to be more and more to share amongst everyone.

These argument raged when Charlie proposed his Pension Reserve Fund, folk like me argued the illusory nature of this fund and indeed pointed out that it was silly to have debt on the one hand and a rainy day chest on the other. I wonder how that geared investment policy worked out in the end.

The basic fact is that the dynamics of saving and funding are completely different at the national level than they are at the individual or company level.

 

[Purple]

Oh Purple let go, it’s over you were wrong accept it and move on. It’s getting boring now.

I understand you are trying to save face but please stop ruining the thread for others!

You still haven't answered my question; if a pension is funded and paid by the state how is it not a state pension.
You have stated that it is not a state pension so what is it?
Why will you not answer that straightforward question?

 

[Purple]

Very true Duke but as our population ages and lives longer the proportion of earners to pensioners will continue to change. The question is how do we pay for it.
Bismarck brought in a universal old age state pension in Germany in the 1880's. At that time the average person started work in their mid teens. They get their pension at 70 and, on average, only drew it for about a year. That meant that they worked for over 50 years and got a pension for less than two. That's a ratio of over 25 to 1.
We now start work in our 20's, retire at 65 and live into our late 70's. The ratio is now less than 4 to 1.
What will it be in 20 or 30 years?